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December 22, 2004

Economic Slowdown in Japan

Well, this is not good:

WSJ.com - Japan's Economic Activity Declined 0.4% in October: Japanese economic activity fell 0.4% in October compared with the previous month, the government said Wednesday, confirming recent data pointing to an economic slowdown. The fall in the Ministry of Economy, Trade and Industry's all industries index, a supply-side measure of economic activity, was worse than a median forecast of a 0.2% on-month fall, according to a Dow Jones Newswires survey of economists. The index rose 0.1% in September and rose 0.2% in August...

Posted by DeLong at December 22, 2004 11:43 AM

Comments

I have a feeling that Brad is trying to prove that economics is the dismal science. Good economic news in France and Germany - no mention. Bad news in Japan - it gets an uh-oh.

Posted by: Andrew Boucher at December 22, 2004 12:11 PM


It would be interesting, if tricky, to model economic health indirectly via the health of trade partners.

Related issue, remember the saying 'If the US sneezes, our trade partners catch colds'? Having our trade partners report head colds but our reports saying that everything is fine worries me.

Posted by: linnen at December 22, 2004 12:41 PM


http://www.nytimes.com/2004/12/22/politics/22aid.html

U.S. Cutting Food Aid Aimed at Self-Sufficiency
By ELIZABETH BECKER

WASHINGTON - In one of the first signs of the effects of the ever tightening federal budget, in the past two months the Bush administration has reduced its contributions to global food aid programs aimed at helping millions of people climb out of poverty.

One administration official involved in food aid voiced concern that putting such a high priority on emergency help might be short-sighted. The best way to avoid future famines is to help poor countries become self-sufficient with cash and food aid now, said the official, who asked not to be identified because of the continuing debate on the issue. "The fact is, the development programs are being shortchanged, and I'm not sure the administration is going to make up the money," the official said.

At a private meeting with charities last month, Lauren Landis, the director of the Food for Peace program at the Agency for International Development, warned that her budget for food aid was smaller than in recent years and that the increased costs of buying and shipping commodities presented "a significant challenge," according to the minutes of the meeting. She also warned that the Office of Management and Budget had been pressing her office "to reduce its spending on development programs, and this has been a consistent message over the past year."

Posted by: anne at December 22, 2004 12:55 PM


A lot of food aid never gets to hungry people because it rots in storage or transportation. Why don’t we use irradiated food to solve this problem? Is it fear that somehow the food will become radioactive (it won’t), or does it alter the taste? I remember government officials of some African country complaining that we sent them yellow corn instead of white. It seems they consider yellow corn pig food, and took it as an insult. I suppose the government official was well fed.

Posted by: A. Zarkov at December 22, 2004 01:08 PM


The only corn related African complaint I heard was about Zimbabwe. They were worried that the local farmers would plant American genetically modified (GMO) corn the next year from the imporetd corn and they would no longer be able to export corn to Europe.
Then the only thing to do with the corn would be to feed it to their own citizens instead of exporting it to earn foreign currency to buy imports like medecine or consumer electronics, or whatever.
Their is a difference between feed corn and sweet corn. Sweet corn is for human consumption for corn. Feed corn is used for animal food, and I believe (I could be wrong) for food products like corn syrup, monosodium glutamate, and tortillas. You would have to talk to a corn farmer to know if there is a nonfeed corn as well as sweet corn the way there is a bread wheat and a macaroni wheat as distinct from high protein feed wheats.

Posted by: wkwillis at December 22, 2004 01:19 PM


Anne - maybe I'm dense, but I don't understand what your comment has to do with Brad's post.

Maybe you should get your own blog (if you don't already have one)?

Posted by: Andrew Boucher at December 22, 2004 01:27 PM


Learning that America is cutting back food development assistance, is surprising and critical. Last night, I listened to Jeff Sachs talk about how little we contribute to such world development efforts. Then, Anne, who I dearly value, points out we are even doing less than Sachs knew. Yes; this fits any and every post. We need to look to our values.

