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Japan awaits their latest GDP report out on Monday (Sunday night for most) and they are expecting a second consecutive quarter of expansion, just like many of the other G7 countries. This really doesn't tell us all that much and neither does too much of the economic data that Japan releases.
Why will the US eventually get out of the ZIRP (zero interest rate policy) whether its in 2012 or later?
Answer: Population growth. See the chart below, the US is enjoying tremendous population growth but Japan and so many of the other G7 countries are not. It's unlikely that Japan will grow anytime soon w/ its low birth rate and immigration policies. It's not just Japan either, in Germany for example the birth rate ratio is 1.5, hardly high enough to maintain their population of approx. 83m.
In a nutshell, Zero percent population growth has and will keep domestic demand low leading to low consumer inflation levels leading to a very prolonged period of ZIRP in Japan.
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The population growth bodes well for the long-term of the US but for now the current consumption pattern is inconsistent. The US consumption pattern is following a similar pattern to that of the prior recession this decade, all except the 'cash for clunkers' which was a disappointment as compared to the 0% financing offered back in Oct '01. That may help stabilize matters in the medium-term but for now if we continue to follow the prior recession then we are due for a few more tough months ahead.
This and the 10.2% unemployment rate explain the weak U Mich figure. On that U Mich, the Expectations component fell to 68.6 and was the below the Current component. Poor indeed, especially considering that the stock market is forward looking and not looking at coincident indicators.
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Lastly, we revisit the Aussie jobs figures from this week. Remember that the headline figure initially was celebrated by the market but closer examination shows that its only part-time jobs being created this year. The chart below left does show an up-tick for full-time females but the "He" recession rolls on.
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The RBA has suggested that their labour market is still fairly tight and they are hiking for preventative measures, but the trend has not changed for the unemployed yet. It is still heading higher, there are potential signs of it topping out but going from unemployed to a part-time job won't necessitate too many more hikes from the RBA.
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