Japanese Currency & Debt Crisis Enters Implosion Phase

A little over a year ago I wrote in regards to Japan as an example as to what Keynesian US policy will bring about:

All these low rates will do is allow the debt to get even more bloated. And interest rates won’t remain low forever, as you can see in Greece and similar situations. Did people like the above author see any of those sovereign debt crises coming?

What about Japan? Their debt is the most crushing of all industrialized nations, and I’m predicting that their time of low rates will be drawing to an end any day now, with their debt and pension crisis having entered its final stage. Then what?

Now we hear that the Bank of Japan chief is saying this:

“I do not expect a sudden spike in long-term bond yields. In the long-run, if the economy recovers and inflation heads towards two percent, we might see nominal interest rates rise but that’s natural.”

As it is with statements politicians make, usually the exact opposite is true.

Mish posts this chart on his site:

Japanese Government Bond Yields

Expect a spike in Japanese bond yields and a further collapse in their currency valuation globally, sending the Japanese economy into another long overdue financial crisis.

Furthermore expect more and more of the same 30+ year long policy from the Japanese government and central bank: Money creation, debt creation, all to no avail and leaving no other option but a chaotic and painful endgame.

So long as people ridicule libertarians for their “strange” ideas of sound money and fiscal responsibility, this is what they’ll get.

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Nuclear Power in Japan; Prescient Voices From the Past Catch Up With the Present

I thought I’d reference some older snippets from articles that I found with background and warnings about nuclear reactors and power companies in Japan, some of them eerily prescient …

An LA Times article from 1988 explains how government intervention has incentivized the production of nuclear energy in Japan:

Strong financial resources, combined with government-set rate structures that guarantee a “fair return” of 7.2% on capital investment, largely insulate the nine major power companies from the economic woes that have bogged down nuclear plant construction in the United States.

Furthermore …

Hirose maintains that numerous minor accidents and operational problems over the past several years have gone largely unreported in the mainstream news media. Though shutdowns are rare, he believes these incidents belie the industry’s safety claims and foreshadow an eventual disaster on the scale of Chernobyl or Three Mile Island, in Pennsylvania.

Tamai, the industry federation official, rejects such criticism. Japanese nuclear plants have the best safety record in the world, he contends, with fewer than one-tenth the number of shutdowns of other countries and an enviable 76% average rate of operation.

To correct “distortions” advanced by Hirose and others, the federation has spent more than $5.6 million on newspaper advertising since this year’s Chernobyl anniversary in April, trying to reassure people that Japan’s water-cooled nuclear reactors are far safer than the graphite reactor in Chernobyl.

August 2004, Four workers die in Japanese nuclear plant accident:

Prime Minister Junichiro Koizumi told reporters: “We must put all our effort into determining the cause of the accident and to ensuring safety.” His government would respond “resolutely, after confirming the facts.”

However, a review of the events leading up to the accident and the history of other nuclear industry incidents over more than a decade reveals that far from “ensuring safety”, the government, together with the self-regulated nuclear power companies, is squarely to blame for the horrific deaths and injuries suffered at the KEPCO plant.

KEPCO admitted this week that the burst pipe had not been checked in the 28 years since the nuclear reactor began operating, even after a maintenance sub contractor notified it of the urgent need for inspection in November 2003. Further reports emerged that up to 17 such pipes at up to 10 other nuclear power plants operated by KEPCO throughout Japan have never been inspected.

March 2006, Nuclear reactor ordered shut by Japanese court:

A district court yesterday ordered the first shutdown of a nuclear reactor in Japan, saying the country’s second-largest reactor has a high risk of causing accidents and leaking radiation if an earthquake strikes, media reports said.

July 2007, Japan nuke plant leak bigger than thought:

The malfunctions and a delay in reporting them fueled concerns about the safety of Japan’s 55 nuclear reactors, which have suffered a string of accidents and cover-ups. Nuclear power plants around Japan were ordered to conduct inspections.