Posted by: Jennifer at December 22, 2004 01:51 PM


Europe could also be doing a lot more in the way of food development assistance, as could Japan, Australia and Canada.

Posted by: Jennifer at December 22, 2004 02:19 PM


I guess you understand, Jennifer, that Anne's comment has nothing to do with Brad's post if it "fits any and every post". Everyone's special, so no one's special, so to speak.

Again, maybe Anne should put such stuff on a blog of her own. That shouldn't be taken as a criticism, it's more a constructive suggestion. She seems to have a fan club, of which Jennifer is one member, who like to read her stuff, so why not?

Maybe it would even be blog history - blog commentator out of the shadows and into her own blog - superstardom, or what have you.

Posted by: Andrew Boucher at December 22, 2004 02:36 PM


Andrew Boucher

I often read and enjoy read your Blog, and would like comments there as well. You have interesting things to say. The French also, however, need to work on development assistance.

Posted by: Jennifer at December 22, 2004 02:53 PM


A slowdown in the Japanese economy means the BoJ will be even less likely to let the Yen appreciate against the dollar. They will intervene to keep that from happening. This puts the pressure of a weak dollar mainly on the euro.

Posted by: steve at December 22, 2004 03:10 PM


Andrew

I just noticed a post by you that tells of Chinese tourists becoming the prime spenders in Paris stores this season. This is amazing.

Posted by: Jennifer at December 22, 2004 03:18 PM


WKWillis,

I’m not a corn farmer, but I do know a bit about corn, so here it goes. First, generally speaking corn is divided into flour, flint, dent, sweet, or pop corn. Any of these categories could be consumed by humans or used as feed for animals. Most “feed” and corn for human consumption in the US today is hybrid dent corn. There are other countries where flint corn is preferred. Most American Indian tribes in North America preferred flour or flint corns. The corn on the cob or in the can at your local grocery store is sweet corn, but the cornmeal, corn syrup etc. is dent corn. “Feed” corn is also dent corn. About the only commercially available non-dent, non-sweet corn out there is “blue” corn. My understanding is that most of the commercial varieties are flour corns, but I’m sure by now some yahoo has gone and hybridized a blue dent variety. The reason dent corns are preferred in the US is because hybrid dent corns tend to have the highest yields, although in terms of quality they aren’t necessarily superior.

As a bit of historical trivia, the dominance of hybrid dent corn in the US can be traced to Henry Wallace- yep, the Vice President Henry Wallace. Wallace started work developing hybrid corn varieties back in the 1930s using Reid’s Yellow Dent and Bloody Butcher, a fine southern red dent corn, as his base corns.


As for color, there is no tie between color and type. A dent corn could be blue, white, yellow, green, brown, purple, you name it. White corn is preferred in Africa, but keep in mind that was also true in 19th Century America. “Table” corn varieties were all white, and “feed” corn varieties were yellow and not fit for human consumption. If I’m not mistaken, the switch to yellow corn in the US was due to the introduction of Golden Bantam Sweet Corn in the early 20th Century. A heavy advertising campaign was needed to persuade people that a yellow “table” corn was perfectly acceptable. The advertising was so successful that yellow corn is now the norm.

Sorry Mr. Boucher, since this is really off topic.

Posted by: aiontay at December 22, 2004 04:01 PM


The discussion of corn was most interesting. The country that objected to corn distribution from America was Namibia. Namibia seels a considerable amount of beef to Europe. Indeed they are the largest national supplier. Europe will not buy beef that is fed on genetically altered corn. So, Namibia had to stop corn imports from South Africa and refused corn from America.

Were we to look at Africa, we would find much conflict that agricultural development assistance might do much to allievate. We owe far more than we are giving in assistance to Africa, and agricultural development assistance is critical.

