Japan’s Wage Debate Is Also Our Debate

Japanese consumer confidence has “contracted for the third straight month in February to 38.2.  That’s the worst reading since Mr. Abe entered office in January 2013 and the lowest since September 2011.”  Interestingly enough, business sentiment was at an all-time high in the January-March period.  So consumers and businesses are separated by their attitudes towards the future; we might conclude that the upcoming rise in sales tax from Prime Minister Shinzo Abe has people a bit unsure of its impact.  In an attempt to offset the impact of his sales tax hike, Abe has been lobbying Japanese businesses for a broad wage increase; his efforts seem to be paying off at Toyota, Hitachi and Panasonic.  “But this first batch of companies in Japan’s annual ‘spring labor offensive’ represent the bluest of the blue chips; the vast majority of Japanese employees work for smaller companies that haven’t benefited as much from ‘Abenomics.’…For example, when big car makers such as Toyota raise base pay for their workers, they can squeeze suppliers to cut costs, putting downward pressure on their wages and diluting the economic lift of the wage gains at the top.”  Abenomics is providing a real life experiment for an academic debate: “Have stagnant wages been a cause, or a result, of deflation?  And will lifting wages cure the disease, or, absent other fixes, just create more ailments?”  Meanwhile, “cash bonuses paid to Wall Street employees in New York City rose 15 percent on average last year, to $164,1530…the biggest average bonus since 2007.”  The increase occurred despite a slight decline (1.2%) in employment year-over-year.  ”A range of businesses in New York — from restaurants to luxury real estate — pin their fortunes to Wall Street pay.  While the financial industry makes up just 5 percent of jobs in the city, those jobs account for 22 percent of the city’s wages.”  Also, “Wall Street’s biggest firms are close to agreeing on a plan that would safeguard the financial markets from the crippling fire sales that engulfed Lehman Brothers Holdings Inc. and Bear Stearns Cos.  Prodded by the Fed, industry groups with the support of dealers, banks and investors are coalescing around proposals to guarantee the most-liquid types of collateral used to borrow money in repurchase agreements…guidelines to ensure investors who accept riskier assets can price, hold or sell the collateral if a dealer defaults are also being discussed.”

UK: Further Decoupling From EU?  George Soros on George Soros: Be Careful.

One Reuters poll finds that “a significant number of economists have doubts about the European Central Bank’s view that deflation is not a threat and that the recovery will take hold without any more action.”  Meanwhile, another Reuters poll suggests “Britain’s economy will grow faster than any other G7 nation in coming quarters, but the Bank of England will not raise interest rates until next year to avoid choking off the recovery.”  Also, George Soros, “the man who nearly broke the Bank of England with a huge bet against the pound in 1992,” says “an independent Scottish currency could be vulnerable to attack from the type of speculation he used to practice.”

USA: Surprise 5 Million Barrel Crude Oil Reserve Sale

“The U.S. Department of Energy will sell up to 5 million barrels of crude oil from the Strategic Petroleum Reserve, a move it said was to test the capabilities of the nation’s emergency stockpile in a rapidly changing oil market.  In the first sale from the reserve since 1990 that is specifically designed as a test, the department will offer sour crude from its West Hackberry and Big Hill sites on the U.S. Gulf coast.”

Global: Cash Abroad Rises $206 Billion As Apple To IBM Avoid Tax

“Multinational companies have accumulated $1.95 trillion outside the U.S., up 11.8 percent from a year earlier, according to securities filings from 307 corporations reviewed by Bloomberg News.  Three U.S.-based companies — Microsoft Corp., Apple Inc. and International Business Machines Corp. — added $37.5 billion, or 18.2 percent of the total increase…The top 15 companies now hold $795.2 billion outside the U.S., up to 10.6 percent.  That increase was slower than the 15.9 percent rise in stockpiled profits those same companies had the previous year.”

USA: State Revenue Growth Has Slowed Sharply

“The strong revenue growth that U.S. states enjoyed early in 2013 from taxpayers taking advantage of expiring tax breaks has ended, with revenues registering only a scant gain in the fourth quarter.”

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