Yi and the International Market | Keiichirou Koyano's Website

“When analyzing the world economy and international markets, we use the outer hexagram. Especially with countries that are the opposite hexagram, there is a high possibility of a complementary relationship. To walk in a mutually complementary relationship, economic policies and financial policies work in a complementary manner. It is also necessary to look at the hexagram from the perspective of the other party. On top of that, we confirm the correlation with the inner hexagram. First, finance and financial affairs are compared, and household and exchange rates are the center. The price level is closely related to the household. The household is compared to finance and corporate accounting. The exchange rate is compared to the current account and finance. Finance is compared to finance and exchange rates, and corresponds to companies. Companies are compared to households and correspond to finance. Finance is compared to households and finance, and corresponds to the current account.

We look at the movements of countries in a complementary relationship. When the other party is rising, our country is falling, and when the other party is falling, our country is rising. This is because the economies of the two countries interact through trade. However, even if we try to forcibly push down the other country to raise our own country, the change will only be temporary, and it will destroy the balance and harmony of the world market and economy. This is because the cause of our country’s movement is mainly in our own market and economic conditions.

There is a hidden force in the entire world market that tries to balance living standards, income levels, and price levels.

When our economy is declining, we need to find the cause of the decline in our own circumstances and structure and consider restructuring. That is the law of nature and reason.

The market and economy are always working to balance. That force circulates “money” in the market and distributes wealth evenly. It also works to grow the economies of each country and improve and level the lives of people. When one side expands quantitatively, the other side improves in quality, and when one side grows, the other side matures. When one side goes for mass production, the other side seeks small quantities of various products. When one side saves through income, the other side invests and releases savings, preparing for the next development.

We determine the direction of movement and change, and then decide the state and direction to proceed next. Based on that, we decide the policies to be taken. It is an interaction. Forcing our own convenience on the other country will only provoke confrontation and will not lead to a fundamental solution. This is because the main cause of our economic condition lies in our internal structure. By repeating expansion and contraction periodically, the market grows with balanced mass and quality.

When the market is shrinking, it is an opportunity to shift from quantity to quality, from high quality, high-end, high unit price, mass production to small quantities of various products, and high value-added industries.

The current world economy is deeply connected through trade and is now inseparable and integrated. The key is where and what we import from and where and what we export to. No country can be in a state of isolation.

Just as there are four seasons in a year, spring, summer, autumn, and winter, the economy also has cycles.

The maturity period is like the autumn of harvest. We appreciate the rich harvest, prepare for the coming winter, and wait for spring. If we try to go back to summer or spring just because it is getting cold, we will rot the autumn harvest and lose the seeds to sow even when spring comes. We will not be able to survive the harsh winter.

In autumn, we appreciate autumn, in winter, we become familiar with winter, in spring, we rejoice in spring, and in summer, we enjoy summer.

The world cannot solve its own problems without mutual help and cooperation.

First, observe the relationships and arrangements of the outer hexagrams.

The first line of the outer hexagram represents the increase or decrease in financial balance, the second line represents exchange rates, and the third line represents the increase or decrease in financial balance.

The global market is chaotic.

Key Points of Analysis by I Ching

The number three is important. One becomes two, and two becomes three.

First, determine one origin point. Next, judge the situation with two points of yin and yang. Determine three elements, decide the arrangement of elements based on their functions, and set the relationships. By combining the three key points, derive eight patterns. Extract the characteristics and functions of each pattern.

For example, when analyzing the passage of time, determine the unit period. If the unit period is set to one year, observe three years as points. Judge the situation of each point in time with yin and yang. The first line is the third year, the second line is the second year, and the third line is the first year. I Ching is a reverse number. If the yin and yang of three years ago is the first line, the yin and yang of two years ago is the second line, and the yin and yang of one year ago is the third line, eight patterns of changes in the flow of time will appear.

When grasping the overall picture of the world market, First, broadly classify and position countries with a positive (surplus) current account and countries with a negative (deficit) current account. Next, classify countries with high and low exchange rates, and countries with strong and weak currencies. Then, further divide the financial account.

In this way, position each country in the world market based on the outer hexagram. Then, clarify the roles and functions between countries.

For detailed analysis, For example, in the current account, first determine whether it is a deficit or surplus to know the yin and yang. Then, delve into the details.

The current account consists of the trade balance and the service balance, so we will look at the trends by separating exports and imports into positive and negative. Similarly, we will look at the trends in the financial account by separating them into positive and negative to observe signs of change. At the detailed stage, it is not necessary to be particular about the form, but it is better to think simply by separating into positive and negative.

In viewing the current account, exports are positive, imports are negative, increases are positive, and decreases are negative. When the current account is in surplus and exports are increasing, it can be viewed as positive-positive-positive. In this way, it is also effective to observe the trends of the current account of the country.

The global market is driven by the large circulation of “money.” The large circulation of “money” causes flows through transactions, resulting in ups and downs, increases and decreases, ins and outs, ON and OFF, surpluses and shortages, openings and closings, expansions and contractions, deficits and surpluses. This is the concept of yin and yang. Yin and yang arise from the distinction between self and others, inside and outside. Yin and yang seek balance. Therefore, they generate attraction and repulsion, resulting in action and reaction. The entropy of the market increases.

Moreover, transactions are equivalent exchanges. The economic value within the scope of transactions is zero-sum balanced. Money flows from buyers to sellers. Money flows from sellers to buyers. This bidirectional flow forms transactions. Therefore, the economic value within transactions is preserved as zero-sum.

Interactions between countries arise from action and reaction, relationships. Where there is yin, there is yang. A country’s current account balance maintains equilibrium by periodically repeating deficits and surpluses.

When a country (self) trades with the global market, a current account balance arises. Trading with the global market creates relationships between inside (yin, hidden) and outside (yang, visible). The current account balance results in ins and outs, surpluses and deficits, surpluses and shortages, yin and yang. Deficits and surpluses periodically alternate, causing the circulation of goods and money.

Whether the citizens can produce or procure enough resources to maintain a minimum standard of living. This is a decisive indicator.

This is reflected in the current account balance.

Exchange rate fluctuations (yen appreciation, yen depreciation) arise from the current account balance.

The sun represents a current account surplus and yen appreciation. Lesser yin represents a current account surplus and yen depreciation. Lesser yang represents a current account deficit and yen appreciation. Greater yin represents a current account deficit and yen depreciation.

Exchange rate fluctuations result in lending and borrowing. Lending and borrowing result in changes in the financial balance.

Qian represents an increase in the current account balance, yen appreciation, and an increase in the financial balance. Dui represents a decrease in the current account balance, yen appreciation, and an increase in the financial balance. Li represents an increase in the current account balance, yen depreciation, and an increase in the financial balance. Zhen represents a decrease in the current account balance, yen depreciation, and an increase in the financial balance. Xun represents an increase in the current account balance, yen appreciation, and a decrease in the financial balance. Kan represents a decrease in the current account balance, yen appreciation, and a decrease in the financial balance. Gen represents an increase in the current account balance, yen depreciation, and a decrease in the financial balance. Kun represents a decrease in the current account balance, yen depreciation, and a decrease in the financial balance.

The hexagrams that form opposites are Qian and Kun, Dui and Gen, Li and Kan, Zhen and Xun.

The current account balance responds to fiscal policy. Additionally, exchange rates are influenced by the current account balance and finance, and households respond accordingly. Finance is influenced by fiscal policy and exchange rates, and businesses respond accordingly.

The fluctuations in exchange rates, yin and yang, affect trade and influence the current account balance. The yin and yang of the current account balance influence exchange rates. Furthermore, the yin and yang of exchange rates influence monetary policy and, in turn, affect government bonds. The yin and yang of government bonds influence fiscal policy. Additionally, the yin and yang of exchange rates affect prices and influence households. Moreover, the impact of the yin and yang of the current account balance and exchange rates is reflected in corporate performance. By quantifying the impact on each part, future predictions and appropriate policies can be clarified.

Post-war, Japan and the United States had a complementary relationship, as shown in the outer hexagrams. High economic growth, the bubble, and the burst of the bubble were all influenced by the relationship with the United States and the complementary relationship. The misfortune of both countries lies in the fact that they prioritized their own convenience without taking policies that would improve the situation for both countries based on this premise. Especially after the Plaza Accord and the burst of the bubble, the imbalance between fiscal policy and finance was a significant blow to both countries.

During the high economic growth period, the inner hexagrams were Xun or Kan. During the high economic growth period, fiscal policy and finance were balanced, but after the Plaza Accord, the influence of fiscal policy and finance expanded.

During the fixed exchange rate era, the price of gold was the standard. However, the fixed exchange rate fundamentally undervalued the yen, making it yin.

After the burst of the bubble, China began to cast a shadow between Japan and the United States. The relationship between the United States, Japan, and China is a triangular relationship.

Now, if the relationship between the United States and China is severed, the relationship between the United States, China, and Japan will fall into a conflicting relationship. The global market will return to chaos and the state of Taiji.

Income is expenditure, and expenditure is income. Therefore, no matter how much you suppress expenditure through discounts, if income decreases accordingly, the net effect is zero. Sales are costs, and costs are sales. If you endlessly cut costs, sales will also decrease. Prices have meaning, and costs have meaning. Prices are the result, and the meaning lies in the content. It is the process.

Prices are the result, the phenomenon that appears on the surface. The substance works behind the scenes. The content is in the middle, in the intermediate. In other words, what moves the market is the process. Water, in the process of flowing, moistens the soil, nurtures plants (trees), and sustains people. Money is the same. In the process of flowing, it creates employment and nurtures businesses.

What is important in the result is how it worked in the process. If you simply reduce costs and pass everything on to prices to seek cheapness, the market will dry up, and the market will become desolate. In the end, people will not be able to live.

What is required of prices is appropriateness, not cheapness. It means increasing savings after covering costs.

The sky is high, and the earth is low.

When the heavens and the earth are blocked, people cannot live in confinement.

The sky is high, and the earth is low, nourishing all things. Water circulates evenly across the earth, nurturing plants and quenching the thirst of living beings. Those who go against the heavenly principles and monopolize profits will be cursed by all things.

The heavenly principles lie in the harmony between heaven, earth, and humanity. Eventually, the heavenly mandate will descend.

The heavenly principles exist for those who nourish all things.

What is required in the economy is the harmony and balance of heaven, earth, and humanity. Heaven is gold. Earth is goods. Humanity is people.

If one is only obsessed with heaven, the earth will not receive the blessings of heaven, and people will not be able to live.

Just as human labor compensates for the excesses and deficiencies of goods, money circulates through the market. If heaven is separated from the earth and humanity, heaven will return to chaos. The earth can produce blessings by receiving the light of heaven. Humanity cannot control heaven and earth. Only by understanding the principles of heaven and following wisdom can humanity sustain itself.

Heaven, earth, and humanity.

The small hexagram and the large hexagram are arranged according to the characteristics of heaven, earth, and humanity.

In the small hexagram, the first line represents the earth, the second line represents humanity, and the third line represents heaven.
In the large hexagram, the first and second lines represent the earth, the third and fourth lines represent humanity, and the fifth and top lines represent heaven.

In the small hexagram, the inner hexagram consists of the first line as enterprise (earth), the second line as accounting (humanity), and the third line as finance (heaven).
The outer hexagram consists of the first line as finance (earth), the second line as exchange rates (humanity), and the third line as the current account balance (heaven).

In other words, enterprises and households form the earth, fiscal policy and finance form humanity, and exchange rates and the current account balance form heaven.
Enterprises and households, fiscal policy and finance, and exchange rates and the current account balance can be analyzed by considering enterprises and households from the perspective of the real economy.
Fiscal policy and finance can be viewed as an internal whole, while exchange rates and the current account balance can be analyzed as external functions.

Exchange rates and the current account balance are, so to speak, interfaces.
They connect the domestic market with the global market.

Attention should be paid to the fluctuations in exchange rates.

A strong dollar means a weak yen, and a strong yen means a weak dollar. When one rises, the other falls.
They are in a paired relationship.
In other words, international transactions cause currencies to move in tandem, resulting in fluctuations.
However, the actual international market involves multiple countries trading simultaneously, so it is not determined solely by bilateral transactions.

Exchange rates are also influenced by the overall balance and harmony of the market.
Fluctuations are determined by the direction of money flow.
The direction of money flow is determined by buying and selling, and borrowing and lending.
In other words, it is determined by the direction of the flow of money and goods.
Borrowing and lending, which do not involve the flow of goods, are extensions of capital transactions.
Borrowing and lending create an equal amount of claims and debts in the vertical direction of the money flow.
Claims and debts work in opposite directions.

Why do exchange rates fluctuate? It is due to the effects of trade between countries.
Trade is the connection of money between countries.
Domestic transactions use the currency of that country.
Trade compensates for the surplus and shortage of goods through market transactions between countries.
The surplus or shortage of goods arises from the needs of the citizens’ lives.

Thus, the current account balance and exchange rates interact with each other, and exchange rates respond to households.
The flow of money and goods due to trade, and the borrowing and lending to compensate for the surplus and shortage of money, cause fluctuations in currency values.
The surplus and shortage arising from the buying and selling of goods are compensated by borrowing and lending, resulting in a balanced zero-sum.

The international market formed by exchange rates and trade creates opposites, yin and yang, due to the characteristics of exchange rates and trade.
In other words, if there is a country where exchange rates rise, there will be a country where they fall in opposition.
And the total sum of the market as a whole balances to zero-sum.
If there is a country with a current account surplus, there will inevitably be a country with a deficit, and the total sum balances to zero-sum.
From a single transaction, positive and negative, in and out, front and back, up and down, yin and yang arise.

There are relationships of mutual generation and mutual overcoming between countries, and if each country correctly understands its own circumstances and its role in the global market, and harmonizes with other countries, the global market will balance and harmonize.

The origin of this lies in the harmony and balance of heaven, earth, and humanity, and of gold, goods, and people.

Yuan Heng Li Zhen.

Yuan is the beginning of all things. It corresponds to spring and benevolence. Set your aspirations at the beginning.
Heng is the growth of all things. It corresponds to summer and propriety. Correct your conduct.
Li is the nurturing of all things. It corresponds to autumn and righteousness. Do not neglect cultivation, self-discipline, and training.
Zhen is the completion of all things. It corresponds to winter and wisdom. Study and refine your knowledge.

The phases of each country’s economy continuously change and circulate while complementing each other.

Benevolence, righteousness, propriety, and wisdom.

Tariffs, regulations, and interest rates all have their meanings, functions, and roles. It is simplistic to blindly label them as bad. However, if used incorrectly without understanding their meanings, functions, and roles, they can become harmful, just like medicine. Medicine must be prescribed according to the illness and symptoms. Just as there is no universal medicine, the same applies here. Depending on how they are used, they can become either poison or medicine.

We must not forget that the economy exists because there are counterparts. It is a transaction. Because it is a transaction, there are two sides, yin and yang. If there is a rising country, there is a falling country. No country can continue to rise forever.

Everything has its pros and cons. There are good aspects and bad aspects. The key is balance. Depending on how you view and interpret things, weaknesses can become strengths, and strengths can become weaknesses. Fortune and misfortune are intertwined like a rope. A crisis can be an opportunity, and an opportunity can turn into a crisis if one becomes complacent. Growth contains signs of decline, and decline hides the seeds of growth.

When you notice bad aspects, look for the good ones. When you see good aspects, do not turn a blind eye to the ugly ones.

In good times, prepare for bad times. In bad times, place hope in the future.

