Japan Tells Firms "Stop Sitting on Cash", Ignore the Lack of Customers

If you are looking for idiotic policies in action, the theories of Japanese Prime Minister Shinzo Abe should be right in your spotlight.

Abe now tells Japanese firms "Stop Sitting on Cash"

Okuma, a Japanese machine-tool maker, has seen its stock price rise around 30% this year. Its customers have outdated machinery that needs replacing. But, for now, the company isn't investing. Instead, it is sitting on a pile of cash worth about $280 million—50% higher than its pile a decade ago, equivalent to one-fifth its annual sales, and more than twice the level required for the firm to be deemed loan-worthy by a bank.

Why? Senior director Chikashi Horie says the answer is simple. Okuma's clients "are not investing, not even to raise efficiency, so we are not investing either," he says.

Okuma's thinking embodies one of the key challenges for Prime Minister Shinzo Abe's ambitious growth plan: persuading Japan's famously stingy companies to stop stashing their earnings in the bank, and putting the money to more productive use, helping complete—rather than short-circuit—the virtuous economic cycle.

Blatantly Obvious Idiocy

What is with these central planning fools anyway?

Not only do they think they know better than the free markets, they want companies to produce what their customers clearly do not want.

The irony in this situation is that Abe is hell bent on producing inflation in Japan.

Here's a simple question: What happens to prices when more products are produced in the face of falling or static demand?

Abe is a fool in the first place for his inflation targets, but he is even more of a fool to think producing merchandise no one wants is the way to achieve that goal.

 Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com