Economics Bulletin

What is Yield Curve?
(Original article: How Do Stock Markets React when the Yield Curve Changes?)
February 1, 2019
Akira Kondo

Financial Capital v.s. Economic Capital
Capital Creates Efficiency and Efficiency Creates Productivity
March 3, 2016
Akira Kondo

The word, “capital,” is often used in financial and economic articles in newspapers as well as periodicals. If you are a student majoring in Economics, you might have read Thomas Piketty’s “Capital in the Twenty-First Century” to learn global level income inequality over the past centuries. Then, you may have confused what “capital” exactly means because you may find out two different “capitals” from the Piketty’s book and your expensive Introductory Economics textbook. Although Piketty’s book is about economic issues, the word, “capital,” used in the book is different from the one that you see in your Economics textbook. The former “capital” refers to “financial capital” while the later “capital” in your textbook is “economic capital,” and they are completely different capitals. <Continue to read - click here>

Is Japan, Inc. Efficient?
Growing Chikan and Lack of English Skills Make Difficult for Mr. Abe’s Goal to Reach 600 Trillion Yen Economy
January 18, 2016

Japan is unique. While you are stepping into one of crowded train stations, you may become curious about eye-catching weird posters, sometimes erotic, that are displayed, especially at the bottom of an escalator or stairs. They are the typical posters that try to prevent frequently occurring public molestation, which is commonly called, “Chikan,” in Japanese language. It is very common that you may watch Chikan-related news on TV at least many times a day if you can understand Japanese. Though most foreigners are having difficult time to understand the language while in Japan, the Japanese are also reluctant to speak English. In fact, most Japanese do not speak English even they have gone through a six-year mandatory English class through high school. When you want to ask for a direction while you pick a nicely dressed businessman on the street, the chances are he would speak to you with his minimal English vocabulary, plus his artificial smile at you. Possibly, he would be a molester as well. Although Chikan and English skills are not related to each other, in terms of economics, however, they would generate some impacts on Japan’s productivity. <Continue to read - click here>

Starbucks in Khon Kaen, Thailand: Green Mermaid Will Shine Next to Golden Arch
October 5, 2015

Khon Kaen. Just less than a decade ago, there was only one airline flying back and forth from Thailand’s capital to this northeastern city. Today, Air Asia, Nok Air, Thai Smile, and a legacy flag carrier THAI fly between these cities throughout the day to transport growing fliers. Once you land Khon Kaen Airport, you will have to walk the ramp side, whether it is sunny or raining cats and dogs, all the way to the building to claim your luggage or directly head to hail a taxi. Interestingly, there are many foreigners traveling to this city. However, most of them are probably not tourists. There were even no meter-taxis a few years ago but now a meter-taxi counter is kindly available in the airport to send growing foreign and domestic visitors to their destinations in the city. While a number of flights to Khon Kaen have significantly increased over past years, a second Starbucks store debuted when Central Plaza Khon Kaen department store opened its door in 2009. In coming months, the third Starbucks store in Khon Kaen is expected to inaugurate in the out scurf of the city. <Continue to read - click here>

12 Regional Feds and the Central Bank: Manipulating Today’s Economy
September 8, 2015

The Federal Reserve Bank, as also known as lender of the last resort, monitors every aspect of the U.S. economy while mainly focusing on inflation and employment of the world’s largest economy through its monetary policy goals. Its name may not sound familiar to you unless you are an economist or a college student, who is majoring in economics or finance. However, you may have seen this Federal Reserve Bank in your neighbor, as it is not alone. There are 12 Federal Reserve Banks across the United States and those are located in New York, San Francisco, Chicago, Boston, Dallas, St. Louis, Kansas City, Minneapolis, Richmond, Philadelphia, Cleveland, and Atlanta. Along with those 12 Federal Reserve Banks across the states, the main Federal Reserve Bank is located in Washington D.C., where a current Chair of the Board of Governors, Janet Yellen, is sitting in the office. <Continue to read - click here>

