Japan's Business

Folks,
As you may have heard me say, in spite of asia hoping to "export its way out
of trouble", I recommend one not take advantage of the situation and squeeze
the supplier for a low price..,instead pay a higher price since the customer
in america does not know quite what the price ought to be on your innovative
item, and also, since int'l trade is about relationships, start building for
the long term now by paying a fair price, a price very attractive to even the
best suppliers.
Japan's interest rates are low, which would suggest even further advantage
possible..that is using Japan interest rates to finance deals, something I
have recommended..when Japans are lower than even ours...now here comes advice
that would make that move a bad idea if this advice were taken by Japan banks
(advice I would like to see taken).here is a report on Japan's banks..,
Today's Investor's Business Daily (Nov. 9, 1998) leads its economics section
with a piece on Japan's banking troubles by Charles Oliver. He quotes
economist Frank Shostak, an adjunct scholar of the Mises Institute:


Japan has spent 10 years in an economic swamp, and its troubles have damaged
other economies in the region. Many Western economists say that if Asia is
ever to get out of that muck, Japan must lead the way.
After years of political inaction, Japan finally is starting to deal with its
crippled banking system, which many say is at the heart of its economic
catastrophe.
Until recently, near-zero interest rates have been the government's biggest
contribution to the save-the-banks effort. Now it's actually giving taxpayer
money to troubled banks.



So what's next?



There seems to be a growing consensus among economists: Japan needs to pump up
its money supply - big time. If you add enough money to the system, the
argument goes, banks will lend it - then people will spend it. That should
translate into a much-needed boost in domestic demand....
Maybe, say other economists, but that doesn't solve Japan's real problem....
''Japan's real pool of funding is shrinking. Its real wealth is declining, and
that's due to loose monetary policy and bad fiscal policy,'' said
FrankShostak, an economist with Ord Minnett Jardine Fleming Futures in Sydney,
Australia.



When central banks create money, they pump it into credit markets, which
causes a credit boom. Banks, flush with cash, fall over each other to lend it
out. In the short run, that actually brings interest rates down.



In Japan, that money fueled stock market and real estate bubbles that burst in
the late '80s. A lot of capital ended up in projects that never should have
gotten off the ground.



When the dust settled, banks were left with a mountain of bad debt, this
argument goes.



''Japan should focus on rebuilding its pool of funding, its real wealth,''
Shostak said.
That means it must stop throwing money at bad projects, let the banking
system clear out its bad loans and let unprofitable plants and firms go under.
Shostak also says the government must make big, permanent cuts in taxes and
spending to get resources back into the more-productive private sector.
****
So cut taxes (expenses), let interest rates rise, take the write-off on bad
debts, let what money there is flow to sober investments, and grow the economy
thus. Sounds like advice to a young married couple whose credit cards got
them in trouble...,
I advise in my classes you develop a product that provides a real value, build
it slowly over time, with a viewe to long range benefit. It still applies. I
remember in the mid-70's meeting in Asia the wealthy people who had started
trading a decade earlier, when Asia was a mess and they were poor too. the
conditions today are not unlike then, in many respects. Time to get
going...,building those relationships...,
John Spiers

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