Japan Return to '91 GDP Gives Markets Mega Risk Crisis

[The Northerner]

Jan. 4 (Bloomberg) -- Japan’s Prime Minister, Yukio Hatoyama, swept to power by a public seeking an end to economic and political stagnation, is failing to arrest the nation’s decline.

Japanese gross domestic product shrank to an annualized 471 trillion yen ($5 trillion) in the third quarter, without accounting for changes in prices, the lowest level since 1991. The tumble is unprecedented among the biggest economies since the 1930s, according to Paul Sheard, global chief economist at Nomura Securities International Inc. in New York. As a result of the contraction, the Finance Ministry projects tax revenue this year will drop to a quarter-century low.

Hatoyama’s 2010 budget, released Dec. 25, does nothing to rein in record deficits that threaten Japan’s Aa2 rating, said Carl Weinberg, chief economist at High Frequency Economics. It avoided consumption-tax increases or deregulation to boost productivity; without policy changes, deflation and a shrinking population risk eroding the savings pool restraining Japan’s bond yields.

“Japan’s fiscal conditions are close to a melting point,” said Takeshi Fujimaki, a former adviser to billionaire investor George Soros and now president of Fujimaki Japan, an investment advising company in Tokyo. “My biggest concern is whether the Japanese government will be able to sell all the bonds at auctions,” he said, adding that such failures might send 10- year note yields climbing through 2.4 percent.

Read more: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aJFLmoxlrjhE

[Double T]

1. Guess what?

The USA is paralleling many of the things done wrong in Japan's 'lost decade' and is also doing nothing to rein in our own staggering deficits and debt. Many major world economies are close to a melting point. To claim the USA recession is over and recovery has started is delusional. Worst part is nothing is being done to stop it from melting down. Looks like 2010 is going to be a bumpy ride, hang onto your wallet.