Starbucks in Ho Chi Minh City, Vietnam: Green Mermaid Joins Asia’s Biggest Coffee-Oriented City
July 6, 2015

Motorcycle commuters never stop in front of the green mermaid whether their reasons are to go back home early after work or not. At 6 o’clock in the evening, Ho Chi Minh City’s traffics are in full swing and what you see on the streets are the hundreds of thousands of motorcycles pass by, from left to right or the other, along with some popular Toyota vehicles in between. Vietnam is not as wealthy as another socialist country, China, whose per capita GDP is nearly four times higher than the country, while both countries remain communist states, where three others: Cuba, Laos and North Korea, remain so as well. Starbucks started to settle itself in this lively city since the company opened the first store in 2013. Currently, there are 11 Starbucks stores available across Ho Chi Minh City, Vietnam’s largest commercial city. <Continue to read - click here>

Vanguard Total Bond Market ETF (BND): Benefits of Investing in a Bond Basket
June 1, 2015

One of the finest ETFs (Exchange-Traded Funds) to have in your portfolio after SPDR S&P 500’s SPY is probably Vanguard’s Total Bond Market, as known as BND. As its name shows, this ETF offers exposure to U.S. investment grade bonds, such as corporate and government bonds. The beauty of owning BND truly comes from its ability to pay out dividends (or should say coupons instead) monthly. Yes, this is one of the few ETFs that pay out dividends monthly and this turns into your monthly income after taxes. Along with its monthly dividends, BND currently yields handsome 3.51 percent, well above SPY’s current 1.93 percent (as of May 30, 2015). In very general, bond is up when stock is down, vice versa. While most U.S. equity indices have been experiencing bull market over past years, BND can be a perfect fit into your portfolio when thinking of future potential downside on stock markets. <Continue to read - click here>

The Evidence of the Middle-Income Trap
January 27, 2015

Over the past few years, more and more articles from academic journals to business periodicals about the middle-income trap were published with more extensive empirical evidence. The problem of middle-income trap study was used to be a lack of empirical evidence but this problem has started to diminish. Before the financial crisis in 2008, not many economists believed about this trap and they intended to conclude the Asian miracle was over after the Asian financial crisis in 1998, rather saying they were trapped in the middle-income society. However, the word, “middle-income trap” began to widespread within the past year or even today thanks to China’s economic slowdown. <Continue to read - click here>

The Largest Government Pension Fund is Investing Overseas: Is it an Ironic Move for the Japanese?
January 17, 2015

In November 2014, Japan’s Government Pension Investment Fund (GPIF), the largest pension fund in the universe, rolled out its plan to expand asset purchases overseas. With $1.1 trillion assets under GPIF’s management, its planned exposure into oversea markets may become favorable over the U.S. equity markets.

According to the GPIF’s new asset allocation plan, its significance mainly comes from a huge cut back of the domestic bonds, which today accounts for 50 percent or about $550 billion value. The GPIF plans to decrease its share of domestic bonds into the 35 percent target from the original 60 percent or from today’s 50 percent. <Continue to read - click here>

How Do Stock Markets React when the Yield Curve Changes?
September 25, 2014

The yield curve, which is one of my favorite economic indicators, describes how the economy is doing right now and into the future. It is a collection of interest rates from the shorter maturities, such as treasury bills as known as T-bills, to the longer maturities, like 30-year government bonds.

This is probably the best economic indicator that you can utilize when learning today’s as well as future’s economy and the stock market movement. Personally, I would not have performed well on my investment portfolio during the financial crisis period if I did not know what the yield curve was. Unfortunately, a basic Economics class does not teach this yield curve in details, so does the intermediate Economics course, which not many students are willing to register unless they are majoring in Economics.

