The impotence of monetary policy

For my part, I am with Richard Koo. Monetary policy reflation will not work in a balance sheet recession when fiscal policy is contractionary. But at some point, the Fed will be compelled to act anyway

Roach: Return of the Living Dead

Rather than adding stimulus with the aim of goosing demand to help the economy reach escape velocity, I would say that the central objective of economic policy is to help the economy reach full employment. Doing so will increase demand, increase output, and cut budget deficits tremendously. Policy makers should do this while aiding the economy in reallocating scarce resources to areas that will sustain longer-term productivity growth. In America, that means less resources in finance and housing and perhaps more in technology and infrastructure

Chart of the Day: How Deep Was Your Recession?

I mean to ask how deep the downturn in your country was. On Tuesday, Martin Wolf had a good graphic on this. The upshot of his analysis is that while US GDP growth compares favourably to Japan and Western Europe, its unemployment compares unfavourably to Germany in particular

Fukushima Daiichi Disaster Prompts Closure of Another Plant

As workers continue to battle with the crippled Fukushima Daiichi Nuclear Plant, more impacts from the worst nuclear disaster since Chernobyl are starting to arise. The latest impact will hit car manufacturers, with plants in central Japan hit the hardest: power firm Chubu Electric has agreed to shut its Hamaoka Nuclear Plant until it can build better defenses against the kind of massive earthquake and tsunami that hit on March 11, and Hamaoka provides power to at least 15 auto plants

Waiting for Trichet, but Watching the Yen

Dollar stronger against most majors, but the yen is the strongest currency today, breaking 80
The ECB is meeting and Trichet’s press conference should be the key news today
BOE leaves rates unchanged as expected

Chart of the Day: Japanese Money Stock – M3

Despite pumping trillions of yen into the economy over the last decade, Japan’s M3 money stock is no higher now than it was at the beginning of the last decade as the private sector has deleveraged

Japan’s Economy Fights For Air

With the arrival of the first real Japanese data since the Tsunami struck the immensity of the tragedy which Japan is passing through is only now gradually becoming apparent. Exports were down by a seasonally adjusted 7.7% in March over February, while imports were only fell by a much more modest 1.4%, with the inevitable consequence that the trade surplus which forms the lifeline for Japan’s fragile economy shrank sharply. In particular car production was badly hit, with output at Toyota plunging 62.7% during the month, while Nissan reported a drop of 52.4% and Honda put the shrinkage in its Japanese domestic production at 62.9% adding that output would be at 50 percent of its former projections until at least the end of June.

In fact March output across the whole of Japanese industry fell at a record monthly pace of 15.3%, while household spending declined at the record annual rate of 8.5%

Slow progress at Fukushima Daiichi

The outcome at the embattled Fukushima Daiichi nuclear plant is so important to the future of nuclear power that we thought an update would be in order. The long and the short of it is that Tepco is making progress, but oh so slowly

Japan is even worse than the economic data suggest

The power shortages and damaged factories are taking a larger toll than was initially evident. Press reports, for example, warn that the contagion via the supply chains may have greater global impact, which in turn could impact the manufacturing activity outside of Japan. Toyota, the world’s largest auto producer, has indicated that its output collapsed by nearly 2/3 in March compared with a year earlier. Honda’s loss of output was similar while Nissan reports its auto output was cut by a little more than half. One press report indicated that Toyota will cuts its output from its Melbourne, Australia plant by half this month and next, citing a shortage of parts that were to be shipped from Japan.
While the disruption emanating from Japan will hit other auto sectors on the margin, the disruption of the Japanese economy itself appears more severe. Moody’s today revised this year to 0.0%-1.0% from 1.5% and with downside risks

GDP, Policy Mixes and Sterling-Yen Trade Idea

The US and UK report their first estimates of Q1 11 GDP this week. While the US economic data, like ISM readings suggest the US economy is enjoying reasonably good momentum, the GDP components are distinctly softer and suggest a disappointing sub-2% reading. Headwinds caused by higher oil prices, which appears to have been a factor cutting into consumption, and the ever-difficult-to forecast– inventory data, appear to be the main culprits

INET Video: Richard Koo on Balance Sheet Recessions

Below is a video of Richard Koo from this past weekend’s INET conference in Bretton Woods giving us his latest thoughts on policy responses to a balance sheet recession. He believes that Europe, the U.S. and China have much to learn from Japan ‘s post-1990 balance sheet recession.

Notes from Private Briefing with BOJ

By Marc Chandler The BOJ’s rep office in NY invited a number of analysts to meet the Deputy Director of the stats office and hear a presentation about the economic impact from the recent disaster. The key take away points from the BOJ is that disaster may not be as costly, but it will take