Balance is achieved through mutual support.

When in distress, change; when you change, you will find a way; when you find a way, you will endure.

Harmony and balance are maintained through mutual support and assistance.

The mystical elements of divination should be eliminated as much as possible, and efforts should be made to make it a scientific method. For this purpose, it is important to design the major and minor hexagrams.

When designing the major and minor hexagrams, focus on the composition, assembly, positioning, function, relationships between the elements, and their interactions.

They are composed of the current account balance, exchange rates, and financial balance. They are assembled by elements that connect the domestic and international markets. The positioning is as follows: the first line is the current account balance, the second line is the exchange rate, and the third line is the financial balance. The current account balance is the contact point between the international and domestic markets. The function of the exchange rate is the exchange of currencies. The financial balance backs up the current account balance.

The relationship between the exchange rate and the current account balance is key to how the movements of the exchange rate and the current account balance are linked. Bilateral exchange transactions have a front-and-back relationship. A strong dollar and a weak yen hide the counteracting movements of a strong dollar and a weak yen. Therefore, the domestic function is a weak yen. When the financial balance is in surplus, it is in surplus. The current account balance and the financial balance are complementary, having a front-and-back and mutually exclusive relationship. Additionally, the trend of the exchange rate has a positive effect on households through prices.

A strong yen pushes up the external prices of export goods, suppressing exports, while conversely lowering the prices of import goods, promoting imports. When interest rates are lower than overseas levels, there is a movement to raise funds domestically and operate them overseas.

If you sell yen and try to operate overseas, the yen will become cheaper.

Using Japan’s bubble as an example, consider the mechanisms working behind the scenes in exchange rates, current account balance, finance, fiscal policy, land prices, stock prices, and prices, as well as overseas, finance, fiscal policy, households, and companies.

The trigger for the bubble was the appreciation of the yen due to the Plaza Accord. The domestic market had reached saturation and was transitioning from a period of high growth to low growth. The part that could no longer be earned from the main business was earned from non-core businesses, resulting in funds flowing into stocks and land, leading to asset inflation, or a bubble. However, during this period, prices remained relatively stable. Additionally, when the economy overheated, Black Monday occurred in the United States, and financial tightening measures could not be taken. This resulted in the promotion of the bubble. Ironically, during the bubble period, fiscal conditions improved. The bubble left behind excess facilities, excess employment, and excess debt as aftereffects. These became non-performing loans. Non-performing loans are also non-performing debts on the opposite side.

Using the bubble as an excuse, the forced lowering of land and stock prices resulted in the market bottoming out and still not recovering.

After the Plaza Accord in September 1985, the yen appreciated significantly, and initially, the J-curve effect increased the surplus (the peak of the surplus was $94.1 billion in 1986, 4.4% of GNP), but the surplus steadily decreased, shrinking to $33.7 billion (1.1% of GNP) in 1990.

However, the current account surplus turned to increase again, rapidly increasing to $90.2 billion (2.6% of GNP) in 1991, and further reaching a record high of $125.9 billion (3.3% of GNP) in 1992.

The trade balance contributed the most to the expansion of the current account surplus since 1991. Between 1990 and 1992, the current account surplus increased by $92.2 billion, and during this period, the trade balance surplus increased by $66.2 billion.

The export amount is decomposed into quantity factors and price factors.

The increase in export amounts in 1991-1992 was mainly due to (1) a small contribution from export quantities, (2) an increase in export prices in dollar terms, and (3) the progress of high value-added exports in the form of “upgrading of export items.”

The overall export quantity remained almost flat because (1) exports to the United States remained flat, (2) exports to the EC were on a declining trend, but (3) exports to NIEs and ASEAN increased. Although not included in this estimate, exports to China and Latin America also increased in 1992 (Cabinet Office website).

From 1988 to 1992, the fiscal balance was in surplus (World Data Book).

It is important to note that during the bubble period, both export and import volumes did not change much.

Based on these premises, let’s design the hexagrams. First line: companies Second line: households Third line: fiscal policy Fourth line: finance Fifth line: exchange rate Top line: current account balance First line: stock prices Second line: prices Third line: growth rate Fourth line: interest rates Fifth line: exchange rate Top line: crude oil prices.

Divination should also eliminate as many mystical elements as possible and strive to make it a scientific method. To achieve this, it is important to design the major and minor hexagrams.

When designing the major and minor hexagrams, consider the composition, assembly, positioning, function, relationships between the elements, and their interactions.

The relationship between the exchange rate and the current account balance is key to how the movements of the exchange rate and the current account balance are linked. Bilateral exchange transactions are in a complementary relationship. A strong dollar and a weak yen hide the counteracting movements of a strong dollar and a weak yen. Therefore, the domestic function of a weak yen When the financial balance is in surplus, it is in surplus. The current account balance and the financial balance are in a complementary relationship, and they are in a complementary and antagonistic relationship. Moreover, the trend of the exchange rate has a positive effect on households through prices.

A strong yen has the effect of raising the external prices of export goods, suppressing exports, and conversely, lowering the prices of imported goods, promoting imports. When interest rates are lower than overseas levels, there is a movement to raise funds domestically and operate them overseas.

If you sell yen and try to operate it overseas, the yen will become cheaper.

The trigger for the bubble was the appreciation of the yen due to the Plaza Accord. The domestic market had reached saturation and was transitioning from a period of high growth to low growth. The part that could not be earned in the main business was earned outside the main business, resulting in funds flowing into stocks and land, leading to asset inflation, or the bubble. However, during this period, prices remained relatively stable. Also, when the economy overheated, Black Monday occurred in the United States, and financial tightening measures could not be taken. This resulted in promoting the bubble. Ironically, during the bubble period, the fiscal situation improved. The bubble left behind excess equipment, excess employment, and excess debt as aftereffects. These became non-performing loans. Non-performing loans are also non-performing debts on the opposite side.

Using the bubble as an excuse, forcibly lowering land and stock prices resulted in the market bottoming out and still not recovering.

However, the current account surplus turned to increase again, rapidly increasing to $90.2 billion (2.6% of GNP) in 1991, and further reaching a record high of $125.9 billion (3.3% of GNP) in 1992.

The trade balance contributed the most to the expansion of the current account surplus after 1991. Between 1990 and 1992, the current account surplus increased by $92.2 billion, and during this period, the trade balance surplus increased by $66.2 billion.

The export amount is decomposed into quantity factors and price factors by definition.

The increase in export amounts in 1991-1992 was mainly due to (i) a small contribution from export quantities, (ii) an increase in export prices in dollar terms, and (iii) the progress of high value-added exports in the form of “upgrading export items.”

The overall export quantity remained almost flat because (i) exports to the United States remained flat, (ii) exports to the EC were on a declining trend, but (iii) exports to NIEs and ASEAN increased. Although not included in this estimate, exports to China and Latin America also increased in 1992 (Cabinet Office website).

From 1988 to 1992, the fiscal balance was in surplus (World Data Book).

It is important to note that during the bubble period, both export and import volumes did not change much.

Based on these premises, let’s design the hexagrams. First line: companies, second line: households, third line: fiscal policy, fourth line: finance, fifth line: exchange rate, top line: current account balance First line: stock prices, second line: prices, third line: growth rate, fourth line: interest rates, fifth line: exchange rate, top line: crude oil prices

The problem with exchange rates is that there are currency transactions unrelated to trade. So, what determines the yin and yang of exchange rates? This can also be said for other lines.

The problem with foreign exchange is that currency transactions occur in areas unrelated to trade. So, how do we determine the yin and yang in foreign exchange? This can be said for other lines as well.

What determines yin and yang?

If there are winners, there are also losers. Winning and losing are common in the world, but the fundamental match is one. From one match, victory and defeat, yin and yang arise.

There are listeners and speakers. However, the story is one. Although yin and yang arise from listening and speaking, the essence of the story is one.

When the yen rises against the dollar, it means the dollar falls against the yen. A strong yen and a weak dollar mean a weak dollar and a strong yen.

If a strong dollar and a weak yen are considered yang, then a weak yen becomes yang. If we consider Japan and the United States separately and regard the high value of one’s own currency as yang, when the dollar is yang, the yen becomes yin.

The key is whether the effect is positive or negative. Originally, if a strong yen reduces the current account surplus, that is correct. If the surplus does not decrease but increases, that is incorrect. In that case, it is optional to consider a strong yen as yang and the reduction of the current account surplus as yin. It should be set based on the effect.

Since yin and yang are determined by the initial setting, they should be defined by their function rather than their appearance or form. Especially for exchange rates. Also, it is sometimes more appropriate to use increases and decreases as the basis rather than raw numbers.

It is not a matter of whether a surplus or deficit, or a strong or weak yen, is right or wrong, or which is beneficial or harmful. It is about clarifying, based on data, how and where a surplus or deficit, or a strong or weak yen, affects and what results it brings. In conclusion, what is bad is when there are decisive impacts on people’s lives, such as rapid inflation, chronically high unemployment rates, shortages of goods, disruptions in logistics, rising bankruptcy rates, widening income disparities, and an increase in homeless people.

In economics, what you want to know must be set as the initial problem. Discussing economics meaninglessly and aimlessly leads to nothing.

What is a bad state, and what must be avoided? Since economics is an activity for living, economic collapse means that people’s lives cannot be sustained.

A state where life cannot be sustained. Phenomena or situations where life becomes extremely difficult.

It appears in places such as an increase in crime, the occurrence of starvation, and an increase in homeless people.

The balance of people, goods, and money is broken. There is an extreme shortage of necessities for living, or there is no work to earn living expenses. Many people are unemployed. The minimum income necessary for living cannot be obtained. The gap between rich and poor widens, hindering fair distribution. Also, prevent situations where excessive “money” flows into the market, making it impossible to control prices.

For that purpose, indicators such as economic conditions, prices, interest rates, exchange rates, stock prices, land prices, and income are used.

To keep the economy healthy and functioning normally, yin and yang should be defined to monitor market trends. Yin and yang should be determined to fulfill this purpose.

For example, if a strong yen reduces the current account surplus, which is the normal state, then based on that premise, the positioning of the current account balance and exchange rate should be set, and what to consider as yin and yang should be determined.

In short, it is about clarifying whether heaven, earth, and people are in harmony.

Determine the purpose. Without being bound by theory.

The Structure and Function of the Current Account Balance.

Yi is a means of analysis.

What are the principles for designing Yi as a scientific model?

Yi analysis clarifies the structure and mechanisms of the economy, and the details are refined through mathematical formulas. Once the structural movements are understood, the details of the causal relationships are clarified through mathematical formulas.

Examine the correlations and causal relationships between indicators. If based on the same data, link them.

During the high-growth era, indicators that had strong correlations may lose their correlations entirely or even become inversely correlated during the low-growth era. Therefore, it is important to remember that relationships are not absolute and can change depending on the environment, situation, stage, and assumptions. It is necessary to constantly confirm the power relationships and the direction of forces acting on the structure.

There are internal and external forces, forces of entry and exit, forces of upward and downward movement, forces of increase and decrease, parallel forces, and forces of front and back.

Phenomena that appear on the surface are influenced by the underlying structure. Behind the current account balance, the financial balance is at work.

Yi has a complete binary tree structure with six levels. Edit objects at the three levels.

Analyze the structure of the current account balance, what acts on which parts, and what moves them. Then clarify the workings between the indicators.

First, the surpluses and deficits of the current account balance, financial balance, fiscal balance, household balance, and corporate balance are zero-sum balanced and consistent. Therefore, add the exchange rate to these and edit the grand hexagram.

The current account balance, exchange rate, and capital balance work to adjust internal and external disparities and balance the world market. Therefore, the three indicators of the current account balance, exchange rate, and financial balance form a minor hexagram.

The current account balance connects the domestic market with the world market, thus it is considered the sky. The exchange rate adjusts and balances the levels of the domestic market and the world market, thus it is considered human. The financial market works behind the current account balance.

Fiscal, household, and corporate sectors realize production, distribution, and consumption, making the economy work. Fiscal policy balances the national economy, thus it is considered the sky. The household sector supports people’s lives, thus it is considered human. The corporate sector procures and produces the goods necessary for people to live and distributes “money” through work, thus it is considered the earth.

Behind the current account balance, the financial balance works and controls the surface current account balance. The essence of the financial balance is debt.

What functions does debt have? Debt is also a loan. In other words, borrowing and lending are two sides of the same coin. Those who borrow take on debt in exchange for cash. Borrowing is a liability and a debt. Debt is a claim. A claim is a savings. In other words, borrowing generates cash, debt, and claims. Cash, debt, and claims are equivalent. Claims are assets. Cash, debt, and claims have quantity and direction. This is the basis of their function. In other words, debt generates cash, liabilities, assets, debt, and claims, and debt and claims have functions with direction and value.

The current account balance consists of the trade balance and the service balance. The trade balance means the difference between the import and export of goods. The import of goods means the entry of goods and the exit of “money.” Export means the opposite. The service balance works similarly.

Since the balance is the positive and negative of “money,” the profit and loss, increase and decrease of the balance are determined by entry and exit. The financial balance (capital balance) working behind the scenes is determined by the entry and exit of funds based on financial transactions. This leads to the increase and decrease of foreign exchange reserves.

The function of the current account balance affects the upper limit of the exchange rate. The upper limit of the exchange rate affects the increase and decrease of the volume of imports and exports through the prices of goods and services. It also affects import prices and is reflected in prices. Furthermore, it influences the economy and is reflected in the unemployment rate.

Such a structure is tested through the hexagram model.

The Structure and Function of Foreign Exchange

What drives foreign exchange?

What are yen appreciation and yen depreciation? In many cases, it refers to the yen becoming stronger or weaker against the key currency. Foreign exchange is relative; if the yen rises, the counterpart currency falls. If the yen falls, the counterpart currency rises.

Currently, the key currency is the dollar, so yen appreciation means yen appreciation and dollar depreciation, and yen depreciation means yen depreciation and dollar appreciation.

The foreign exchange rate system refers to the system that determines the exchange rate, i.e., the exchange ratio between currencies, in foreign exchange transactions.

Foreign exchange systems are broadly divided into three categories: the “fixed exchange rate system,” which fixes the exchange rate at a certain value, the “floating exchange rate system,” which allows the rate to fluctuate according to market supply and demand, and the “intermediate exchange rate system,” which is positioned between the two. There are also cases where they are broadly divided into three categories: the “hard peg system,” the “soft peg system,” and the “free float.” The “peg system” refers to the fixed exchange rate system.

The fixed exchange rate system includes the currency union (hard peg system), the currency board system (hard peg system), and the single currency fixed rate system (soft peg system). The intermediate exchange rate system includes the currency basket system (soft peg system), the crawling peg system (soft peg system), and the exchange band system (soft peg system). The floating exchange rate system includes the managed floating rate system (soft peg system) and the free floating rate system (free float).

Japan adopts the managed floating exchange rate system.

What are the factors that cause foreign exchange to rise and fall? Factors that move foreign exchange include the current account (trade), interest rate differentials between domestic and foreign markets, monetary policy, exchange rate policy, speculation, prices (purchasing power parity), crude oil prices, stock prices, and foreign exchange intervention. The basic principle is to correct domestic and foreign disparities.

Factors that move foreign exchange are:

Current account (trade balance, service balance).
Capital movement.
Speculation.
Intervention.
Arbitrage, etc.

Generally, foreign exchange is influenced by the trade balance, capital movement, and speculation, but foreign exchange intervention plays an important role at decisive moments in determining the direction of the economy.

