Do it yourself

The tremendous economic growth achieved by Japan in the post-WWII era is popularly known as “The Japanese Economic Miracle”. It was in fact nothing less than a miracle – a country totally devastated by war rose from ashes to become one of the largest economies in the world. Japan recorded a high rate of economic growth during 1950-1975. The growth was primarily led by strong capital accumulation, strategic initiatives to expand trade share in global markets, concentration on technology development & innovation, and development of a strong high-quality ethical workforce. Supported by benign monetary policy, easy credit, and profligate fiscal policies, by the end of the 1970s, Japan had become a powerhouse of technology and finance. The 1980s however witnessed unprecedented heating of the Japanese economy. Asset prices ballooned to unsustainable levels. The Bank of Japan, in its wisdom, decided not to tighten the monetary policy to control the surging asset prices. Low rates...

In a world where almost every central banker is struggling to contain inflation and tightening monetary policy, the People’s Bank of China (PoBC) seems to be facing a different set of problems and hence adopting a divergent policy approach. PoBC has actually cut the key loan prime rate (LPR) twice in 2022. It is pertinent to note that the Chinese economic growth has been on the decline ever since the global financial crisis. The pandemic has slowed the growth even further. The latest growth data suggests that the Chinese economy is growing less than 5% this year, its lowest growth rate in at least three decades. Some part of the growth decline could be attributed to the zero tolerance policy towards Covid and stringent lockdown; but it is important to keep the declining trend since 2010 in mind.   Considering that China has been one of the key growth drivers of the global economy; declining Chinese economy is a matter of concern for all. Besides, China has been one of the primary (...

In recent days the following three global trends have evoked much interest amongst market participants: 1.     The production, consumption and import of commodities in China have increased materially. 2.     The USD weakness is persisting. The China letting CNY appreciate against USD is noteworthy. 3.     BP in its yearly outlook virtually declared "peak oil" demand, stating that the oil demand growth may not be seen through 2050. These three trends are important in my view as these could materially influence the markets in short term. For past two decades, China has been a major driver of the commodities' demand and hence prices in the global market. The slowdown in Chinese economy in past 5years has led to correction in commodity prices, impacting a large number of commodity driven economies like Australia, Canada, OPEC countries, Brazil etc. This is cited as one of the reasons of sustained deflationary pressure on US, Japan and...