Japan and fake capitalism: Bonds, Shares, and Yen (Singapore to G7)
Kanako Mita and Lee Jay Walker
Modern Tokyo Times
The nation of Japan is blighted by mainly Liberal Democratic Party (LDP) rule apart from the odd temporary blip decade after decade. China, Cuba, Iran, the Russian Federation, Saudi Arabia, Vietnam, and a few others, can only dream about Japan’s political system.
Japan isn’t alone. Singapore is even worse under its one-party dominance which renders democracy pointless. However, unlike China, Cuba, Iran, the Russian Federation, Saudi Arabia, Vietnam, and a few others: the nations of Japan and Singapore come under the terminology of “democracy.”
The People’s Action Party (PAP) in Singapore – similar to the ruling LDP in Japan – is a family-based political system. Lee Kuan Yew (1923-2015) and his son Lee Hsien Loong have dominated the political scene since the creation of Singapore. Hence, the LDP is more open because several ruling family elites swap the prime minister chair between each other – with the odd interlude in recent decades.
However, when it comes to economics, Japan literally “takes the non-capitalist biscuit” related to buying shares, the purchase of government bonds to an extreme, and bailing out the yen when all else fails.
Kyodo News reports, “The Bank of Japan bought 16.20 trillion yen ($119 billion) worth of Japanese government bonds in June, setting a monthly record, after it sought to stem a rise in long-term yields above its upper limit to ensure monetary easing, data showed Thursday.”
Hence, with the Yen weakening horrendously under Prime Minister Fumio Kishida, state intervention once more. Reuters reports, “Japan spent a record $42.8 billion on currency intervention in October to prop up the yen, the finance ministry said, with investors keen for clues about how much more the authorities might step in to soften the yen’s sharp fall.”
This is approximately 6.4 trillion yen. In September, Japan spent 2.84 trillion yen to prop up the currency. On top of this, the Pension Fund and Bank of Japan buy shares on the Tokyo stock market at a high rate. Therefore, phony capitalism – in a nation with a low minimum wage compared with Australia, France, the United Kingdom, and others.
Japan is the holder of the highest ratio of debt in the world. At the same time, stock holdings purchased by the Bank of Japan (BOJ) and the Government Pension Investment Fund (GPIF) are extremely high compared with other major capitalist nations in the G7. Therefore, the news that the Bank of Japan now holds 50 percent of all long-term Japanese government bonds isn’t a shock.
NHK reports, “There are worries that the bank’s increasing assets may have serious repercussions on the financial market, when the BOJ shifts to tapering its monetary easing policy.”
The BOJ and the GPIF hold roughly one-eighth of the market capitalization of the Tokyo Stock Exchange (the First Section).
Japan is an anomaly within the G7 group. This concerns economics, the legal system (can be held for long periods without being charged), the ratio of debt, and the role of government within the mechanisms of the stock market and other areas of finance.
The current leader of Japan – despite the economic malaise and mountain of debt – wants to double military spending.
Yes, you guessed it – more debt and government bonds are on the way!
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