Famous foreign exchange policies include the Nixon Shock and the Plaza Accord.

Foreign exchange, in conjunction with household (prices), influences the current account and financial account to determine the direction of the economy. The financial account controls companies through lending and interest rates. Fiscal policy controls the market through tariffs, subsidies, income redistribution, and easing or tightening of regulations.

Foreign exchange reserves are funds used by monetary authorities for foreign exchange intervention. They are reserve assets used in cases such as currency crises, where it becomes difficult to repay foreign currency-denominated debts to other countries. (Bank of Japan)

Foreign exchange is a driver of the economy.

Furthermore, as the idea of purchasing power parity suggests, foreign exchange is said to have a function of equalizing the global market. However, this is greatly constrained by the nature of each country’s market and its political and economic system.

If a country imposes its policies solely for its own convenience without considering the circumstances of the counterpart country, it may lead to the export of poverty and poor working conditions.

From the perspective of the international market, the external hexagram turns into the internal hexagram. Reading Japan’s economic data in dollar terms results in the overall hexagram, while the reverse hexagram is the opposite. Understanding a country’s position, function, and role in the global market cannot be achieved from a domestic perspective alone.

The appearance rate of hexagrams holds significant meaning.

Structure and Function of the Financial Account

The financial account refers to the income and expenditure from borrowing and lending money.

The financial account operates behind economic entities such as households, businesses, government finances, and the current account.

The functions of finance are:

Supplying and circulating money through markets via businesses, households, and government finances.
Controlling the circulation of money.
Facilitating the transfer of funds from entities with a surplus to those with a deficit.
Maintaining the balance between stock (long-term function of money) and flow (short-term function of money).
Pooling funds (savings and reserves).
Adding time value to money.

Economic indicators include prices, stock prices, land prices, income, and exchange rates.

Among economic indicators, interest rates and tax rates are manageable indicators.

The financial account operating behind the current account includes:

Direct investment.
Securities investment.
Financial derivatives.
Other investments.
Foreign exchange reserves.

International financial crises are often triggered by sudden fluctuations in exchange rates, leading to many instances where financial crises are seen as currency crises. The typical example is the Asian financial crisis.

A currency crisis refers to a situation where the external value of a country’s currency rapidly declines due to concerns about debt repayment ability, significantly impacting economic activities.

In the 1990s, crises occurred in emerging countries like Mexico, Thailand, Indonesia, South Korea, Russia, and Brazil, which had effectively pegged their exchange rates to the US dollar. These crises were triggered by unsustainable current account deficits under the liberalization of capital movements and active capital transactions.

The causes of the Asian financial crisis in 1997 are considered to be the structural vulnerabilities of Asia, such as the mismatch in currency and duration in financial institutions’ funding and the excessive reliance on bank loans for corporate funding.

At that time, Asian financial institutions were raising short-term foreign currency funds, converting them into local currency, and making long-term loans. As a result, the significant depreciation of local currencies increased the burden of repaying foreign currency-denominated debts, leading to a series of bankruptcies in both the corporate and banking sectors as foreign investors refrained from reinvesting (Bank of Japan).

Currency crises are often interconnected and linked because currencies are closely tied to finance.

The Plaza Accord, the bubble, the Asian financial crisis, and the Lehman shock may appear as independent phenomena on the surface, but they are connected behind the scenes. Moreover, various signs were already appearing behind the scenes before they became apparent on the surface.

The inner hexagram represents the domestic economic state.

Total income signifies the sky. Total expenditure signifies people. Total production signifies the earth.

The first line represents corporate balance, the second line represents household balance, and the third line represents finance. The sky represents the political system, economic system, military power, production capacity, and growth stage. People represent the total population, labor force, income, living standards, and unemployment rate. The earth represents resources, major industries, and location conditions.

Structure and Function of Finance

The core function of finance is the redistribution of income. The redistribution of income varies significantly depending on the tax system.

Generally, the current account refers to the balance arising from a country’s transactions with overseas. However, the current account exists not only for the country but also for government finances, households, businesses, and finance. The current account refers to the function of flow, but behind the flow function, an equivalent financial account (capital account) operates. Financial transactions refer to borrowing and lending money, while the current account refers to buying and selling.

Behind the current account, an equivalent financial account operates.

The current account is positive, and the financial account is negative. Goods are positive, and money is negative. The current account appears as a surplus or deficit of goods, while the financial account appears as a surplus or deficit of money.

The financial account operates behind the current account because money circulates, which is a natural result. Money can be used because it is possessed, and without money, it cannot be used. The question is how to obtain money. To obtain money, one must sell goods or borrow money. By repeating borrowing and lending, buying and selling, money circulates.

Money is different from water or air. It is an artificial creation. To utilize money in the market, it must be distributed and obtained in advance. The direct means of obtaining money are selling goods or working. If there are no goods to sell or one cannot work, borrowing is an indirect means.

If there is no certain amount of money in the market, buying and selling cannot occur, so initially, funds are supplied to the market through borrowing and lending. Borrowing and lending form payment reserves and stock, while direct means such as buying and selling and labor form the flow.

A fiscal deficit is the result of the fiscal balance, that is, the flow. If the flow is the visible function of money, the stock operates equally behind the scenes. Stock includes investment and savings.

When considering the causes of a fiscal deficit, it is necessary to consider the balance between investment and savings. The balance between investment and savings is called the IS balance.

Simplifying the definition of GNI from the expenditure side:

GNI = Consumption + Investment + Government + Exports – Imports

Here, government includes both government final consumption expenditure and government investment expenditure. Exports minus imports include net factor income from abroad. The above equation can be written in symbols as follows:

Y = C + I + G + EX – IM (1)

From the perspective of income disposition:

Income = Consumption + Taxes + Savings Y = C + T + S (2)

From equations (1) and (2):

S – I = (G – T) + (EX – IM) (3) Private sector savings surplus = Government fiscal deficit + Current account surplus

Equation (3) is the savings-investment balance equation (IS balance equation).

Total supply is consumption + private savings (households, businesses) + taxes + imports Total demand is consumption + private investment (households, businesses) + government expenditure + exports

By analyzing the differences between private savings and investment, taxes and government expenditure, and imports and exports from both the monetary and goods perspectives, the economic state can be clarified.

Since the high-growth era, Japan’s economy has experienced an excess of private savings. The excess savings in the private sector have led to an excess of money and goods. Since the 1990s, government finances have experienced fiscal expenditure exceeding tax revenue, resulting in fiscal deficits. The deficit leads to a shortage of goods, meaning a state of money and goods shortage. In overseas transactions, until the current account deficit in 2011, Japan had maintained a current account surplus since the second oil shock. The current account surplus was accompanied by an equivalent financial account surplus (capital outflow). This means that goods and money flowed overseas in proportion to the surplus (goods shortage, money shortage).

In the latter half of economic growth, the market became saturated, leading to a plateau in corporate profits, resulting in an imbalance between investment and savings. Even before that, excess household savings were being channeled into corporate investment funds, but after the bubble burst, corporate savings also tended to increase, contributing to the fiscal deficit.

Japan has long experienced an excess of private savings, particularly in households. As a result, there has been a tendency for an excess of goods and money, leading to higher unemployment rates.

One of the factors behind the fiscal deficit is the end of high growth. It is a matter of timing.

Private investment in macroeconomics can be broadly categorized into capital investment, housing investment, and inventory investment.

Structure and Function of Households. Price Fluctuations and Functions.

The Structure and Function of Households. Price Fluctuations and Their Impact.

Households are the core of consumption and, in response to exchange rates, form prices. Consumption is also the final stage of the economy. It is the goal of the economy. Households provide labor to companies and earn income (living expenses). Households pay taxes, forming the fiscal revenue.

The essence of households is living expenses, with the basics being food, clothing, and shelter. In recent years, energy and information have been added to this.

Households borrow from financial institutions to invest in housing.

If the core of households is living expenses, then households are the main factor in creating prices and are also the entities most affected by price fluctuations.

Households form consumption, and companies handle production. Households create demand, and companies handle supply. Household investment is in housing. Company investments are in equipment and inventory.

Price fluctuations include inflation (positive) and deflation (negative). Underlying these are the positive and negative aspects of people, the surplus and shortage of goods (positive and negative), inflows and outflows (positive and negative), and the surplus and shortage of money (positive and negative).

From living, income (negative) and expenditure (positive) arise, creating a balance.

Prices are formed by the relationship between people, goods, and money.

There are prerequisites for price formation.

Firstly, the causes of price fluctuations lie in people, goods, and money. For example, the causes of inflation include employment conditions, wages, psychology, shortages of goods, excess money, and exchange rate fluctuations.

Secondly, as can be seen from the fact that modern economies are based on debt, with currency formed under promissory notes, receipts, and government bonds, debt is fundamental. Debt exists because of interest, which forms the time value of money. Prices are influenced by the time value of money. When interest is at work, prices continuously rise in accordance with interest.

Thirdly, in the global market, there is a force that tries to balance prices. This is called purchasing power parity, and in the long term, the global market converges to a certain level. This is referred to as market entropy. Exchange rates have a role in controlling global market prices.

It is said that purchasing power parity influences prices and has a significant impact on exchange rates. The idea is that the price levels in international markets converge to a certain level in the long term.

These are the fundamental premises when considering prices.

It is difficult to predict prices using only formulas. The difficulty in prediction is caused by human intentions and desires. Human intentions and desires are influenced by individual subjectivity, and there is a tendency to outsmart others, making it even more troublesome.

Whether it is prices, exchange rates, or stock prices, multiple factors are intricately intertwined. Therefore, it is difficult to make short-term predictions.

However, distinguishing between changeable and unchangeable factors can simplify relationships.

The determinants of prices include income and unemployment rate (people), supply and demand relationships, surplus and shortage of goods, disasters (goods), speculation (money, people), crude oil prices (energy prices) (goods), the circulation of money (money), monetary policy, interest rates (money), economic conditions (money, people, goods), fiscal policy, taxes, economic policy (money), asset values, land prices, stock (goods, money), and exchange rates (money).

The troublesome aspect of prices is that while people and goods are finite, money is not and can expand infinitely. This is why prices can sometimes run out of control due to the open-ended nature of currency value.

When the money supply cannot be controlled, prices run out of control.

The causes of inflation include imbalances in supply and demand, rising prices of raw materials such as oil and fresh food, exchange rate fluctuations, wars, accidents, natural disasters, cartels like OPEC, hoarding, tariffs, and policy changes such as tax reforms.

Imbalances in supply and demand can be seen from the demand side as demand-pull inflation and from the supply side as cost-push inflation.

As for the major factors of household formation, initial factors include prices, income, changes in government bonds, or unemployment rates, interest rates, exchange rates, and growth rates.

Structure and Function of Corporate Balance.

Corporations are the centers of production.

Corporations have two roles: production activities and distribution activities.

Corporations produce materials, apply them to the market, and earn sales and revenue. Corporations create employment and distribute income.

Balance and profit and loss are different. Balance refers to the difference between income and expenditure of money, meaning the balance. Profit and loss refer to the function of money within a unit period.

From the profit and loss statement, the flow of money is not visible. To understand the flow of money, it is necessary to look at the cash flow. This point requires attention.

Looking at the cash flow of all industries, it can be seen that financial cash flow rapidly declined due to the bursting of the bubble. Financial cash flow hit bottom in 2004 and once recovered, but declined again due to the Lehman shock.

When considering the impact of corporations on the economy, it is necessary to understand the long-term and short-term functions of money. The short-term function of money forms the flow, and the long-term function forms the stock.

The flow affects households through prices and income.

The stock becomes savings and investment.

The balance between savings and investment also affects prices. Savings are the money or goods that were not used for consumption out of what was produced or earned this year. Investment refers to the money or goods used for future supply expansion out of what was produced or earned this year. Both savings and investment can be considered long-term functions of money.

Supply is based on production, and demand is based on consumption. Income is provided by being involved in production, and expenditure occurs through consumption. Surplus income becomes savings, and savings are turned into investment, so it should be a three-sided equivalence, but in reality, it is not always balanced. Therefore, investment is expenditure to prepare for future production and supply, and savings are income that was not spent. If investment exceeds savings, there will be an excess of money, leading to inflation. If investment is less than savings, there will be an excess of goods, leading to a recession and an increase in unemployment.

The economy is sustained by the cycle of production, distribution, and consumption. Production, distribution, and consumption are essentially the same and should coincide, which is the three-sided equivalence. However, production, distribution, and consumption do not occur simultaneously. Production, distribution, and consumption occur with a time lag. When this wave is disrupted, it causes inflation or recession.

Disruptions in the flow of production, distribution, and consumption cause inflation or deflation.

The changes in the surplus and shortage of people, goods, and money are undulating. Finance and fiscal policy work to adjust these waves. How to smooth out the waves caused by production, distribution, and consumption is an important role of the economy.

Corporations work to streamline the waves caused by production and distribution. In other words, they stabilize uncertain and unstable sales as monthly salaries and fixed salaries. At that time, finance is working behind the scenes.

Such a structure is tested using the hexagram model.

For example, it is difficult to predict even a single movement in the exchange rate. Even interest rates and tax rates, which should be artificially controllable, cannot have their effects predicted in advance. Therefore, it is necessary to statistically analyze economic movements from data.

Many people confuse freedom with randomness. They believe that being free means being inactive by eliminating artificial actions. However, that is merely losing oneself. If one does not express their opinion, they do not contradict anyone’s thoughts. This does not mean denying others’ opinions, but simply not having one’s own thoughts. Human society is built on intentional actions. Some people are preoccupied with the pros and cons of conspiracies. The difference is whether it appears on the surface or not. This world is driven by human will. The important thing is the fundamental issue of what kind of will one is based on. It is about what one considers right and wrong.

Why do we analyze the economy?

It is because we must make our own judgments and live our lives according to our respective positions at any given time. To live, we need to clarify our current situation and environment, predict the future, and make planned decisions. This is where the significance and meaning of economic analysis lie. Conversely, economic analysis that does not lead to concrete measures is merely self-satisfaction and remains a hobby.

So, what are economic measures? I want to clarify what economic measures are. Before that, there is something that needs to be confirmed. It is about politics and the economy. The political system and the economy need to be distinguished. This is because politics involves ideals such as human rights, rights and obligations, the nature of the state, and the way people live. The economy is the reality of life. Even if the political system collapses or becomes dysfunctional due to war or disaster, the economy must be maintained. People must live under any system or environment. Even if the political or economic system collapses, the mechanisms of production, distribution, and consumption must be maintained for life to continue. Therefore, even if political and economic issues are closely related, politics and the economy must be distinguished.

There are three economic measures in a nation: systems, regulations, and policies. Systems have hierarchies. At the top is the system that creates the framework for the global market and trade. The second level is the system that creates the framework for the political and economic systems of individual countries. The third level is the system for controlling the internal sectors such as finance, households, and businesses. The fourth level is the system for further subdividing individual sectors and managing and controlling them by industry. The fifth level is the system for controlling the actions of individual individuals.

The first level includes the foreign exchange and overseas trade system. The second level includes the political system, legal system, fiscal system, and monetary system. The third level includes the market, economic system, tax system, financial system, accounting system, and securities system. The fourth level includes the securities trading system and the Liquefied Petroleum Gas Law. The fifth level includes labor laws, pension systems, and social welfare systems.

It is necessary to formulate measures for each level. It is important to discern the unchanging, the changing, and the simple. Therefore, the method of divination is effective.

