|
The Japanese government and the LDP are accelerating the arms race in the name of the Ukraine war. It has articulated plans to increase defense spending to 2 percent of gross domestic product (GDP) and is working on strengthening weapons to reflect "enemy base attack capability." Nihon Keizai Shimbun said on the 7th that the Liberal Democratic Party plans to propose to the government to increase defense spending and introduce military equipment by the end of this month, while keeping in mind the emergency (war) in Taiwan, the national plan is revised to the end of this year. He reports that his goal is to embody this in a security strategy. The newspaper added that Russia's invasion of Ukraine had sparked public opinion on strengthening Japan's defense capabilities, and the proposal was being brought forward a month earlier. The main content of the Liberal Democratic Party's proposal is to increase defense spending. It will include a plan to raise defense spending to more than 2 percent of GDP from the current level of 1 percent. Achieving measures such as expected timing and annual increases will be more specific than ever. There are two main reasons why the Democratic Party insists on increasing defense spending. With the Ukrainian war and the U.S. having to deal with Russia, Japan must strengthen its defenses against China and North Korea. Internationally, the U.S. defense budget for fiscal year 2023 (October 2022-September 2011) increased by 4.2% compared with this year, and Germany also increased its total domestic production to more than 2%, a trend that continues. "The LDP's goal is to spark public discussion about possible emergencies across Japan after the Ukrainian invasion," the Nikkei reported. The fact that the LDP has moved so quickly is largely influenced by public opinion. A telephone poll conducted by the Yomiuri Shimbun from the 1st to the 3rd showed that 64% of people answered "agree" to strengthen Japan's defense capabilities. Former Prime Minister Shinzo Abe has also been insisting on increasing defense spending. Former Prime Minister Abe said in a speech on the 3rd in Yamaguchi Prefecture, his region, "(defense spending) 2022 (2021) supplementary budget". That adds up to about 6 trillion yen. It's important to secure this money in next year's budget. This year's defense spending is about 5.45 trillion yen, which is the norm for this budget, which, as former Prime Minister Abe said, must be increased by about 11.1 percent. The LDP is expected to include concerns about having direct attacks on neighboring countries such as North Korea and China. Specific details of the missile base's "enemy base attack capability." It is planning to request the introduction of military equipment to increase deterrence against North Korea and China, and to tease out the methods and conditions for having an "enemy base attack capability." The Japanese government is also accelerating the expansion of weapons. The Tokyo Shimbun plans to increase the long-range "stand-off" missile Self-Defense Forces based on the revision of the Ministry of Defense's "Mid-term Defense Forces Development Plan" on the National Defense Program Outline and Weapon Systems, which was reported at a private meeting held by the Liberal Democratic Party's Security Investigation Committee. "The purpose is to strengthen deterrence against China and North Korea by increasing the production and performance of weapons that can be converted into capabilities to attack enemy bases," the newspaper analyzed. The Defense Ministry said at a closed meeting that it called for improvements. "Type 12 Surface-to-Ship Missile (SSM)" and secure budget for early commercialization. The Ministry of Defense plans to increase the range of 200 kilometers to more than 1,000 kilometers, five times the current range of 200 kilometers, not only on the ground and on ships, but also on fighter jets and deployed in actual combat until the second half of the 2020s, which is being promoted middle. |
|
For some 40 years after the Nixon shock of 1973 in the second half of the 20th century, the world's currency was changed to a floating exchange rate system, the Japanese economy was overwhelmed by the depreciation of the yen and the appreciation of the yen. Afraid of the appreciation of the yen, and relieved by the depreciation of the yen, this habit has been deeply rooted in Japan since this time. This is because the Japanese economy at that time was driven by manufacturing for exports. It's natural to think about it. At that time, the number one manufacturing industry in Japan was the automobile industry, and its largest market was the United States. Suppose you have a car that sells for $20,000 in the US. Assuming that one dollar is 100 yen, the cost of exporting a complete vehicle from Japan is 1.2 million yen. The cost in dollars is $12,000 and the gross profit is $8,000. (Actually, a portion of the profit goes to wholesalers and dealers.) When this price rises to 80 yen per dollar, the cost in dollars rises to $15,000, or 1.2 million yen divided by 80 yen. Gross profit decreased to $5,000. If it's in Japanese yen, it's actually the same, but this time the $20,000 price tag will be 1.6 million yen instead of 1 million yen. Therefore, in Japan at that time, the formulas of "a strong yen is recession" and "a weak yen is prosperity" were established. After that, in the "Abenomics" conducted by the Abe administration at the time in the 2010s, the yen exchange rate must have been successful in inducing cheapness. But it's not as effective as it was at the end of the 20th century. <Deindustrialization of major industries> This is because the Japanese economy is being hollowed out. Most cars in North America are produced locally. Although it has fluctuated in recent years, the Japanese auto industry as a whole is about 20% domestic production and 80% overseas production. Since domestic production includes minicars, the foreign share in currency terms is higher. Although the parts and material industry is still in Japan, the composition is that large components such as engines are assembled in China, and the complete vehicle is in North America. In this case, the contribution of a car's sales to Japan's economy, or GDP, is extremely limited. Still, the business community wanted the yen to depreciate, and the Abe government responded with another purpose. As a result, multinational companies from Japan, such as the auto industry, appear to expand when converted into yen due to the depreciation of the yen. In addition, shares in many companies are held by overseas shareholders and traded in overseas markets such as New York. Therefore, stock prices are formed by the dollar, but if the yen depreciates, the stock prices in yen will expand. Therefore, if viewed purely in Japanese yen, it means "unprecedented profits in the market" or "unprecedented share prices" of multinational companies. |
|
Top Fed officials, eager to tackle the latest inflation, say they are continuing to raise interest rates, even in the euro zone, where Ukraine's invasion has fueled fears of a slowdown in economic growth. The European Central Bank (ECB) is accelerating its hawkishness. Ironically, there is growing concern about economic overkill as monetary policy is over-tightened. Attention has focused on the difficulty of quelling inflation (a so-called soft landing) without causing a recession. Both the U.S. and European Central Banks maintained their stance on a successful soft landing, but as the pace of rate hikes progressed, Oxford Economics faced the risk of excessive rate hikes, increasing significantly with each rate hike. The main reason for the difficult soft landing is that the impact of monetary tightening on the economy and prices cannot be known until more than half a year in advance. Although not sure which route it is and how big the impact is, if you notice it, it is likely to tighten too much, and even if you rush to cut interest rates, you will lose it sooner or later. Worryingly, uncertainty about the effects of tightening is a move by banks to tighten corporate credit standards from a global perspective. |