Posted by: anne at December 22, 2004 05:04 PM


Thanks to Aiontay for that interesting discussion of corn. Actually, I frequently buy white corn at the supermarket when they have it. When I used to shop at the Safeway store in Orinda CA, I couldn’t get any kind of corn in the produce section. At that time, circa 1990, the produce manager told me that they don’t sell corn. He acted as if it were a strange request. It reminded me of the time when I couldn’t get halibut at a restaurant right on the Homer Spit in Alaska. There was halibut everywhere, even right outside the door of the restaurant. But getting back to corn in Africa. I don’t think it was a question of genetically modified corn, but an affront at being offered yellow corn instead of white. It seemed like bad public relations to be so fussy when someone offers you food. Should they be surprised when their food aid gets cut?

Posted by: A. Zarkov at December 22, 2004 05:07 PM


A Zarkov

Though I will dig around again, the problem that confronted Namibia was so difficult. Corn is a most important food stuff, and the prospect of genetically altered corn becoming part of the animal feed or taking hold in Namibia was really a matter of concern. There are times when we simply have to be respectful of culture and needs even when we have tried to do our best. We then do a little more.

Posted by: anne at December 22, 2004 05:45 PM


Aiontay and all.

Lovely comments.

Posted by: anne at December 22, 2004 06:08 PM


I'm pretty sure the issue in Africa was mainly the fact that the corn GM corn, and they, rightly or wrongly, were afraid of GM corn. Genetically modified crops have also been an issue in Thailand and India. I'm pretty sure the country that refused the corn during a famine was Zimbabwe (sp?). Of course, the main problem could have just been Mugabe being an idiot.

On the other hand, quite a few countries are much more concerned with genetic modifications of common crops than the US seems to be- rightly in my opinion- so they might resent what could be seen as an attempt to force them to use GM corn due to their misfortune.

Posted by: aiontay at December 22, 2004 06:19 PM


Aiontay

Absolutely, you are right about Zimbabwe rejecting American corn. Also, in the episode of Janaury 2003, Zambia and Malawi. Europe actively discouraged the acception of genetically altered corn by Zambia and Malawi.

Posted by: anne at December 22, 2004 06:43 PM


Monthly and even quarterly economic statistics tell you basically nothing about the performance of an economy, because there is so much "noise". And Japan's monthly statistics are especially prone to large and unpredictable revisions. Still, as another poster above implies, some people just need an excuse to worry.

Posted by: PJ at December 23, 2004 03:56 AM


When I was lived and worked in Japan in the mid and late '70s, my Japanese colleagues repeatedly stressed that because Japan imports nearly all its energy and raw materials, success in export manufacturing is vital to its survival. Then and now, I thought it was an obvious corollary that they should want the yen-dollar rate as high as possible, to get the imports as cheaply as possible, and devote their resources as much as possible to improving their (then quite low) standard of living.

By the end of the '70s, this was beginning to happen. The yen had risen to around 180 to the dollar, and the question of how to deal with the enormous stress imposed by that rate (and turn it to advantage) was a very hot topic in the Japanese company where I worked. One reaction was to site the factory for a new product line in Georgia, rather than Japan. To stay in the game against American competitors, the company had to sell its products essentially at cost of production, hoping to make some profit on maintenance contracts in the future.

Had it not been for the rise in the dollar spurred by the high US interest rates of the early '80s, initiated by Volker's inflation-fighting policies and then exacerbated by the bone-headed Reagan deficits, Japan's economic structure might have evolved in the direction of a rational balance between import and export. When the rate was at 180 yen/$, the view was that 210 yen/$ would be about right for competitive balance between Japanese and US manufactures. But then the rate went back through that to 250+ yen/$, putting US manufacturers at an even greater disadvantage than the Japanese suffered at 180. Selling against competitors whose exchange rate lets them price 20% below you is pretty damn hard (in manufacturing, the percentage of imported factors made cheaper by a high exchange rate is rarely high enough to give any meaningful offset).

The resulting trade imbalances then led to the pressure on Japan to stimulate domestic consumption, leading turn to its stock and land bubbles of the late '80s, the side effects of whose bursting led in turn to other problems.

I wonder whether all of our current economic problems might not be traceable to our failure to place international trade on a basis such that no country could for long import goods having an economic value of "X" without also being forced to export goods of equal value.

Posted by: jm at December 23, 2004 12:18 PM