There are measures for systems, measures for regulations, and measures for policies. The main differences between systems, regulations, and policies are their functions and the time required for implementation. It takes at least four to five years for a system, two to three years for regulations, and one to two years for policies. The functions differ: systems are the foundation and literacy, regulations are laws and rules, and policies are operations.

Based on the hierarchy, if we construct the hexagram of the system, the first line is the fifth level, the second line is the fourth level, the third line is the third level, the fourth line is the second level, the fifth line is the national ideology, and the top line is the first level. Then, it is necessary to formulate policies in order from the top line.

There are inherent cyclical waves in people, goods, and money. Similarly, production, distribution, and consumption also have their own cyclical waves. Furthermore, each of these waves has both long-term and short-term cycles, and their effects differ depending on the duration. The inherent waves of people, goods, and money overlap with the waves of production, distribution, and consumption, creating large surges. Economic measures are designed to adjust and level these surges.

Waves are suppressed by systems, controlled by regulations, and directed by policies. To claim that competition is the principle and deregulation is a panacea without understanding these relationships is akin to a quack doctor prescribing aspirin for everything. Economic phenomena are relative, and there is no absolute cure-all. Prescriptions should be determined according to the symptoms.

Systems represent the framework and organs of the body, regulations adjust the circulation such as blood and respiration, and policies address the symptoms.

There is no absolute economic system; each system, whether it be a controlled economy, a free economy, or a planned economy, has its pros and cons. It is necessary to adopt the measures that are deemed optimal according to the system, environment, and preconditions.

The basic requirement lies in life and survival, and the minimum requirement is that all people can lead a minimum standard of living. Even if the national system or monetary economy ceases to function, the economy must continue to operate. Politics is an ideal, while the economy is reality. The problem arises when one becomes rigidly fixated on ideals and loses sight of the primary purpose of the economy, which is to sustain human life. What is required in the economy is a pragmatic and flexible mindset.

If we compare it to driving a car, the system refers to the body of the car, regulations refer to traffic laws, and policies refer to the actual driving.

There is no absolute economic or political system yet. Every political and economic system has its flaws. This is a given. The issue is not the system itself, but the purpose and the desired state. Political systems fundamentally lead to ideological philosophy.

In the entire market transaction, the amount of income and expenditure always match. This is because income is expenditure and expenditure is income, with the only difference being the giver and the receiver. The money and goods being exchanged are the same money and the same goods. If they were different money or different goods, it would be fraud or crime. This is the basis that establishes the three-sided equivalence.

Since the money required for transactions is fixed, the total amount of currency is determined by the balance of payments and the turnover rate.

Imports and exports are different matters. Just because you import does not mean you can export. However, money is necessary. Without money, you cannot import. The money needed for imports is earned through exports. If there are no goods to export, you have no choice but to borrow.

The function of creating a flow of money in the market and circulating money in the market is due to the surplus and shortage of money. When money is used, it is lost, and the amount of money on hand decreases. If left as it is, money will become scarce. The shortage of money must be constantly replenished by working. This work creates the flow of money and makes people work. The force that balances the surplus and shortage of money between economic entities, sectors, and countries circulates money in the market. Surplus and shortage are two sides of the same coin; if there is a surplus, there is an equal shortage. Therefore, if surplus is considered good and shortage is considered bad, money will not circulate in the market. Instead, it is a matter of the degree of shortage and the degree of surplus. Shortage (yin) becomes negative (yin), and surplus (yang) becomes positive (yang). The problem lies with entities that continue to be in a state of one-sided shortage or surplus. If an entity continues to be in a state of one-sided shortage or surplus, the market will split and cease to function. Both positive and negative accumulate. It is necessary for surplus and shortage to alternate in a certain cycle. In other words, there are good positives and bad positives, good negatives and bad negatives.

Furthermore, the flow of money is also formed by time value. Time value is formed by interest and profit. Time value tends to grow exponentially. Therefore, if money stops circulating, it will rise geometrically at a certain point.

The function of money has long-term and short-term functions. The long-term function is due to long-term equilibrium, and the short-term function is due to short-term equilibrium. These long-term and short-term functions create long-term and short-term waves.

The accounting system and financial statements measure these short-term and long-term functions.

Since the overall market transaction is zero-sum balanced, the function of transactions is exerted by amplitude and wavelength.

The utility of money is balanced in the long-term and short-term, so profits converge and compress.

The short-term balance of money appears in working capital, and the long-term balance appears in investments, forming claims and debts.

One of the roles of companies is to streamline unstable and uncertain production, sales, and revenue, and convert them into stable income. They also create employment and distribute money to consumers. They make debt possible through business.

The economy is based on the balance of positives and negatives, and positives and negatives arise from surpluses and shortages. Surpluses and shortages create assets and liabilities, claims and debts. This form appears in the I Ching.

The balance of positives and negatives is based on debt. Whether production, distribution, and consumption function normally depends on how debt and shortages are positioned and utilized.

If debt and shortages are considered bad, wasteful, or unnecessary, the economy will not function. The important thing is balance. The idea of a necessary evil is also wrong. What is necessary is not evil.

Modern society is built on debt, and what sustains that debt is stable income, that is, stable employment and wages.

People, goods, and money each have their own inherent cyclical waves. Production, distribution, and consumption also have their own inherent cyclical waves. Furthermore, each of these waves has long-term and short-term cycles, and their functions differ in the long and short term. The inherent waves of people, goods, and money overlap with the waves of production, distribution, and consumption, creating large swells. Economic policies adjust and level these swells.

Waves are suppressed by systems, controlled by regulations, and directed by policies. To claim that competition is the principle and deregulation is a panacea without understanding these relationships is like a quack doctor prescribing aspirin for everything. Economic phenomena are relative, and there is no absolute panacea. Prescriptions should be determined according to the symptoms.

Systems represent the framework and organs of the body, regulations adjust circulation like blood and respiration, and policies address symptoms.

There is no absolute economic system; each system, whether controlled, free, or planned, has its strengths and weaknesses. It is necessary to adopt policies that are considered optimal according to the system, environment, and preconditions.

The basic requirement is life and survival, and the minimum requirement is that all people can lead a minimum standard of living. Even if the national system or monetary economy ceases to function, the economy must continue to operate. Politics is ideology, and the economy is reality.

The problem is becoming fixated on ideology and losing sight of the economy’s original purpose of sustaining people. What is required of the economy is a pragmatic and flexible mindset.

To determine economic policies, it is necessary to clarify the structure of the economy.

An important point in considering the structure of the economy is how to connect production, distribution, and consumption. The key is what connects what. The economy connects people and goods through “money.” However, it is important to note that the main actors are people.

By linking the production process and distribution process to consumption through the flow of “money,” and by circulating consumption back to production through the market, a circulation movement of “money” is created. By connecting people, goods, and money along the flow of “money,” production, distribution, and consumption are realized. This is the monetary economy. The mechanism of the economy is to work by making people, goods, and money operate through the flow of “money.”

What becomes important here is private property rights. If private property rights are not recognized, economic activities will be specialized only in consumer goods, weakening the connection between production, distribution, and consumption. Alternatively, the connection may not be possible. Private property rights are one of the important elements in constructing the structure of the economy.

Furthermore, investment and savings also play an important role behind the scenes of the structure. Investment and savings generate debts and claims, and debts and claims form liabilities and assets. Private property rights play an important role in debts and claims. Therefore, how private property rights are handled has a decisive impact on the economic structure.

Institutions create the framework for linking production, distribution, and consumption. And within the framework, the market mechanism plays a central role. Whether production and distribution function properly depends on how the market mechanism is structured and what kind of regulations are imposed.

The basic policy and regulations that oversee and manage this are the antitrust laws.

The function and role of the market are important. The belief that competition is always good is akin to a kind of faith. The market is a relative and historical product. It is necessary to understand this well and analyze the customs and structure of the market.

Generally, the market does not exist as a single entity but is formed by combining multiple markets according to stages and curves. Even if one market has a monopolistic structure, it affects the whole. The structure also varies depending on the means of production and production structure. Therefore, it is necessary to analyze the structure of the market along the flow of “money.”

It is necessary to look not only at the flow of “money” but also at the flow of goods in the market. The production process of products and manufacturing facilities are fundamentally different in agriculture and industry, so it is reckless to uniformly deregulate.

The nature of the market varies by industry. The structure of the securities market, automobile market, fish market, and trade market are clearly different.

The impact of exchange rate fluctuations varies by industry.

Economic policies such as tariffs, deregulation, regulation strengthening, subsidies, land regulations, and changes in accounting systems need to be formulated comprehensively, considering their overall impact and their effects on other markets. This is because markets are closely interconnected and interact with each other. Partial changes will inevitably affect the whole.

Therefore, it is structural.

The role of markets and industries is to create employment and distribute income by producing goods. It is not enough to simply produce or lower prices. There is an important role in creating employment and distributing income. If all industries reduce personnel, considering employment and labor costs as waste, distribution will not function. Balance is crucial.

The economy is driven by the circulation of “money,” which swings like a pendulum in terms of time and space. Understanding the amplitude and wavelength of this surplus and shortage correctly leads to controlling the economy.

Change and fluctuation are not bad; it is necessary to understand and respond to them correctly.

It is no exaggeration to say that the policies taken in the 1990s have created the current situation in Japan.

Every industry has its own life cycle, including creation, growth, maturity, decline, and regeneration. The overlapping life cycles of industries form the state of the national economy. The life cycle determines the market situation, and the market situation changes the industrial structure. In the creation phase, the market is unstable and uncertain; as it enters the growth stage, the market stabilizes. As the industry grows, the market becomes saturated. During the growth stage, industries develop through competition, but as the market becomes saturated, profit margins are squeezed. Policies are formulated based on assumptions about the state of the industry, considering the growth stages of industries and market conditions.

I would like to clarify the roles and relationships of the elements that constitute the economy, using land prices as an example.

The fundamental premise is that economic standards are relative, not absolute. In the first place, since perception is relative, standards are fundamentally relative. Firstly, economic standards themselves are determined by arbitrary agreements. They are treated as given laws for players, just like the rules of sports. Sometimes, even university professors or finance ministers forget this fundamental premise.

The role of land prices arises from relationships that work left and right, front and back, and inside and outside. Also, the relationships that work on land prices are determined by preconditions, situations, and environments.

Factors that affect land prices include the following:

Land can be used as collateral.
Land transactions generate claims and debts.
Assets and liabilities are established from claims and debts. Assets arise from claims, and debts form the basis of liabilities.
Investment and deposits.
Flow and stock.
Borrowing and repayment.
Land is non-depreciable.
Expenditure and depreciation costs.
Income and expenses.
Nominal (book value) and market value.
Land prices are relative values determined by supply and demand.
Taxes have a structural impact on land prices.
Interest rates also have a structural impact on land prices, similar to taxes.
The difference in domestic and foreign prices works potentially on land prices.

The fundamental premise is that economic standards are relative standards determined by the relationship between supply and demand. They are not absolute standards. Non-performing loans have non-performing debts on the other side, and land prices are relative evaluations. Because they were mistaken for absolute evaluations and forcibly disposed of, the market bottomed out. If you try to forcibly dispose of non-performing loans, it may further depress land prices depending on the situation, widen the damage, or turn healthy loans into non-performing loans. The usual measure is to pickle land prices and wait for them to return. If you try to liquidate unnecessarily, a large amount of land will circulate when the bubble bursts, depressing the overall market. The handling of non-performing loans calls for non-performing loans and creates a situation where they proliferate, so careful handling is required. Also, the principle is to leave the handling of non-performing loans to the parties involved.

Economic value and land prices are relative values determined by market transactions and cannot be handled solely by internal circumstances.

Because the government and the central bank forcibly handled non-performing loans using financial institutions, land prices fell below the critical point and could not return to normal levels. Companies lost the source of funds for new investments, making it impossible to make forward investments, and capital investment stagnated for a long time.

What should be noted here is that the means of corporate financing are basically borrowing, capital increase, and revenue, and the collateral for borrowing is latent assets or future revenue. These two factors were contained by the handling of non-performing loans and deregulation. Since then, Japanese companies have given up on external financing and switched to internal financing.

As a result, the balance between investment and savings could not be maintained.

Behind land prices are debts, interest rates, and excess money. Next to them are stock prices and golf club memberships. In front (preconditions) are the yen appreciation recession, the end of high growth, the oil shock, etc.

Why did land prices soar in the first place? One of the important factors is the expansion of the domestic and foreign price difference due to exchange rate fluctuations. Another is taxes, especially inheritance tax. The current tax is based on the idea of returning private property to the public at the time of succession. In this respect, communism and capitalism are no different. They dislike the unilateral accumulation of private wealth.

Factors such as the yen appreciation recession (exchange rate), the end of high growth, and inheritance tax become preconditions.

One of the reasons that made the bubble burst serious is that land cannot be depreciated. In other words, the funds allocated to purchase land cannot be expensed. Therefore, when land prices fall, expenditures that cannot be recorded as profit and loss occur, causing phenomena such as bankruptcy despite being in the black. It worsened liquidity. Although commonly referred to as “loan withdrawal,” it does not appear on the surface of accounting, making it difficult to grasp the actual situation and causes.

What must be noted is the liquidity of funds. When the economy improves, there is a concern that bankruptcies will increase rapidly due to liquidity.

There are investments and speculation in fund management. In other words, there is real demand and speculation. Real demand involves capital investment accompanied by production activities, not just land, while speculation does not involve the substance as a means of production. Therefore, cost processing such as depreciation cannot be done. The decline in land prices directly leads to a shortage of funds. This widened the wound of the bubble burst.

Another important factor is the impact on prices. Land prices are stock, and prices are flow. The rise in land prices does not directly affect prices, which are flow, but it has a serious impact on fund management through borrowing and lending, and the time value ceases to work. The affected areas are profits, interest rates, income, and finance. This became the cause of long-term stagnation.

Flow and stock are profit and loss and borrowing and lending in corporate accounting. Profit and loss have a short-term effect. Borrowing and lending have a long-term effect, and land belongs to borrowing and lending. The wild fluctuations in land prices caused serious damage to the long-term flow of funds behind the scenes. As a result, companies appear to be surplus fund entities on the surface, but in reality, they are in a state where external financing is not possible.

Even with just one land price, so many factors are intricately intertwined. Therefore, structural and comprehensive responses are required.

It is not something that can be solved simply by handling non-performing loans.

From fluctuations in surplus (yang) and shortage (yin), yin (inflow) and yang (outflow) arise. From inflow and outflow, selling (yang) and buying (yin), lending (yang) and borrowing (yin) arise. From lending and borrowing, claims (yang) and debts (yin) arise. Claims and debts become assets (yang) and liabilities (yin).

Savings and investment are two sides of the same coin. From savings, claims (assets) and debts (liabilities) arise. From investment, claims (assets) and debts (liabilities) arise.

The key is surplus and shortage, balance, and necessity.

What went wrong? Why has Japan’s economy stagnated for such a long period? The answer lies in the policies adopted at the beginning of the stagnation, that is, when the bubble burst and immediately thereafter.

Everything has a beginning. What is set at the beginning becomes the cause of the later state.

When considering this, there are a few key points to focus on: stock and flow, long-term and short-term, and the emphasis on profit. Investment and savings.

First, what is a bubble? Let’s consider the causes of the bubble and how to deal with it. The factors of the bubble are becoming clear.