Again, the yield curve is a collection of interest rates. The rates start off with the shortest maturity three-month interest rate, which is often known as T-bills. It is the key rate that the Federal Reserve Bank Chairman always keeps eyeing on and controls it depending on the state of the economy. Then, you see the six-month or one-year interest rates while they are still considered to be shorter maturity treasuries. After that, maturities get longer into two years, five years, ten years, 20 years, and all the way up to the longest maturity, 30 years. <Continue to read - click here>

Starbucks in Japan After the Sales Tax Hike
April 1, 2014

The price of Tall Coffee yesterday was 340Yen, of which 16Yen was the 5 percent sales tax. Thus, 324Yen was the price of Tall Coffee before tax. Today, the price of Tall Coffee costs me 345Yen, of which 25Yen is the new sales tax. That said, 5Yen increased from yesterday. This 5Yen difference is about a rise of 1.5 percentage points, which is less than the 3 percent sales tax increase.

How about everyone’s all-time favorite, Caramel Macchiato (CM)? The price of Tall CM yesterday was 430Yen, of which 32Yen is the sales tax. Today, CM costs 442Yen. That said, 12Yen was up from yesterday. This 12Yen difference is about the rise of 2.8 percent, which is almost inline with the 3 percent sales tax increase. Again, CM is one of the most popular handcrafted drinks and its popularity might have lifted its price higher than the price increase of Tall Coffee. <Continue to read - click here>

The Lewis Turning Point
May 8, 2013

On my flight back to Nagoya, the city between Tokyo and Osaka, I grabbed a Chinese magazine written in English in an airport lounge at Pudon International airport. This magazine* describes today’s China by presenting numerous pictures, such as the recent Sichuan earthquake.

It was my first time to read this magazine and somewhat this magazine nicely killed my time on the two-hour flight back to Nagoya on NH940 from Shanghai. While reading through this magazine, I have found one economic vocabulary, the “Lewis turning point” on the page 43. <Continue to read - click here>

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Analyzing My Starbucks Rewards Programs in China and Thailand
March 15, 2014

My Starbucks Rewards program is probably one of well-known reward programs in the United States while Starbucks Coffee Company successfully has integrated into the mobile technology that we now live with. This reward program is now available outside the United States, but it is available in limited countries. Starbucks China started the program in 2012 while Starbucks Thailand just kicked off the program on February 4, 2014. In this article, I would like to show the differences between My Starbucks Rewards programs in China and Thailand. Since both countries are located in Asia and their income levels on average are pretty much similar today, it probably is good to compare between them.

What is My Starbucks Rewards program?

Put it simply, you will collect Stars to get rewarded. In order to earn one Star, you need to spend certain amount of money. For instance, 50RMB for one Star in China and 100Bahts for one Star in Thailand. While earnings Stars, you will receive some benefits, such as birthday drinks, and discounts on some certain products. By the way, earning Stars in the U.S. is far easier because you need to purchase one cup of coffee/drink to get one Star regardless of a price. <Continue to read - click here>

Reading Back the 2004 Fortune Magazine
April 16, 2013

Reading back the Fortune magazine, which was issued in 2004 when I was writing my undergraduate thesis at Berkeley. China has changed a lot since then but I realize that many articles fail to predict today's China. Plus, the economists and writers in 2004 did not often express their thoughts empirically. In other words, periodicals that we are reading today are more sophisticated in the empirical science. That would be the reason today's economists are required to show empirical evidence. Thus, it would be the reason we see more graphs, figures, and tables in today's periodicals, journals, and books. Studying economics is much harder than ever before.

China's Consumption - Looking Purely at Starbucks
April 22, 2013

My day always kicks off with a cup of coffee or Americano at one of four Starbucks stores nearby my home in Shanghai. I live relatively close to Fudan University where I regularly commute in daily basis. Before heading to school, I always stop by Wanda (name of shopping mall) Starbucks store where my good friends of Starbucks serve me coffee everyday.

It's been my daily life to do so for the past few years while I have also been a daily Starbucks customer when I lived in San Francisco for nearly 10 years. I know the products and services of the company very well but Shanghai's Starbucks experience is much different from the one I have experienced in San Francisco. <Continue to read - click here>