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Thursday, February 25, 2016

Safes Sold Out In Japan

Is it better to be safe than sorry?

Well… at least it's a better option than sticking it inside a mattress.

Right now, the majority of the Japanese populace isn't spending any of its hard-earned money.

Nothing wrong with saving money—or so I hear… never really done that - just always lived and enjoyed while I can… but when money remains stagnant and isn't moved throughout the economy, the economy takes it up the butt.

On January 29, 2016, The Bank of Japan—in a surprise move—joined the negative interest rate club to true and force consumers to spend some of that money they were saving.   

What is a negative interest rate? Well… you know how when you put money in a bank and hope to earn a pittance of interest?

Well… with a negative interest rate, the customer pays the bank to hold onto their cash.

However… economists have found that rather than taking their money out to spend it and help stimulate the greater Japanese economy by purchasing more porn-related items, foods and booze, the Japanese are hoarding it.

Now… where does one keep all one's money when it's not in a bank?

Myself, it's all in my wallet… all $13.47 - and I get to survive on that until Friday… of course,… with my car blowing something in the starter engine last Saturday, I still have to pay my mechanic $400+. Same as it ever was. Same as it ever was. It's actually quite amusing… because what else can one do, but laugh?

The Bank of Japan isn't laughing however, because the Japanese aren't spending their just-removed bank money, nor are they storing it in fat wallets - no… they are purchasing safes/vaults… to store their hoards of yen.

In fact… there has been a surge in Japan's economy… but only for the sale of safes.

Shimachu Co.—a Japanese chain store retailer that sells hardware and home products—said on February 22, 2016 that the sale of safes in the week that ended Sunday were 2.5x higher than in the same period a year earlier.

Maybe I'm just ignorant, but I would like to know HOW MANY safes are sold during any given week in Japan. Five? 10? 50? $1,000?

This is the best way to gauge if there really is a run on safes at home. There's a baseball analogy in there, somewhere.

For example, although Shimachi Co. says that one brand of $700 safe is sold out and they won't be getting any more in for a month - If 1,000 safes was the normal number of safes sold, and there was an uptick to 2.5x the number of safes sold…

… that means that 2,500 safes were sold.

Okay… out of how many Japanese people?

There are, as of July 2015, some 127.3 million Japanese people.

That would imply that there was one safe purchased for every 50,920 people.

Let's assume for the sake of argument, that the average Japanese family size (per -the Organisation for Economic Co-operation and Development) is 2.71 people per household  (a lot of Japanese families will also have older members living with them, which helps offset the low birth rate the country has experienced over the past 10+ years).

50,920 divided by 2.71 =  18,790 (rounded up) - which would be per household… so one out of every

One out of every 18,790 Japanese households have purchased a safe recently?

Of course not.

There is no way in hell that Japan has seen safe sales of 1,000 per month.

For one thing, not every one can afford such an extravagance. Not everyone sees the need for a safe.

Not everyone has even thought about purchasing a safe. And maybe not everyone has thought about removing money from the bank, despite the negative interest rates.

To be honest, here in Canada… we have a hidden negative interest rate.

Money is in the bank… maybe we get 3% interest on it. Now… despite what you mighty have heard, many people in Canada do live from paycheck to paycheck (interesting that we don't say 'paycheque', even though Canadians write 'cheque' rather than 'check')… now, supposing one can maintain a positive balance, Canadians use their ATM/Debit (Automated Teller Machine/Debit) card to pay for a lot of their purchases or to pull money out from an ATM to pay in cash.

There are charges for such transactions - if you can find and use an ATM machine from your bank, you are charged regular monthly rates. If you use another bank's machine, you get charged a surcharge.

I wonder… if we were to add up all of the usual monthly bank charges, would it be greater than or equal to or less than the interest we earn on he money we have placed with in our bank's savings/chequing accounts?

I have no idea, but perhaps one of you smart people has a legitimate answer that can be explained without a lot of double-talk to an ignorant mass such as myself.

Anyhow… despite media jumping on the band wagon regarding Japan's negative interest rate causing the sales of safes to increase and not much else, I just wanted to temper that fear-mongering by the media - including the Wall Street Journal - that it's hardly the collapse of the Roman Empire (which took decades, by the way).

It's an amusing little story.

Yes… sales of safes in Japan have gone up - and gone up a lot… but it's hardly such a huge number… does any news report provide you with a figure of safe sales per capita that would make one think that Japan's economy is anything but safe?

Yeah… Japan's economy is in the toilet. So are a lot of countries. 

The story, however, is really about how the Bank of Japan's idea to force consumer spending via negative bank interest rates has been stymied.    

Considering most Japanese tend to utilize the humble futon as their bed, perhaps safes and vaults can beam the de facto hoarding solution as mattresses are not all that common.

Or, you could follow the sage advice from a Japanese man quoted in a recent Wall Street Journal article:     

“I am a bit worried about what will happen next,” said Kazuo Matsumoto, a customer at one of the Shimachu stores in Tokyo. While he didn’t buy a safe, the 64-year-old said he might turn some of his cash into gold and keep it inside a safe-deposit box he rents.

That… is actually a pretty smart idea.

By the way... according to the OECD, as of 2014, Japan's annual household disposable income was negative, with a -0.92 annual growth rate. So... despite the Bank of Japan wanting the populace to spend more money, they have less of it available to spend—even before factoring in the cost for a new safe which can be used to keep that shrinking pile of cash.  

Andrew Joseph

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