One is the exchange rate, the appreciation of the yen. The widening price gap between domestic and foreign markets due to the appreciation of the yen. Another is the recession. It is said that the appreciation of the yen is the cause, but before that, there were fundamental industrial problems such as the end of high growth and the oil shock. Another is the transition from a high-growth era to a low-growth era. The economy was supposed to shift from a mass-production economy to a small-lot, multi-variety economy, and from a heavy and large-scale economy to a light and small-scale economy. The end of economic growth meant that the domestic market had reached saturation. In other words, the nature of the market had changed. A shift from quantity to quality was necessary. To achieve this, it was necessary to deregulate growth industries while simultaneously strengthening regulations on mature industries. Another is interest rates. The problem of monetary easing. When there were signs of a bubble, Black Monday occurred, and tightening was delayed. Another is the fiscal deficit. What is noteworthy is that during the bubble period, the fiscal situation improved. The collapse of the bubble caused the fiscal situation to deteriorate again. Another is taxes, especially inheritance tax. The rise in land prices exponentially increased the burden of inheritance tax, and measures to deal with inheritance tax promoted the bubble. When the bubble burst, it became a serious social problem, changing consumer preferences from owning homes to renting. Another is employment. The long-term growth model of seniority-based and lifetime employment revealed its flaws, and the burden of excessive retirement led to a shift from regular employment to temporary employment. This also widened the generational gap in consumer lifestyles.

Since the bubble was caused by the discrepancy between flow and stock, it is reasonable to adopt policies that align the levels of flow and stock. So why did flow and stock diverge?

One issue is on the flow side. The problem on the flow side is primarily a revenue issue. When high growth ended, the appreciation of the yen caused a recession, and companies that could no longer make profits in their main business all turned to side businesses and diversification. Some of these companies turned to speculation. The difference between investment and speculation is that investment involves actual demand, while speculation seeks nominal profits. In other words, speculation seeks short-term profits with long-term funds without involving capital investment. This leads to no depreciation and no revenue generation. As a result, when the bubble burst, it caused serious funding shortages for companies.

Profit and loss represent the workings of long-term and short-term funds, and profit is an indicator that measures the workings of long-term and short-term funds. It is important to note that profit and loss do not directly represent the inflow and outflow of “money.” Companies are fundamentally driven by cash flow. The first thing to consider is the balance of cash flow, but if zero-sum balance is achieved, the difference between surplus and deficit is lost, and “money” stops flowing. Therefore, profit and loss were devised to measure profit by distinguishing between long-term and short-term workings and creating short-term differences. However, the weakness of this is that the direct flow of funds is buried. The repayment of long-term funds is not recorded anywhere. Excessive emphasis on profit causes the discrepancy between flow and stock.

When considering profit and loss, it is necessary to think in conjunction with cash flow. In that case, it is important to note that profit and loss are not directly linked to cash flow.

First, the repayment of funds paid for land among investment funds is not recorded as an expense. The portion invested in equipment is recorded as an expense through depreciation, but it is not linked to the repayment of borrowed funds. Naturally, the funds for repaying borrowed funds are not linked to profit. Also, the profit and loss for tax calculation and the revenue and expenses in accounting are separate. Sales and income are different. Expenses and expenditures are different.

Without correctly understanding this point, it is impossible to distinguish between speculation and investment. Speculation is an unproductive expenditure. This became a drag on the economy after the bubble burst.

Incidentally, deregulation can be considered a type of deflationary policy. This is because it is a policy to intensify competition and suppress prices. This can be seen from the companies that thrived during the long-term stagnation period. They are all discount companies. As a result, monopolies and oligopolies advanced in Japan.

Another important point is the time value, which is the motivation to circulate “money” in the market. Because there is a time value, “money” is circulated. Interest rates and profits create time value. And interest rates and profits underpin the growth rate. Interest rates create time value, but when the link between interest rates and repayment (debt) becomes invisible, it causes the discrepancy between flow and stock.

Another issue is on the stock side.

The most important issue is inheritance tax. The rise in land prices significantly increased the burden of inheritance tax. It increased the poverty of asset owners. The flow could not keep up with the rise in the value of the stock.

In terms of actual demand, people who really need housing to live in cannot afford it because it is too expensive. In other words, speculation suppresses actual demand. As a result, investment standards were set in places unrelated to cash flow. Cash flow was disregarded. As a result, the link between stock and flow was lost.

The modern economy is built on debt. What backed consumer debt was stable income from regular employment and retirement benefits. Long-term stable income was guaranteed, and debt was backed by retirement benefits. Changes in employment patterns jeopardized this backing. This shifted the focus from owning homes to renting, and from detached houses to apartment buildings.

The bubble was also caused by ad hoc policies. Similarly, the stagnation after the bubble burst was caused by ad hoc policies.

It is necessary to correctly understand that deregulation and regulatory reform are different.

Behind the prolonged stagnation and fiscal problems after the bubble burst lies the issue of the balance between investment and savings. One manifestation of this is the improvement in fiscal conditions during the bubble period.

Firstly, it can be said that during the period of high economic growth, despite various issues, the fiscal balance was maintained to some extent. However, this balance became questionable towards the latter half of the high growth period.

After the bubble burst, companies’ latent assets were depleted or turned negative due to the decline in land and stock prices. Additionally, the market became saturated, and deregulation led to excessive competition, causing prices to fall and making it impossible to secure future profits. As a result, it became difficult to raise funds externally, forcing companies to rely on internal funding, making new capital investments challenging. Consequently, liabilities decreased, and savings increased. The fiscal deficit expanded as the government compensated for the reduction in corporate investment.

The phenomenon known as the “lost two decades” is primarily due to the suppression of private capital investment. The reason for this is that companies lack assets that can be used as collateral when making capital investments. The assets that can be used as collateral are latent assets and future profits. Therefore, it is necessary to implement policies that boost stock and create a market environment where future profits can be expected.

This requires an environment conducive to capital investment, not a speculative one.

However, it is important to note that if the balance of current deposits at the Bank of Japan, which amounted to 525 trillion yen in February 2025, melts away, it will push up prices. As of November, the balance was 119 trillion yen, meaning there is approximately five times the pressure.

Investment and savings are two sides of the same coin. A decrease in investment means an increase in savings, but savings also mean investment in financial institutions. If financial institutions’ investments decrease, their savings decrease, and government bonds circulate. This also becomes a fiscal burden.

In other words, without funds circulating into private companies’ capital investments, fundamental solutions cannot be achieved. The bubble burst is more serious than the bubble itself because funds did not circulate into capital investments. Since money does not circulate into equipment, corporate savings increase.

No matter how forcefully funds are supplied to the market, if there is no demand for funds, money will only accumulate in the Bank of Japan’s current deposits. First, it is necessary to create a market environment where profits can be generated, but this is not achieved through deregulation.

Furthermore, zero interest rates result in the loss of time value and squeeze profits. It is not the interest rates that squeeze profits, but the market environment where interest rates cannot be obtained that squeezes profits.

The key is to create a market environment that promotes capital investment and housing investment. However, if current deposits melt away before that, it will lead to price increases and a fiscal crisis. It is essential to understand that policies are always a double-edged sword.

The prolonged period of stagnation continued because policies contrary to normalization were consistently implemented after the bubble burst.

Modern economies are built on the foundation of the monetary system. Therefore, the nature of “money” is constrained, particularly by the nature of paper currency.

The functions and characteristics of “money” change depending on the situation.

First, “money” is a means of exchange (purchase, payment). “Money” can be transferred. “Money” is a means to purchase goods.
Second, “money” is a means of production (investment).
Third, “money” is a means of distribution.
Fourth, “money” is a means of expenditure.
Fifth, “money” is a means of saving and value preservation (payment preparation). “Money” can be held and owned.
Sixth, “money” is a means of settlement. Settlement means to conclude a transaction.
Seventh, “money” is a means of evaluation. “Money” is a means to evaluate work.
Eighth, “money” is a means of measuring value (standard, scale). “Money” is a standard and unit for measuring economic value. However, economic value itself is a relative value determined by market transactions. Therefore, the value of money is not an absolute value but a relative value. The standard of “money” is a standard for distribution. The problem is that the value of money is open-ended, and both the objects to be measured and the subjects measuring them are finite. It is inconvenient if the standard of “money” for distribution is open-ended. There is a risk of it becoming limitless, so it is necessary to put a cap on it. In other words, some form of restriction (formal, institutional, etc.) is imposed. In the past, gold was used as a cap. That was the gold standard system. Without restrictions, balance cannot be maintained, and there is a risk of runaway.
Ninth, “money” is a means of calculation. “Money” has the function of quantifying value. The value of money is a discrete number and a natural number. The calculation of the value of money is based on additive reduction, remainder calculation, and balance principle. “Money” has the function of unifying value.
Tenth, “money” is a means of lending and borrowing.
Eleventh, “money” has anonymity. “Money” cannot be distinguished whether it is picked up, stolen, or robbed. “Money” has anonymity.
Twelfth, “money” is mobile.
Thirteenth, “money” can be owned. Ownership means that ownership rights can be transferred. Fourteenth, the function of “money” changes depending on its use and usage. The functions of “money” include settlement of sales, rent, compensation for labor, interest, loans, debt repayment, service fees, gratuities, celebrations, condolence money, membership fees, taxes, investments, savings, etc.
Fifteenth, “money” exerts its utility by flowing. Liquidity.
Sixteenth, “money” has value just by being owned.
Seventeenth, “money” cannot be consumed. It preserves value without being consumed. It does not deteriorate.
Eighteenth, “money” is numerical information.
Nineteenth, “money” must be authenticated, notarized, and guaranteed by public institutions (such as the state).
Twentieth, “money” is a public good, not a private one. Paper currency is a certificate guaranteed by the state.

The fundamental premise is that “money” must be recognized as “money” by everyone and guaranteed by the state to exert its utility. This is the most important requirement that constrains and restricts “money.” This requirement remains indispensable even if money becomes information, symbols, or signals. Conversely, the key is how and by what means the value of money is secured and proven.

In this way, “money” has many characteristics and functions. When considering the relationship between investment and savings, fiscal issues, and devising countermeasures, it is important to note that the function of “money” changes depending on its use.

Savings are investments in financial institutions. What constitutes investment, savings, selling, buying, lending, and borrowing, as well as income and expenditure, changes depending on the position, situation, and premise of the parties involved. The function changes depending on the position. And if economic utility is determined by inflows and outflows, it is necessary to examine who evaluated what from what position and for what purpose to clarify the utility of “money” and economic phenomena.

For example, why did the fiscal situation improve during the bubble? Why did corporate savings increase and the fiscal situation deteriorate after the bubble burst? To understand how to maintain inter-departmental balance, it is necessary to know how the function of “money” changes depending on the department and situation. Transactions do not work in one direction but in both directions. For example, costs, when viewed differently, are sales, rewards, compensation, income, revenue, expenditure, and distribution.

Also, “money” is not consumed. Because it is not consumed, it accumulates. Because “money” is not consumed, it is repeatedly reused. Because it is not consumed, it circulates. It can also be circulated. This point also needs to be correctly understood.

“Money” is numerical information. The visible form of “money” is not its true nature. The true nature of “money” is numerical information. The true nature of “money” is nominal value. However, nominal value alone cannot be handled, so some form or appearance is given to it. That is currency. Therefore, currency has both nominal value and real value.

Currency can be owned by having form and appearance. The important attribute of currency is that it can be owned, and what makes this possible is the form and appearance of currency. Currency can have substance as information by having form and appearance. Ownership arises by having form and appearance.

The relationship between currency and ownership is inseparable and indivisible. Especially in countries where private ownership is restricted, the utility of currency is also limited.

To maintain the efficacy of currency, it is necessary to confirm and identify the owner and ensure it can be preserved. If anyone can issue currency at will, the function of currency cannot be restricted, and its function will be lost. During hyperinflation, items like cigarettes replace currency and perform its function, which is evidence that currency can no longer be restricted. The value of currency is open-ended.

Public investment represents revenue for companies and tax expenditures for households. For the financial sector, it translates into government bonds and loans. If this interaction cannot be depicted, it means that fiscal deficits arise from imbalances.

If the total economic value does not change, an increase in one sector will result in a decrease in another. The source of the total amount is the circulation of currency.

Therefore, creating a market environment that allows companies to make proactive capital investments is the key to fiscal soundness.

However, it is not about deregulation per se, but regulatory reform. If companies cannot foresee profits, they will refrain from capital investments.

When public investment is made, it is important to consider how it will affect each sector. Every sector will be impacted in some way. It is a give-and-take situation, with interactions going both ways, like yin and yang, positive and negative.

The criteria for necessity are survival and self-actualization. The first step of self-actualization is to have discernment between oneself and others. The second step is to know oneself. The third step is to establish oneself within the relationship between oneself and others.

The basics of the economy are issues of people and goods. If production increases and the number of people decreases, the share should increase. The basics of the economy are not about “money,” but ultimately it becomes a matter of “money.” This is because “money” is a means of distribution.

On one hand, there are surplus houses, while on the other hand, there are many people without homes. On one hand, a lot of leftover food is thrown away, while on the other hand, there are people struggling without food. This is a distribution problem, which means it is a “money” problem.

When production and population issues remain unchanged, but prices soar or a recession occurs, it is a monetary phenomenon, a “money” problem. If “money” accumulates in strange places or the flow of “money” stagnates, it hinders distribution. Therefore, it is not a “money” problem, but it is a “money” problem. It is the duty of those who govern the economy to ensure the smooth flow of “money” and facilitate distribution.

Because we are only looking at “money,” we cannot resolve the issues related to “money.” Because we are only focusing on fiscal matters, fiscal issues remain unresolved.
Fiscal problems are simultaneously household problems, corporate problems, financial problems, and trade problems.

What must be absolutely secured is the quantity, not the amount. It is important not to be mistaken about this point.

Japan today is overflowing with goods. However, eighty years ago, there was a shortage of goods, and some people even starved to death.

This can also be a cause of war. It is an absolute requirement for the people to secure supplies for their livelihood.

Maintaining a total production volume and production level that has leeway relative to the total consumption volume and consumption level. However, the era of simply producing in large quantities is a society with a shortage of goods. Guaranteeing minimum consumption is a distribution issue.

To achieve balanced distribution, it is necessary to promote balanced production in line with the consumption tendencies of the people.

Essential goods are important. However, if essential goods are commoditized and left unattended, profits cannot be raised.

Based on the above points, we consider the state of the economy. If we start with “money,” we lose sight of the true nature of the economy, as well as the meaning of prosperity.

The most important point is that what drives the economy is the flow of “money.” Flow means there are inflows and outflows. Inflows and outflows mean there are givers and receivers. In other words, economic transactions cannot be done alone; there is always a counterpart. And flow means there is a before and after. You cannot always be the giver; you must procure from somewhere what you have given out.

Where does the flow of “money” come from, and where does it go? Another important point is that the amount that flows out is the same as the amount that flows in. In other words, the excess “money” compensates for the shortage. Overall, surpluses and deficits offset each other. If the fiscal sector is short of funds, there is a sector with an equivalent surplus of funds. This is the key.

To compensate for fiscal shortages, funds are transferred from surplus entities.

Therefore, private investment. Not speculation, but within private investment, capital investment and housing investment. Private investment includes capital investment, housing investment, and inventory investment

Prices fluctuate due to the imbalance of people, goods, and money, as well as the time value.
Income and expenditure appear as increases and decreases, positives and negatives from the perspective of individual entities, but overall, they are replaced. The total amount of currency is the product of the amount of currency issued and its velocity. Therefore, the economy needs to be viewed from two perspectives: the increases and decreases, positives and negatives, surpluses and shortages of individual entities, and the distribution and bias of the whole. Prices fluctuate due to supply and demand. The basic principle is the surplus or shortage of goods. When there is a shortage of “money,” the government borrows from the people, that is, issues government bonds to supply it.

