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Sunday, February 15, 2009

Japanese Q4 GDP -12.7 Annualized

That's a major ouchie.

GDP at -3.3% on the fourth quarter, which is more than 3 times the US drop and more than twice the European drop. The Japanese government dates the beginning of their recession to November 07, one month before the US start date. It would seem that Japan's GDP will end up contracting over 5% over Q4 08 and Q1 09.

The layoffs in Japan are really picking up, so their downturn has some legs as household spending continues to drop. In Germany, retail sales were still pretty good in the fourth quarter, but their layoffs will tend to draw down household incomes in 2009.

Worse yet, Japan needs a decent rebound in either China or the US before it can see much improvement, as last year exports to China surpassed exports to the US, continuing a long term trend. However, China's economy is dependent on exports to Europe, the US and Japan, and since Japanese domestic demand is destined to fall, there is a recursive downward loop here. What has in the recent years been a stabilizer for Japan ( Asian exports countering the effect of a strong yen and weak US sales ) has now shifted to a negative loop.

More background in this article (most figures from 2005). You can see balance of trade figures and more background information at this link, plus varieties of a graph of trade balance.

In the past there has been a good correlation between US trucking stats and Japanese exports, thus trade balance.


Today the Obama administration released some info about the budget they're going to send to Congress this week.

I was wondering if you have any idea what this means for venture capital firms?

"The president will propose to tax the investment income of hedge fund and private equity partners at ordinary income tax rates, which are now as high as 35 percent and could return to 39.6 percent under Mr. Obama’s plans, instead of at the capital gains rate, which is 15 percent at most."


If I'm understanding this correctly, VC firms will be heavily taxed on their successful ventures. This will essentially end the VC market as a source of capital for startups. There will be no more technological revolutions for the forseeable future--no "green" energy revolution, no biotech revolution. New technology will be the sole domain of the government and the Fortune 500. The technology "pipeline" will be clogged permanently.

I'm hoping I've misunderstood this policy. Do you have any insight here?
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