The plant in Kashiwazaki-Kariwa, 135 miles northwest of Tokyo, eclipsed a nuclear power station in Ontario as the world’s largest power station when it added its seventh reactor in 1997.

The Japanese plant, which generates 8.2 million kilowatts of electricity, has been plagued with mishaps. In 2001, a radioactive leak was found in the turbine room of one reactor.

The plant’s safety record and its proximity to a fault line prompted residents to file lawsuits claiming the government had failed to conduct sufficient safety reviews when it approved construction of the plant in the 1970s. But in 2005, a Tokyo court threw out a lawsuit filed by 33 residents, saying there was no error in the government safety reviews.

Environmentalists have criticized Japan’s reliance on nuclear energy as irresponsible in a nation with such a vulnerability to powerful quakes.

“This fire and leakage underscores the threat of nuclear accidents in Japan, especially in earthquake zones,” said Jan Beranek, a Greenpeace official in Amsterdam. “In principle, it’s a bad idea to build nuclear plants in earthquake-prone areas.”

July 2007, Japanese nuclear reactor under-designed for earthquake?

An earthquake off the western coast of Japan yesterday hit a nuclear plant with more than twice the jolt that the plant was expected to have to handle. The shock seems to have done little immediate damage, but has raised concerns about whether Japan’s nuclear plants are designed to withstand the kind of shaking they are likely to experience.

May 2009, Delays at Japan’s ill-fated nuclear plant:

“The failure to produce vitrified waste with domestic technology shows that Japan’s reprocessing technology is 10 to 20 years behind Europe and the United States,” Koide said.

The source at the Rokkasho plant agrees with Koide. “We have to accept that we were too optimistic from the beginning,” he said. He also said that JNFL should change its policy, whatever it takes, to solve the difficulties with the current furnace at Rokkasho.

One possible solution would be to use French technology, but the Japanese government is bent on developing its own technology and unlikely to choose that option. If the plant suspends operations for more than three years, as the source at Rokkasho suggests, then the situation will be more serious as Japan’s nuclear power policy is premised on reprocessing spent nuclear fuel at the plant.

May 2010, Japan reactivates repaired nuclear reactor:

The BBC said the accident that forced the shutdown resulted in no injuries and no release of radiation, but coming just two years after starting operation raised concerns about the safety of the plant. The plant’s operators were criticized for concealing the extent of damage to the reactor, the BBC said.

May 2010, Japan restarts controversial nuclear reactor

The proportion of the country’s energy generated from nuclear plants is to increase to 50 per cent from the current one third, and the utilization of the power plants is to increase from 60 per cent to 90 per cent of their generating capacity.

Monju is already decades behind its original schedule, and the government has so far poured some 900 billion yen (9.7 billion dollars) into the project.

The Japan Atomic Energy Agency expects to spend another 23 billion yen a year on the fast-breeder programme in the coming years. The government wants to complete the development of a commercial fast-breeder reactor by around 2050.

As always, the best thing we can do to ensure a safer future for ourselves and our offspring is listen to those who saw things coming before everyone else suddenly became an expert on the causes of such earthshaking events.

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Japan Faces Potential Nuclear Disaster; Nikkei Down Over 16% in 2 Days

The NYT reports Japan Faces Potential Nuclear Disaster as Radiation Levels Rise:


The No. 3 reactor building of the Fukushima Daiichi nuclear plant burned Monday after a blast following an earthquake and tsunami in this satellite image.

Japan’s nuclear crisis verged toward catastrophe on Tuesday after an explosion damaged the vessel containing the nuclear core at one reactor and a fire at another spewed large amounts of radioactive material into the air, according to the statements of Japanese government and industry officials.

In a brief address to the nation at 11 a.m. Tokyo time, Prime Minister Naoto Kan pleaded for calm, but warned that radiation had already spread from the crippled reactors and there was “a very high risk” of further leakage. Fortunately, the prevailing winds were sweeping most of the plume of radioactivity out into the Pacific Ocean, rather than over populated areas.