Among government bonds, the portion that is not converted into banknotes or currency is pooled in the central bank’s current account deposits. When production and consumption are balanced, the circulation of currency does not have a decisive impact, but when the balance between people and goods is disrupted, there is a risk that price runaway cannot be controlled. This is because the balance between flow and stock, investment and savings, long-term and short-term, assets and liabilities cannot be maintained.

The original economic quantity lies in production and consumption, not in monetary value. Monetary value is the volume of transactions. However, since economic quantity cannot be measured directly, transaction volume is used.

Even if public investment is called an economic stimulus measure, it is not enough to simply invest. It must be accompanied by economic value. It should not be implemented merely for the sake of economic stimulus or unemployment measures without a purpose. In that sense, public investment during the bubble period can be said to have been old-fashioned investment for the sake of investment, based on Keynesian ideas. As a result, it supported the bubble, and after the bubble burst, it led to an increase in non-performing loans. Consequently, many general contractors went bankrupt and were liquidated. Additionally, a large portion of national funds was spent on cleaning up the construction industry. Public investment needs to be implemented systematically based on national plans. It is a project related to the economic foundation. In that sense, national defense and disaster prevention expenses need to be more carefully based on national strategy.

“In speculation and investment, tariffs, stock prices, and insurance, the root of the problem lies in the mismatch between the initial purpose and the actual function. Not all of these are inherently bad, but when they become excessive, the initial purpose can be forgotten or unattainable. A good example is when speculative transactions cause land prices to soar, making it impossible for people who genuinely intend to live there to buy a house.

Of course, there are cases where the purpose is misunderstood from the beginning. This is due to a lack of proper understanding of the function.

Tariffs are relatively old taxes. This is because toll taxes are easy to collect.

By analyzing the increase and decrease, positive and negative, and the surplus and deficit situations of the income and expenditure of individual entities, departments, and countries, as well as the overall distribution, flow, cycle, and bias, we can determine the direction and flow that should be guided. It is important to clarify which means are effective for this purpose. The important thing is to clarify where the money comes from and where it goes, even among individual economic entities, departments, and countries. Also, examine whether there are distortions, stagnations, sediments, or biases in the flow of money. Based on this, clarify the characteristics of individual entities, departments, and countries. The functions of tariffs include correcting internal and external disparities, protecting vulnerable industries, realizing fair competition, and correcting exchange rate fluctuations.

First, clarify the ideal state, the standard state, and the normal movement, and then find and warn of abnormal points. Create a balance model.

Since the economy moves with the flow of money, the inflow and outflow of money are important. Therefore, it is necessary to track where the money comes from, where it goes, what the source is, and who the recipient is.

Since the economy is driven by the flow of money, if the economic volume does not change, even if individual economic entities, departments, and countries have increases, decreases, positives, and negatives, it is merely a replacement and movement of allocation in the overall picture. The total amount of the economy is determined by the amount and turnover of banknotes issued.

When imports increase, the yen depreciates. When exports increase, the yen appreciates. When the negative (imports, yen depreciation) reaches its peak, it turns to the positive (yen appreciation), and when the positive (exports, yen appreciation) reaches its peak, it turns to the negative (yen depreciation). When interest rates are low (negative), the yen depreciates (negative). When interest rates are relatively high, the yen appreciates. Yen appreciation lowers prices. Yen depreciation raises prices. This action maintains balance through the movement of imports and exports.

The balance of current accounts is maintained by the intersection of transactions of goods and money.”

The way of heaven and earth is eternal and unceasing.

Why does a stock market crash affect the economy? The answer lies in the function of stocks. Stocks are nominal assets. The function of stocks is to raise funds. The assets that can secure funding are limited. The basics are latent assets and future earnings. However, future earnings are highly uncertain. It is possible to raise funds using business plans as collateral. In contrast, latent assets have been considered reliable. Although the land myth collapsed after the bubble burst, at least land does not become worthless.

On the other hand, stocks carry the risk of becoming worthless. Despite this, stocks are popular because they are speculative.

Stocks have nominal value. Nominal value means they do not have productivity. Land also forms part of nominal value.

The funds raised are invested in capital investment, inventory investment, and housing investment, which generate real value. If they are not linked to capital investment or housing investment, they do not connect to real value.

Moreover, stock prices are determined by a portion of transactions. Floating stocks and a part of market transactions determine the market capitalization. If you try to convert your holdings into cash by selling a large amount, the price will drop accordingly. Such stock prices, when detached from reality, carry the risk of wild fluctuations.

Additionally, stocks and land serve as collateral for raising funds, thus functioning as savings. Stock prices are compared to savings interest rates because stocks have a savings function.

A stock market crash does not directly affect the flow (prices), but it affects fundraising, tightening loans, and gradually squeezing the economy. Japan after the bubble burst is a typical example. The prolonged stagnation in Japan after the bubble burst was largely due to companies being unable to raise funds for capital investment.

Whether it is stocks or land, profits are realized when a sale is completed. However, if you sell a large amount, the price will drop. Therefore, when there are latent assets, both stocks and land are used as collateral for loans instead of being sold. These loans supply funds to the market.

The problem with the decline in asset values such as stock prices and land prices is that it becomes impossible to take out loans. When the private sector cannot borrow, funds stop flowing into the market and instead flow back into the financial sector. This creates deflationary pressure, which suppresses market prices. After the bubble burst, no matter how much interest rates were lowered, there was no demand for funds because asset values had fallen and excessive deregulation made it impossible for companies to expect future profits.

The monetary system is a mechanism that promotes production, distribution, and consumption by circulating money.
For this reason, money is not consumed but repeatedly reused.
It does not deteriorate.
Money functions not only by flowing on the surface but also by recirculating behind the scenes. The transactions on the surface are buying and selling, while the transactions behind the scenes are lending and borrowing.
Therefore, the amount of buying and selling equals the amount of lending and borrowing. Money must circulate to function, so a one-way flow must be avoided.
For example, continuously being in short supply or excess.
This results in fluctuations in exchange rates and balances.
The movement is such that when yin reaches its extreme, it turns to yang, and when yang reaches its extreme, it turns to yin.
Therefore, the law of action and reaction is always designed to work in the opposite direction.
It is structured to create rotational, cyclical, and wave-like movements.
It is not about positive being good or negative being bad.
It is viewed as a state of rotational movement, and its appropriateness is judged based on that state. This is the relationship between profit and loss and lending and borrowing.

Just as there is space-time in natural science, there is also space-time in economic science. The economy has vertical, horizontal, front-back, and time axes. The vertical axis is created by buying and selling and lending and borrowing, the horizontal axis is created by the market, the front-back axis is created by departments, and the time axis is created by production, distribution, and consumption.

The space created in this way has symmetry and equilibrium. Economic movement is based on equilibrium and symmetry.

In the vertical direction of the flow of “money,” an equal amount of claims and debts arise. Through buying and selling, goods of the same value flow in the opposite direction. Because of the flow of “money,” transactions between departments are replaced.

In the flow of “money,” there is a giver and a receiver. If the inflow and outflow are not balanced, surpluses and shortages occur, and the flow is interrupted. Therefore, the economy is based on “inflow” and “outflow.” If the total economic volume is constant, the state between departments means the distribution of surpluses and shortages. In other words, change means replacement. A relationship that accumulates unilaterally will eventually reach an extreme and reverse. If it cannot reverse, it will collapse.

When yang reaches its limit, it turns to yin. When yin reaches its limit, it turns to yang.

In a monetary economy, economic activity arises from the flow of money. Economic activity differs depending on the object or situation, but it arises from the same flow. Therefore, it is equivalent. Monetary value is exchange value, and since exchange is premised, activity must always be bidirectional. Unidirectional activity does not establish. Because it is bidirectional, it balances. That is, it is premised on bidirectional and equivalent activity.

Since the economy has vertical, horizontal, front-back, and time axes, the elements that make up the economy have vertical and horizontal activities.

The vertical axis is created by buying and selling and lending and borrowing, the horizontal axis is created by the market, the front-back axis is created by departments, and the time axis is created by production, distribution, and consumption.

Therefore, when considering the activities and impacts of the elements that make up the economy, it is necessary to comprehensively grasp the impacts on each coordinate axis.

The functions of interest rates themselves are: One, interest rates are costs. One, interest rates arise from debt. One, debt results in repayment. Expenditure. One, debt is a liability. Liabilities give rise to counterclaims. The borrower’s liability becomes the lender’s claim (asset). One, debt turns into assets. Debt is both a liability and an asset in the form of cash. Cash becomes an asset by investing in equipment and land. One, assets are investments. Investments are the basis of income (capital). One, assets are the source of revenue. They also become the source of debt repayment.

Vertical activities are symbolized by profit and loss and lending and borrowing. And they are measured by profit.

On the horizontal axis, the following matters exist: Interest rates affect exchange rates. Interest rates affect prices.

Interest rates affect capital investment. Interest rates affect land prices. They have a function to restrain the economy. They affect exchange rates.

Through the above matters, interest rates affect prices.

In the front-back axis, Interest rates include deposit rates and lending rates. Deposit rates act at the entrance of financial institutions, and lending rates act at the exit. Deposit rates affect consumption, and lending rates affect production.

The source of interest rates is borrowing, debt. Debt is the long-term function of “money.” Therefore, it first affects long-term activities. Long-term impacts include restraining capital investment and land prices. This restrains financial transactions and narrows the supply of funds to the market.

It does not necessarily immediately affect prices, but it gradually works to stagnate the market through sales and income. It is considered an effective means when the economy is overheated, but it takes time for the effect to appear, and if the timing is wrong or missed, it can have the opposite effect.

Short-term impacts are the effects on exchange rates, prices, and the economy due to rising interest rates.

The ultimate is rotation. Rotation gives rise to positive and negative, up and down, in and out, yin and yang.

In a monetary economy, space is formed by the flow of “money.” The space created by the flow of “money” is named monetary space. Monetary space is an independent space. With the establishment of monetary space, monetary value is related to position and movement (activity).

What is important in the economy is not phenomena, but mechanisms and structures.

The economy is a mechanism that realizes production, distribution, and consumption by circulating “money.” The nature of “money” is also determined for the purpose of establishing this mechanism. Even if you only look at the situation or part, it becomes a state of blind men touching an elephant.

Space creates a field.

Circulation generates up and down movements, periodic movements, and waves. The ups and downs of exchange rates also arise from the circulation movement of “money.”

Economic space is created by the flow of “money.” Because it is a flow, if there is “inflow,” there is “outflow,” and if there is “outflow,” there is “inflow,” which creates two actions. This is not a matter of monism or dualism, but a matter of activity. Two activities arise from one flow. This is called yin and yang.

The space created in this way has symmetry and equilibrium. Economic movement is based on equilibrium and symmetry.

In any matter, especially in economics, making an overall judgment based on just one aspect can lead to serious mistakes.

Regarding tariffs, just like during the time of deregulation, there is again a debate on whether tariffs are good or bad. What is important is the function of tariffs: under what circumstances, for what purpose, against what, and how they are intended to be used.

Why are tariffs an issue now? Tariffs, interest rates, and fiscal policies can be directly controlled. Stock prices, exchange rates, profits, and prices cannot be controlled. The fact that they can be directly controlled makes them powerful policy tools. However, it should be noted that it takes time for results to appear. There are procedures for implementing the system, which also takes time.

Tariffs are a means related to trade. The essence of trade lies in the balance of imports and exports. This is the fundamental premise.

Therefore, when clarifying the utility of tariffs, it is necessary to consider both exports and imports.

Tariffs work on imports, but the main cause lies in exports. The point to note is that tariffs are fundamentally a means that act on imports. However, the primary purpose of imposing tariffs is to maintain the balance between exports and imports, and the factor that disrupts this balance is the unfair exports of the other country. At the same time, it lies in the economic premises and industrial structure disparities between one’s own country and the other country.

First, it is necessary to clarify what is causing the unfair export situation. Then, it is important to clarify what the tariffs will act on and what the intended outcome is. Policy should not forget to be a purposeful act. What the purpose is, that is the key.

The function of tariffs is not limited to imports. Naturally, it affects tax revenue. It also affects price and exchange rate fluctuations. It impacts the industrial structure of one’s own country and employment. It affects corporate performance, inventory, investment, interest rates, economic conditions, stock prices, national defense, and diplomacy. It also affects domestic and international disparities.

These impacts also occur in the other country.

Therefore, a comprehensive analysis is required.

When confirming the purpose of tariffs: The purpose of tariffs is to correct domestic and international disparities and eliminate unfair competition. To protect vulnerable industries. To protect industries necessary for national policy and defense. Additionally, to add a deterrent effect against domestic monopolistic and oligopolistic markets. To mitigate exchange rate fluctuations.

It is necessary to predict the purpose of imposing tariffs, where the impact will appear, and what kind of impact will occur.

In terms of imports, the degree of dependence on imports becomes important. The United States, Canada, Russia, and Australia have high production volumes of food, energy, and necessities relative to their populations, so in reality, they are not that dependent on other countries. This is why the Russian economy is resilient to war. Conversely, countries like China, India, and Japan, with large populations, can be said to have high dependency. However, having abundant production is not only a strength but also a weakness. This is the concept of yin and yang, where strengths can also become weaknesses. Simply looking at trade in terms of monetary value can miss the essence. Quantities represent the reality of trade.

When considering the balance of exports and imports, quantitatively, the United States can be considered an exporting country. Because it is an exporting country, it cannot maintain a balance in its current account. If free trade collapses, the United States may face a surplus of goods rather than a shortage. This is happening in reality in Russia.

The issue lies in prices. Maintaining appropriate prices is one of the important functions of tariffs.

Why did Japan’s automobile industry flourish? I believe that the era when Japan’s automobile industry had thirteen companies, the electronics industry had around ten companies, and the petroleum industry also had about ten companies, along with competition in the financial sector, was vibrant. However, after the bubble burst and oligopolization progressed, it quickly lost its vitality.

I think the American automobile and electronics industries lost their vitality when they entered the era of the so-called Big Three. The same goes for IT; countries where garages and small factories are vibrant also have flourishing industries. Tariffs also simultaneously transform such domestic industrial structures.

Regarding Japan’s baseball league, fifty teams are too many, but three teams are too few, and one or two teams cannot have matches. I believe the antitrust laws understood the characteristics of the market economy well.

Trade consists of imports (yin) and exports (yang), so it should be considered from both sides. Exports have two impacts: the effect on the exports of the other country and the effect on one’s own exports. This is the concept of yin and yang.

Regarding tariffs imposed by one’s own country, there are cases where the other country imposes retaliatory tariffs and cases where it does not. Whether retaliatory tariffs are imposed or not depends on domestic circumstances. The circumstances of exports and imports are different.

It is necessary to confirm what is being exported (yang) and what is being imported (yin). Additionally, the industries that one’s own country is exporting and the goods being exported and imported are different.

Countries like the United States, Canada, Australia, and Russia have a lot of raw materials and commodity products such as food and energy. Countries like Japan have many processed products.

When retaliatory tariffs are imposed, there is a high risk of distortions in the production and distribution structures of that country. It is like paying for exports with imports.

Therefore, there should be no unfairness between exporters and importers.

To balance exports and imports, it is necessary to balance export products and import products, and thus review the way imports and exports are handled.

