February 10, 2008 (LPAC)--In his column in the London Telegraph today, Ambrose Evans-Pritchard contends, "There is still $300 billion of bad debt out there, and Japan could be hiding most of it." Evans-Pritchard arrives at this paltry figure by writing that, "American and Europeans have so far confessed to $130 billion of the estimated $400 billion to $500 billion of wealth that has vanished into the sub-prime hole." So, like the shady accountant trying to get a tax evader's books to balance, he borrows from Column B, and concludes that Japan is the culprit.

Evans-Pritchard does, however, make note of some reality: Machine tool orders in Japan dropped 2.8% last November, and another 3.2% in December. January's housing starts fell to the lowest level in 40 years, down 18% from the previous January. "Toyko property was of 22%," he noted.

He quoted Tetsufumi Yamakawa, chief Japan economist for Goldman Sachs, who must have been looking out the back door when he said, "Recession is a clear and present danger in Japan.... We think the Bank of Japan may have to start easing by the middle of the year." By that, he meant lowering interest rates. But the interest rates are currently 0.5%. "So," wrote Evans-Pritchard, "it's back to zero, and the helicopters of central bank cash (`qualitative easing'), those peculiar hallmarks of Japan's past battle with deflation. The brief attempt to `normalize' Japan Inc has already failed."

Evans-Pritchard noted that, "So far, Japan's biggest three banks have admitted to just $4.7 billion in total losses between them. The figure is rising. Mitisubishi, the biggest, has just raised its tally to 12 times the sum admitted in November. This looks like a replay of the early 1990s when fear of losing face delayed the awful news."

Evans-Pritchard devoted the last portion of his column to China, saying that China is as dependent on the U.S. economy as Mexico. He quoted Haruhiko Kuroda, head of the Asian Development Bank, saying, "A significant slowdown in the U.S. economy will most certainly affect the region's growth."

Then Evans-Pritchard concluded, "Once the striptease starts on the onset of a global downturn, it usually has a long way to run."