Forum Topics MFM Mailbag: What is going on in Japan?
DVV1974
Added a month ago

@Strawman you shared some interesting views on Japan's economic situation that resonated with me because I, like the questioner Joel, have also lived in Japan for a long time now and have a young child whose future concerns me. The amount of debt and money printing that has been going on makes me nervous because I earn yen through my job, and the good times are over when I could send money back to Australia (to invest) and come out on top with the currency exchange. Luckily, I made the most of those good times and have been able to grow a sizable portfolio in Australia and the U.S., but not domestically in Japan because I just wasn't sure how long I would end up staying here. Having an escape hatch (returning to Australia) has always been an important option for me (like your analogy of stepping closer to the lifeboat as the captain steers the ship towards the iceberg). There has been talk of putting the consumer sales tax on hold for 2 years, which makes me even more nervous because one has to ask: How are you going to fill that gaping hole? Where/who are you going to try and get that money from? Dividends are taxed as general income (10%) here, and there has been talk before of raising that, which would make me pull the trigger to leave the country. At some point, Japan will have to get serious and address its economic problems rather than political points-scoring, and it will more than likely (IMO) cause a lot of pain for anyone who does not own assets, has only one income stream, is leveraged up to the eyeballs in debt.

POINT: Japan's peculiar economic situation is only going to end up in tears for the average citizen (IMO) because wages have been stagnate for decades and a lot of people have no idea what's coming because what Japan is doing is just not sustainable, which makes it all the more concerning.

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Strawman
Added a month ago

Fascinating to get the local perspective and experience @DVV1974

This is why we need to bang the table so hard when it comes to monetary manipulation and fiscal extravagance, well intentioned though it may be.

The bottom line is that these policies impact ordinary people in very real ways. We see reduced real wages and eroded savings, which essentially means people have to work harder just to stay in the same place. It incentivises asset speculation over productive endeavours, helps exacerbate the wealth divide and sow political division.

Japan should be a cautionary tale for us all since the West is very much on the same path. It is a slow motion car crash that takes a long time to play out, often much longer than the bears tend to expect. Even though a major breaking point may remain far off and impossible to time, there is a steady erosion of livelihoods along the way.

It breaks your heart.

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DVV1974
Added a month ago

@Strawman as a consequence of the economic situation in Japan and the yen losing more and more purchasing power by the year, I have been trading my yen tokens for BTC on a regular basis to try and preserve some domestic operational wealth. There is no incentive to work my ass off for yen, but there is incentive to switch yen into BTC (hopefully my child can benefit from this one day regardless of what he decides to do or where he may live). There is hope (in my mind) and the struggle continues.

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Strawman
Added a month ago

Makes perfect sense to me @DVV1974. Good move

All of this has reminded me of what Buffett said last year re debasement and their position in Japanese stocks (not that he's a fan of BTC, mind you)

https://youtu.be/w1YaS_lSAmw?si=oaAMd-DwLtT8wmUu

At first, it feels a bit like he's contradicted himself, talking of the dangers of fiscal profligacy and currency debasement, but then borrowing in yen and buying Japanese equity.

But he's essentially playing both sides of the coin to protect his purchasing power. By buying those Japanese trading houses, he’s owning real businesses with global cash flows that can raise prices to keep up with inflation (a proven shield against currency debasement). At the same time, he’s funding those purchases by borrowing in yen. So if the yen continues to lose value (debase) against the dollar, the real cost of paying back that debt actually gets cheaper for Berkshire. He’s basically using a depreciating currency to buy appreciating assets, effectively letting the trend work in his favor while his equity stake stays protected.

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