Tariffs, including retaliatory tariffs, are related to the structure of imports, but it should not be forgotten that they also relate to the structure of exports.

Furthermore, what allows the other country to export at unfairly low prices? It may be because there are workers who are forced to work under poor conditions for low wages. This is a phenomenon known as the export of poverty.

Unfair trade may include elements that cannot be resolved by price alone.

Another thing that should not be forgotten is the role of finance and capital behind trade. These roles become the seeds of financial engineering.

Looking at the structure of the current account balance, it consists of the trade balance and the service balance, with the capital account working behind the scenes.

Tariffs mean changing the industrial structures of both importing and exporting countries. There is significant importance in this.

If tariffs are not properly utilized, there is a risk of causing fragmentation of the international market, similar to the Cold War era.

It is necessary to predict the purpose of imposing tariffs, where the impact will appear, and what kind of impact will occur.

The difference in trade structures and current account balances between the United States and China is quite significant. When looking at food alone, the United States is an exporting country, while China is an importing country, and this trend is likely to become stronger rather than weaker. Despite this, China has a current account surplus, while the United States has a deficit. This is a distorted structure.

For China, the issue is not exports but imports, which is a matter of life and death for them. On the other hand, for the United States, the issue is not imports but exports. This difference in perception is quite alarming.

When constructing a system hexagram based on hierarchy, the first line is the fifth level, the second line is the fourth level, the third line is the third level, the fourth line is the second level, the fifth line is the national ideology, and the top line is the first level. Policies need to be established in order from the top line.

If the movement of the economy is a rotational motion, it is important to make the cycle accurate and to understand where you are positioned. Some rise while others fall. Positive and negative, yin and yang alternate. There are times when things go up and times when they go down. It is not always good to be rising. The problem lies with countries that only rise.

The balance and the direction of flow, the direction of movement are important.

If there is always a force trying to balance excess and deficiency, it becomes a cyclical up-and-down movement.

The economy moves through four types of waves: waves between sectors, waves between countries, waves between profit and loss, and waves caused by the workings of long-term funds. At the root of these waves are three types of investments: capital investment, inventory investment, and housing investment. Additionally, the cycles of daily life, consumption, and life events such as eating three times a day, birth, illness, aging, and death create waves.

What is important is where your country is positioned now.

Household financial assets are loans to financial institutions.
Through financial institutions, they are invested in companies and the government. Investments in the government are made through government bonds. In this way, household assets are converted into liabilities of companies and the government. Liabilities are transformed into investments, and government bonds are transformed into public investments, thereby supplying “money” to the market.

The liabilities of companies are recovered from their income, the liabilities of the government are recovered through taxes, the liabilities of households are recovered through income, and the liabilities of financial institutions are recovered through repayments.

The purpose of corporate liabilities is transformed into capital investments and inventory investments, government liabilities are transformed into public investments, household investments are transformed into housing investments, and financial liabilities are transformed into financial assets.

The true purpose of public investment is not economic measures or unemployment measures. It is based on long-term plans.

Investment creates a flow of “money” in the market.

Funds are circulated in the market through the cycle of investment and recovery. In other words, the cycle of liabilities, assets, expenses, and income is organized. Since it starts with expenditure, debt must be incurred initially.

During the growth period, this cycle is easy to balance. Investment generates income, and recovery progresses smoothly. During the maturity period, it becomes difficult to maintain balance, so discipline must be imposed on the market to ensure profits, otherwise stable recovery will not progress. The entropy of the market continues to increase. Therefore, devices are necessary. Energy can be safely controlled, operated, and manipulated with containers and devices.

As the market becomes saturated and transitions from the growth period to the maturity period, the premises of the market change. Regulations and systems are reorganized according to changes in premises.

The flow of “money” is based on inflows and outflows, so it is clearly visible. Therefore, the inflows and outflows of “money” and goods are used as factual evidence.

During the period of high economic growth, households saved funds, which financial institutions collected and lent to private companies for capital investment. This virtuous cycle supported growth; however, when this balance could no longer be maintained, public institutions began to supplement insufficient investments. Consequently, a large amount of government bonds accumulated, and financial institutions increased their investments in financial assets. Fiscal health cannot be achieved by focusing solely on fiscal matters.

Fiscal policy involves recovering investment funds through taxes with short-term balance (annual balance, statutory budget principle) and cash basis accounting. It also aims at redistributing income.

Companies recover investment funds through profits with long-term balance and profit-and-loss accounting.

The market principle is that private sectors—households and companies—maintain equilibrium. However, this equilibrium has been disrupted since the end of high growth periods and post-bubble collapse.

Unless this issue is addressed, markets will not function properly.

The means to eliminate the fiscal deficit involve replacing corporate, accounting, financial, current account, and funds, but where to replace them? Corporations recover through capital investment and inventory investment with revenue. Households recover through housing investment with income, and financial institutions recover through financial investment with repayment.

The strategy to eliminate the fiscal deficit is likely to replace fiscal investment with private investment, primarily capital investment and housing investment. Housing investment and stocks, which are financial assets, are non-productive assets, and when excessive, they can cause bubbles. Moreover, housing investment is recovered through income, meaning that a certain period of guaranteed income is a prerequisite. The guarantee of a certain income over a certain period implies stable corporate management.

This shifts the focus to capital investment. Promoting capital investment becomes a market issue. In other words, the market must create an environment where private companies want to invest in capital. Private companies invest in capital because they anticipate profits; no matter how low the interest rates are, if profits are not anticipated, they will not invest. Therefore, the necessary conditions are whether it is possible to sell at a reasonable price and whether the requirements for interest rates and other factors are met. If labor costs are not reasonable, it is a rational decision to move production bases to regions with lower labor costs.

Hence, it is necessary to review the regulations of the growth era, but this does not mean immediate deregulation. Rather, it is about imposing some regulations to avoid falling into price competition. Otherwise, everything converges to price, and added value is lost.

Market entropy increases, and profits tend to be compressed to zero without a mechanism. Competition exists because there are rules. Rules are regulations. However, regulations that hinder market activities and outdated regulations should be eliminated.

Corporations are profit-driven activities. Creating a market structure where profits can be made is not a bad thing.

It is not that deficiency is bad, excess is bad, or surplus is bad, but that it is bad to be in a state of constant deficiency or excess. When deficiency occurs on one side, excess occurs on the other.

The primary purpose of public investment is to enhance social capital, including disaster prevention and national defense. Since private investment is aimed at production and consumption, the issue is how to balance this.

It is also a matter of balancing long-term and short-term effects, the surface flow (buying and selling), and the underlying stock (borrowing and lending).

Individual countries have disparities due to basic economic conditions and systems. Tariffs are an effective means to correct such basic conditions and disparities.

For example, matching the prices of countries that lower prices through poor working conditions leads to the deterioration of domestic working conditions and the export of poverty. Imposing tariffs and regulations on countries that engage in cheap sales through poor working conditions is a legitimate act and a right.

What is important is the preservation of the market environment. It is the same act as maintaining the field in sports.

It is a choice between aligning your country’s income with that of low-wage countries or importing products from countries where people are forced to work under low wages and slave labor conditions.

The principle is to avoid falling into price competition and to encourage competition in areas other than price. This is especially true for commodity products. Price tends to strip away attributes other than price, leading to a lack of appreciation for added value.

For example, the Swiss watch industry. Watches are a typical commodity industry.

In the end, the issue of tariffs boils down to labor conditions and human rights. There is no other justification.

Fair competition means competition under the same conditions. Tariffs also strongly imply aligning conditions to be the same.

When both the current account and fiscal balance are in deficit, it is often referred to as twin deficits, suggesting a severe situation. On the other hand, a surplus in any sector, whether it be corporate, household, or financial, indicates a surplus. Therefore, it cannot be concluded that a deficit is inherently bad. The issue lies in which sector is in surplus and what impact it has as a result, as well as whether the situation is rigid.

It cannot be simply stated that a surplus is good and a deficit is bad.

What is important is the impact on flows such as prices and how it affects daily life. During the bubble period, the excessive rise in stock prices suppressed actual demand.

The rise in land prices led to wealthy individuals becoming poor. Although asset values increased, taxes also increased, leading to a decrease in income and financial hardship. There are examples of people taking on large debts for inheritance tax measures and going bankrupt after the bubble burst.

Conversely, forward-looking investments may result in a single-year deficit but promise significant profits in the long run.

Economics is a matter of community and daily life, concerning living spaces and the environment. It becomes an issue of urban planning and living environment.

In economics, what is important is the state and situation, not the price. It is about what kind of environment is created through sales activities.

Making money is not the goal. Making money is a means. Misunderstanding this point leads to losing sight of the essence of economics.

It is economic life.

Finding a job, working, building a house, getting married, having and raising children, and living a lifetime. That is the basic of economics.

Assets arise from borrowing, assets turn into expenses, expenses generate revenue, and revenue is used to repay the borrowed money. Within expenses, there is income, and income is allocated to living expenses and consumption. A portion of the income becomes the capital for housing investment. Housing investment is financed by borrowing against future income. Debt is pooled in financial institutions, aiding the circulation of funds. Collateral serves as a backing for funds but is not absolute. It is merely insurance for times when repayment is delayed, so if there are no issues with repayment, it is unnecessary. During the bubble, the problem was the interruption of the flow of funds due to insufficient collateral. The misconception and assumption that debt and expenses are bad are the root of all evil.

Deficits and surpluses are the result of converting rotational motion into linear motion. Debt and expenses also have their roles.

If debt and expenses are reduced too much, money will not circulate in the market.

Making debt and expenses the villains and refusing to understand their roles is the root of all evil.

Reducing liabilities and expenses compresses assets and income, meaning the market and economic scale will shrink.

In reality, the current economy is based on debt and expenses. Assets arise from debt, and income is generated from expenses.

It’s not always good to be productive in everything. The economy is an activity for people to live. We must not forget about people.

A comfortable living space. That is what the economy aims for. It’s not about money. It exists beyond money.

The biggest mistake of economists so far is thinking that the economy is a matter of money and goods. The economy is a matter of people. It is a matter of how people live. It is a lifelong issue.

Heraclitus said that all things are in flux. Everything flows and rotates.
Rotating objects cannot have their functions measured at specific points in time. Therefore, linear motion, which is represented in two dimensions, is considered linear.

There are various calendars and prophecies related to calendars around the world.

In the East, there is a calendar that cycles through ten heavenly stems, twelve earthly branches, and completes a cycle every sixty years. In economics, there are calendars created based on depreciation periods and repayment periods. Economic cycles are formed by the overlap of depreciation periods and repayment periods.

The inflow and outflow of money are clear, providing a basis. It is not a prophecy; it can be clearly defined. Many current economic indices are unscientific because they are not directly linked to the function and flow of money.

Assets arise from loans, expenses arise from assets, and expenses turn into sales and income. The time required for this process becomes one of the economic values.

Annual expenditures include costs and debt repayments. Costs include consumables, personnel expenses, raw materials, and depreciation expenses. However, depreciation expenses do not involve actual expenditures and do not cover all investments. Land is not depreciated.

Land is liquidated and converted into cash when settled.

Therefore, the cycle of long-term funds involves depreciation, repayment, profit, and taxes. In other words, some borrowed funds are accumulated by companies through refinancing, and this refinancing maintains a certain circulation of currency. The idea that debt is bad and should be repaid, and that being debt-free is unconditionally good, is a misconception. Similarly, costs also have a function. Costs are the source of income. Consumables and raw materials ultimately return to income. Therefore, if costs are mechanized and automated, money will not be used for consumption. Money will not be useful for living. In essence, people are removed from the equation.

Would it be considered an ideal economic state if a huge warehouse-like store surrounded by a crowd of unemployed people? Many of today’s economists, managers, and policymakers seem to think so. It’s like entrusting war to machines and AI, believing that they won’t be harmed, but eventually, the blade will be turned towards them. Because it is people who can start and end wars. Even if humanity is wiped out by nuclear weapons, responsibility cannot be shifted to nuclear weapons. The responsibility lies with those who developed and used them.

Modern states may want to believe that they are superior to previous states in all aspects, as they are states established after the formation of nation-states. However, when it comes to infrastructure, it seems that pre-modern states were superior. Planned and controlled townscapes appear to be better before the establishment of modern states. Modern cities are chaotic and completely uncontrolled. They are anarchistic and chaotic.

Before the establishment of nation-states, finances were private and bureaucratic, lacking concepts like income redistribution, social security, and welfare. However, on the other hand, urban planning ideas seemed more advanced than today

Income is an expense. Conversely, expense is income. Reducing expenses means reducing income. It is impossible to increase income while reducing expenses because expenses are income.

Even if the government borrows money and invests in public projects, tax revenue will not increase just from that. Taxes are paid by taxpayers. If taxpayers’ income does not increase, tax revenue will not increase. No matter how much public investment is made or taxes are reduced, if taxpayers’ income does not increase, tax revenue will not increase. As long as policies that reduce expenses, decrease debt, and do not increase profits are in place, tax revenue will not increase.

Taxes do not increase income. Income is increased by expenses and revenue. Debt increases income but must eventually be repaid.

Why has the economy remained sluggish for so long after the bubble burst? It is because profit and interest are exploitation. Regulation is bad. Competition is the principle. Debt is bad. Non-performing loans must be cleared at all costs. A strong yen (weak yen) is bad. Recession cartels are bad. The pervasive belief that cost reduction is always good and cheap is better has spread. The true role of the economy has been lost.

The economy is relative, and economic value and policies are not absolute. It is necessary to constantly check and consider changes in circumstances and assumptions.

Monetary policy and government economic measures alone cannot control fiscal policy or the economy. The government cannot deliver results. Results are produced by the field and the market.

The issue lies in the amount of currency issued. Each country has institutions with the authority to issue currency, making it quite difficult to control the currency volume. However, the economic impact of the currency volume can be confined within the same currency zone. On the other hand, the key currency is directly connected to the global market, making it susceptible to global market influences. Conversely, the impact of the country’s monetary policy can affect the world economy. Additionally, the key currency provides settlement funds to other countries, eliminating the need to prepare settlement funds. However, this can lead to an excessive supply, which may result in fiscal deficits. In other words, it is easy to fall into excessive debt, but we must not forget that behind the debt, there is an equivalent amount of credit. Everything has its pros and cons, its yin and yang.

The current tariff issue ultimately boils down to the problem of exports. Although tariffs are imposed on imports, the entry point is an issue of the exit point, and the exit point is also an issue of the entry point. The reason tariffs are imposed is due to differences in domestic and international prices and economic levels, which necessitate simultaneous adjustment of both entry and exit.

It converges on labor conditions and human rights issues. There are no winners in trade because it is about balance. If there is conflict, both sides will be hurt. That is the will of God.

In the past, sacred symbols such as churches, temples, and shrines, secular symbols of power such as palaces and castles, and squares were centrally located, and living and occupational spaces were orderly arranged, which became place names.
First, city planning was based on people’s lives and livelihoods.

Based on our thoughts about our lives, production sites, distribution sites (markets), consumption, and living spaces were systematically arranged.

Such a people-centered approach is the true economy, but modern economy has become production-first and profit-centered.

While a modern state is considered to be a nation-state that emerged after the establishment of a national identity, it might be tempting to assert that modern states are superior to their predecessors in every aspect. However, when it comes to infrastructure, it seems that pre-modern states were actually more advanced. The planned and well-regulated townscapes appear to be superior in the era before the establishment of nation-states. In contrast, contemporary cities are chaotic and lack any form of regulation. They are anarchistic and disordered.

