“The Japanese, you see, have been repeatedly drop-kicked, ever further down the timeline, by serial national traumata of quite unthinkable weirdness, by 150 years of deep, almost constant, change. The 20th century, for Japan, was like a ride on a rocket sled, with successive bundles of fuel igniting spontaneously, one after another.” – William Gibson “My Own Private Tokyo”

As most everyone else here, I’ve been staring at the financial news with my mouth open for so long I’ve been afraid of swallowing moscas. It was yesterday however, that I remembered that for the Japanese, this is only deja vu all over again.

From the International Herald Tribune:

“The financial crisis looks like fire on a distant shore,” said Atsushi Nakajima, chief economist at the research arm of Mizuho Financial Group. “Japan has remained very calm and peaceful.”

Part of the reason is that Japan has already suffered its agonizing crisis. The 1980s bubble economy collapsed in the 1990s because banks were burdened with real estate-related bad loans, not unlike those that Washington is preparing to take over from banks.

….

There have also been small but telltale signs of rising risk aversion in credit markets. Japanese banks raised short-term interbank lending rates to foreign banks to 0.7 percent, from 0.5 percent, though they still use the lower rate among themselves. That contrasts with New York, where a benchmark interbank lending rate has tripled in recent days to about 3 percent

….

When asked during a debate of prime minister candidates Friday whether Japan could assert more leadership during the crisis, the leading candidate, former Foreign Minister Taro Aso, said he was “proud that Japan was not involved in that money game,” referring to U.S. mortgage debt.

Economists and bankers say Japan is able to keep itself apart for a very simple reason: it has enough cash to finance its own needs.

The country has a $14 trillion pile of household savings, the product of decades of trade surpluses and frugal lifestyles. This has allowed Japan to finance its immense $8.1 trillion fiscal deficit and still have enough money left over to be the world’s largest creditor nation for the last 17 years.

….

That means that Japan’s domestic economy has been largely insulated from global credit market turmoil because it does not borrow from those markets

….

This blessing has also been a curse to investors, economists say. Japan’s wealth shields it from pressures to meet global standards of economic growth or corporate profitability. This is what allowed the nation to accept near zero growth rates in the 1990s and what allows the survival of Japanese corporate practices like valuing employees and clients over shareholders.

Takeaway

As I was on August 20, I still like [[FXY]] and long [[USO]] due to my impression that oil will base support up to $115 and then make a move one way or the other. Japan, on the other hand will return to being a money haven.

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