The sudden turn of events, after an explosion Monday at one reactor and then an early-morning explosion Tuesday at yet another — the third in four days at the plant — already made the crisis at the Fukushima Daiichi Nuclear Power Station the worst nuclear accident since the Chernobyl reactor disaster a quarter century ago.

Right now the Nikkei is down 10.5 percent after already having dropped over 6 percent yesterday …

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Disaster Upon Disaster – Japan’s Inevitable Plight

While Japan’s quake is a disaster of enormous proportions, it pales in comparison to its impending fiscal tsunami. Bloomberg writes

Prime Minister Naoto Kan is also preparing a fiscal response, deploying about 200 billion yen left over from the budget for the fiscal year ending March 31 and planning a supplementary budget. Finance Minister Yoshihiko Noda said it would take beyond the end of this month to compile the additional package.

Opposition leader Sadakazu Tanigaki told reporters in Tokyo yesterday he proposed to Kan a temporary tax to help fund the relief effort, and Chief Cabinet Secretary Yukio Edano said later that such a step cannot be ruled out.

The central bank set up a task force after the temblor, and pledged in a statement March 11 to ensure financial stability and said it will do everything it can to provide ample liquidity. The BOJ extended 55 billion yen to lenders over the past two days to ensure cash was on hand for withdrawals by survivors.

[Finance Minister] Noda said the nation’s growing debt load would not impede its rescue effort. Standard and Poor’s downgraded Japan’s credit rating to AA- in January and Moody’s Investors Service lowered its outlook on the nation’s Aa2 grade to negative from stable last month.

“We are going to do everything we can” Noda told reporters in Tokyo on March 11 after the quake. “The fiscal situation can’t be a constraint to addressing this natural disaster.”

The idea of creating paper and computer entries in checking accounts out of nowhere is a damn lazy non-answer. It’s all the more tragic in light of the magnitude of the underlying disaster.

That this event would be used as an excuse to pile on to Japan’s staggering national debt is such a predictable pattern that it warrants no further comment.

For sure the quake could become a welcome scapegoat to blame for Japan’s debt crisis which is now coming full cycle, akin to Germany’s high public debts being blamed on its reunification or the US financial crisis being blamed on the collapse of Lehman …

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Japan’s Debt & Pension Crisis Enters Final Stage

To follow up on Keynesianism’s Depredations and Futility in Action, there is more evidence that the train wreck that is the Japanese government is hitting a wall …

Bloomberg writes Japan Must Raise Sales Tax Above 10%, Kan Panel Member Says:

Japan needs to more than double its 5 percent consumption tax to shore up the government’s finances given soaring debt and welfare costs, a member of Prime Minister Naoto Kan’s tax and social security panel said.

“I don’t think an increase to 10 percent is enough,” former Financial Services Minister Hakuo Yanagisawa said yesterday in an interview at his office in Tokyo. “Our discussions must be based on new realities.”

Kan appointed the 75-year-old Yanagisawa to the panel that will meet for the first time on Feb. 5. Yanagisawa, a former colleague of Economy Minister Kaoru Yosano, who is leading Kan’s push for a debate on the sales tax and has advocated doubling the levy. The government is set to issue a plan on shoring up Japan’s social welfare system by June.

Concern over Japan’s rising debt, the largest in the developed world, prompted Standard & Poor’s to cut the country’s credit rating last week. Social security costs in Japan, the world’s most rapidly aging society, have risen more than 60 percent since 2000 and will account for 53 percent of government spending in the fiscal year beginning in April.

Again: In my opinion, if you’re looking for a prediction of economic developments in the US, look to Japan. I think it’s possible that things will happen a bit faster here, but Japan shows us how much the system can be stretched before it has to fold.

Japan’s debt crisis is now approaching its endgame fast. But With all the turmoil going on in the Middle East and in Europe, few people seem to be paying attention …

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