The economy is not fundamentally about whether it is useful or not. It is fundamentally about whether it is alive or not.

Deregulation intensifies competition and works to suppress prices. It also renews oligopolies and monopolies. During periods of rapid technological innovation, such as the generation and growth phases, it can be an effective measure even in rigid markets. However, in mature markets, it tends to lead to price wars and exhaust companies. As the market matures and becomes saturated, there is a tendency for regulations to be strengthened.

Regulation works to suppress competition and stabilize prices. On the other hand, it can rigidify, ossify, and conservatize the market, hindering technological innovation and generational change.

Both can become toxic if used at the wrong time and place. It is not about whether regulation is right or wrong. It is important to prescribe it based on the desired state, the timing, and the method.

“Money” is supplied as loans from the central bank to financial institutions, then flows into the market as income (expenses) through private investment (assets). The important thing is that funds are lent to the private sector; as long as they are accumulated in the central bank’s deposits, they do not circulate in the market. However, funds stored in the central bank’s current account are always converted into currency. In other words, when the market faces a shortage of funds, there is a risk of a sudden release. When there is a shortage of goods, if the flow of funds into the market cannot be controlled and the speed of loans cannot be regulated by interest rates, prices will run out of control. There is always a risk of falling into uncontrollability. It is necessary to constantly monitor the liquidity of funds.

There seems to be a misunderstanding regarding the phenomena of crowding out and the liquidity trap.

Crowding out refers to the phenomenon where the government’s fiscal policies, such as massive issuance of government bonds or tax cuts, lead to an increase in real interest rates, thereby squeezing private sector financing. When crowding out occurs, the following problems are said to arise: Firstly, although government spending stimulates the economy in the short term, it suppresses economic growth in the long term. Secondly, private investment shrinks. Thirdly, the economy is said to deteriorate.

The liquidity trap refers to a situation where monetary easing does not lead to a decrease in interest rates, rendering economic stimulus measures ineffective. This is an economic concept that can occur when facing severe problems such as deflation or stagflation. The mechanism of the liquidity trap is as follows: interest rates fall, bond prices rise, and people hold assets as money in preparation for future bond purchases (money demand based on speculative motives). When interest rates fall below a certain level, the opportunity cost of holding money becomes sufficiently small. The substitutability between money and bonds increases, and even a slight decrease in interest rates leads to an infinite increase in money demand. In this situation, monetary policy loses its effectiveness, and fiscal policy is considered to have a greater impact.

Both crowding out and the liquidity trap focus solely on policies, ignoring changes in market conditions and assumptions.

Both crowding out and the liquidity trap are caused by changes in market conditions. When the market transitions from a growth phase to a maturity phase, continuing to adopt the same policies, systems, and regulations as in the maturity phase inevitably leads to institutional fatigue and overreaction. Additionally, when the economy matures and the market shrinks, policies that promote price competition cause “money” with no place to go to flow into assets, leading to bubbles. Since this “money” cannot be absorbed by the market, it inflates nominal values, causing a divergence between real and nominal values. This results in phenomena such as crowding out and the liquidity trap.

A typical example is post-bubble Japan. Japan is thought to be in a state of crowding out, and the cause lies in the policies adopted during the bubble period and those adopted after the bubble burst. In short, if the private sector is unable to raise funds and market activities cannot recover funds, it inevitably falls into a state of crowding out. The same applies to the liquidity trap. No matter how much debt is incurred, if there is no use for it, it remains as deposits in financial institutions. Only when assets are converted into expenses, income, and earnings does “money” circulate back into the market. When “money” circulates back into the market, tax revenues increase, but if “money” does not circulate back into the market, tax revenues decrease, and the deficit must be covered by government bonds. In such a state, no matter how much interest rates are lowered, borrowers do not appear.

In a mature market, it is necessary to nurture the market to prevent falling into excessive competition. In other words, it is not about low prices but fair prices.

Investment is savings, and savings is investment. Selling is buying, and buying is selling. Wages are labor costs, income, compensation for work, and a source of living expenses. Investment and savings are the same flow of “money.” The function changes depending on the target of the flow. The problem lies in the flow path.

Even if we talk about selling and buying, the “money” that flows is the same, so it is of the same amount and quality.

Income is expenditure, cost, sales, cash, and assets. Investment is savings, debt, equipment, assets, and liabilities.

Income, expenditure, cost, and sales are all functions born from the same flow of “money.” “Money” itself is cash and assets.

Since the flowing “money” is shared by both sellers and buyers, sellers and buyers share interests, and yin and yang arise from a single transaction.

Mature markets and growth industries coexist. This point must not be forgotten. Mature markets and growth markets have different market conditions and assumptions. At the very least, if we do not assume they are different, we cannot analyze the phenomena occurring there.

Deregulation induces price competition, and forcibly disposing of non-performing loans to crush the bubble causes funds to stop flowing into the market. If the resulting tax revenue shortfall is supplemented with government bonds, what happens? The results are already evident. It is a grand experiment.

One aspect is vision. We need to create a clear vision of what kind of country we want to build. Based on that, we should focus on long-term planning rather than short-term economic measures. Instead of addressing parts like taxes or monetary policy, we should develop the market and promote private-led commercialization, and invest in education with clear objectives. We must avoid the misconception that universities are places for leisure. It’s not just about making education free; it needs to be directly connected to reality and meaningful.

Regarding the elderly issue, we should not adopt backward-looking measures but rather approach it as a forward-looking and productive endeavor. Work is not a hardship; it is self-fulfillment. We need to make people feel this way. Frankly speaking, converting everything into national defense and military spending is a quick fix, but it does not open up the future. We must end the era of relying on military spending for economic growth.

I believe it is about how to guide and control the flow path of “money.” It’s about determining the direction in which “money” flows.

The flow of “money” alone cannot measure the function of “money.” Therefore, it is replaced by linear movements such as profit and loss or balance sheets. Essentially, it is the same flow. From the buyer’s perspective, it is expenditure, inventory, cost, and asset; from the seller’s perspective, it is income, sales, cash, and asset. Both the seller and the buyer acquire assets, albeit in different forms. Ultimately, it is merely a difference in the flow and function of “money.”

The essence of the economy lies in production, distribution, and consumption, not in profit or making money. It is about the kind of life people desire in their real lives. At the very least, it should not be a state of war. Yet, why does war not cease? It is because production, distribution, and consumption are not balanced, leading to disparities.

By understanding the incentives and motives of “money,” one aspect is the time value such as interest rates and profits. Another aspect is surplus and shortage. Along this continuum, there are deficits and surpluses, so deficits and surpluses are merely results. What is important is the meaning behind deficits and surpluses.

There are two types of “money” flow: one through lending and borrowing, and the other through buying and selling. Lending and borrowing circulate the flow of “money,” while buying and selling realize the utility of “money.”

Lending and borrowing work in one direction, while buying and selling work in both directions. “Money” is a means of settlement.

“Money” is a preparation for payment.

Lending and borrowing involve the transfer of “money” and prepare for payment. Buying and selling are settlements.

Since lending and borrowing are transfers of “money” without a driving force, interest is attached. Interest generates time value. The movement of goods also creates lending and borrowing relationships, which are accounts receivable and accounts payable.

“Money” prepares for payment through lending and borrowing and settles through buying and selling. “Money” does not realize its utility through lending and borrowing alone.

“Money” is supplied to the market through loans from financial institutions and circulates in the market through buying and selling. Lending and borrowing are the negative side, while buying and selling are the positive side. Lending is positive, borrowing is negative. Selling is positive, buying is negative.

Since the basic flow of “money” is the same, the balance of “money” surplus and deficit matches the balance of income and expenditure.

The mechanism of the economy is driven by three simple elements: “income,” “expenditure,” and “balance.” These three elements—”income,” “expenditure,” and “balance”—manifest in various forms such as revenue, expenses, sales, costs, liabilities, capital, assets, income, inventory, receivables, payables, prices, inflation, deflation, interest rates, profits, losses, wages, rewards, compensation, fines, consideration, counter-performance, valuation, taxes, government bonds, deposits, stocks, promissory notes, and more. However, fundamentally, it all boils down to “income,” “expenditure,” and “balance.” Change, constancy, simplicity.

If you think simply, you will see the logic. Provide a place to work, sell the products of one’s labor, and create an environment where one can lead a prosperous life. Few people would consider a battlefield to be a comfortable and safe environment for living. That is the will of God.

Now there are diversities of gifts, but the same Spirit.
And there are differences of administrations, but the same Lord.
And there are diversities of operations, but it is the same God which worketh all in all.
But the manifestation of the Spirit is given to every man to profit withal.
For to one is given by the Spirit the word of wisdom; to another the word of knowledge by the same Spirit;

Economics is about considering life, not about making money.

It is not about excluding the elderly from society because they are deemed useless. Economics is about creating an environment where even the elderly can work.

Work is not a punishment from heaven; it is a means of self-realization.

Modern nation-states are political and economic systems founded on independent individuals, namely citizens. The United States was formed by individuals (citizens) who escaped oppression and established a community based on their own ideas, achieving economic and political independence. This marks the beginning of the nation-state. Therefore, above all, they value freedom.

What we eat, what we wear, the kind of house we live in, what we believe in, and how we live—these are decisions we make ourselves, without being dictated by anyone. This is the essence of a liberal economy.

In life, what we seek is the process, not the result. The result is death. When the process is discarded, what remains is the shadow of death.

In economics, what is sought is the process, not the result. Production is also distribution.

Costs are not only a means of production but also a means of distribution. A company that earns one billion yen with a thousand people and a company that earns one billion yen with ten thousand people—the former may have high productive efficiency, but low distribution efficiency.

The destination of money flow and the target determine its function. What is important is not the result but the process. It is the function that occurs during the process of money flow. Therefore, the route through which money flows is crucial.

The purpose of economics is to determine what kind of life is led by the flow of money.

Economics considers what kind of house is built, what kind of jobs are created, what kind of town is constructed, where children are raised, and what kind of education is provided through the flow of money.

Turning everyone into wage laborers leads to totalitarianism. Monopoly signifies the death of the market because the process is lost.

Economic and political independence is one of the conditions for the establishment of a nation-state. Shopkeepers, retailers, individual entrepreneurs, farmers, fishermen, craftsmen, factory workers, company employees, accountants, lawyers, scholars, media—because various occupations coexist, choices are available. Wage laborers are not bad; the state of having no choice but wage labor is unfree. Even if unemployed, one could once pull a cart or cultivate a field. If individual businesses are lost, there is no choice but to rely on social security.

It is not just about flowing electricity like electrical appliances. Just as the load when electricity flows manifests its function, the load when money flows manifests its function. Oligopoly and monopoly do not bring good results even for managers. This is because appropriate prices and costs are not formed. Appropriate prices and costs are formed through moderate competition. When competition is lost, ethics are also lost. Morale cannot be maintained. Monopoly and oligopoly have drawbacks such as the market ceasing to function.

When the market is monopolized, technological innovation ceases, leading to ossification, rigidity, and conservatism. The ability to adapt to environmental changes is lost. Progress and evolution are hindered.

The purpose of a sports match is to seek results such as winning or losing, but the process is more important than the outcome. Without the process, the match cannot be sustained.

In a monetary economy, distribution occurs in two stages, with the premise that “money” is pre-allocated to all consumers as needed.

Distribution is completed by using the pre-allocated “money” to purchase goods necessary for living from the market. The “money” is then collected and reused. By repeating this procedure, “money” circulates through the market.

The problem lies in how to pre-allocate “money” to every corner. It is necessary to supply “money” to the market in advance, so initially, it is done through lending and borrowing. In other words, “money” is prepared in the market through lending and borrowing. “Money” is the preparation for payment.

“Money” is allocated in the process of production, distribution, and consumption, just as electrical appliances emit light, generate heat, turn motors, or operate computers as electricity flows through them.

What drives the economy is the economic system. The economic system is an artificial structure and does not occur naturally.

The function is determined by the devices (assets, liabilities, sales, income, tax system, expenses, etc.) through which “money” flows.

When considering economic policy, it is important to identify which points can be manipulated.

In a free economic system, the market’s function is crucial.

“Money” exerts its utility through exchange.

The market has the role of creating logistics through transactions while simultaneously circulating “money.”

The market is a place for transactions. It is a place to balance supply and demand, thereby adjusting production and consumption. It is a place to determine prices. It is a place to determine costs. It is a place to circulate “money.”

To control the economy, it is necessary to establish market systems and regulations, and to formulate policies in accordance with changes in the conditions surrounding the market.

Economic value is relative and not an absolute standard. The supply-demand relationship is not constant; it is influenced by people’s preferences and trends. Additionally, costs are not fixed, so competition and arbitration in the market are necessary. This is the reason why markets exist. When a market is monopolized, the power to determine prices is taken away from the market.

Monopoly prices that do not rely on the market do not reflect the relationship between producers and consumers.

Even though we refer to the market in a single term, it is composed of numerous markets that collectively form a whole. Moreover, each individual market that constitutes the parts has its own unique characteristics, development stages, functions, structures, and histories. For example, the structure of the market differs depending on the industry. The oil industry, automobile industry, and information industry have completely different markets. Even within the same industry, the market varies in different aspects such as manufacturing, wholesale, sales, and distribution.

For instance, the oil industry has a crude oil market, and further, gasoline and lubricants each have their own unique market structures. Additionally, there are markets at each stage such as primary sales, special agents, and retail. The market in the oil industry is different from the development stage of the IT industry.

At least when we were children, there were communities.
There were places to live. There were spaces where everyone could discuss and help each other. That should have nurtured democracy.

There were places where life was vividly realized. That was the common sense of what true economy was.

It has been a long time since we started talking about the aging population and declining birthrate. Nowadays, when it comes to elderly issues, it’s about facilities, systems, and money. There is no trace of morality. However, elderly issues are originally moral issues. They are family issues. For modern people, taking care of elderly parents is no longer an ethical issue. The economy insists that it is a matter of facilities and money. Wait a minute. The economy is a family issue. It is a parent-child issue. It is a moral issue. As proof, as elderly issues have been transformed into matters of goods and money, the number of lonely deaths among the elderly has increased. Indeed, elderly issues are moral issues, and because they are based on moral issues, they become economic issues. In other words, economic issues are moral issues.

If you simplistically view rising as good and falling as bad, growth as good and stagnation as bad, positive as good and negative as bad, you will eventually face collapse. Enjoy rising when it rises and enjoy falling when it falls. However, the rotation takes decades to complete a cycle.

It is a grave misunderstanding to consider the economy as a means of making money. The economy is a means of living.

People must live. They must be kept alive. Whether on the battlefield, in the scorching desert, in the freezing cold, on a remote island, in a disaster area, or during a famine, as long as people live there, we must think about living and keeping others alive. That is what the economy is about. The economy is not about making money.

What kind of living environment do we desire?
First, it is essential to clarify the vision of the environment we want to live in.
In the past, urban planning was based on such a vision. It wasn’t just about making money or building houses wherever one pleased. There were rules in place, and these rules helped create beautiful cityscapes. However, during the feudal era, the intentions of feudal lords took precedence. In modern nation-states, the will of the residents should be respected. Nevertheless, it is not advisable to allow houses to be built without any regulations, leading to lawlessness and anarchy. It is challenging to build roads afterward.

Urban planning should have a clear focus. To improve transportation, infrastructure such as roads and ports should be developed.

There is no inherent nobility or baseness in the body. It is not that the anus is base or the head is noble. What matters is the function.