Best of the Week
Most Popular
1. Five Charts That Show We Are on the Brink of an Unthinkable Financial Crisis- John_Mauldin
2.Bitcoin Parabolic Mania - Zeal_LLC
3.Bitcoin Doesn’t Exist – 2 - Raul_I_Meijer
4.Best Time / Month of Year to BUY a USED Car is DECEMBER, UK Analysis - Nadeem_Walayat
5.Labour Sheffield City Council Election Panic Could Prompt Suspension of Tree Felling's Private Security - N_Walayat
6.War on Gold Intensifies: It Betrays the Elitists’ Panic and Augurs Their Coming Defeat Part2 - Stewart_Dougherty
7.How High Will Gold Go? - Harry_Dent
8.Bitcoin Doesn’t Exist – Forks and Mad Max - Raul_I_Meijer
9.UK Stagflation Risk As Inflation Hits 3.1% and House Prices Fall - GoldCore
10.New EU Rules For Cross-Border Cash, Gold Bullion Movements - GoldCore
Last 7 days
Bitcoin Price Crash Below $10,000. What's Next? We have answers… - 18th Jan 18
How to Trade Gold During Second Half of January, Daily Cycle Prediction - 18th Jan 18
More U.S. States Are Knocking Down Gold & Silver Barriers - 18th Jan 18
5 Economic Predictions for 2018 - 18th Jan 18
Land Rover Discovery Sport - What You Need to Know Before Buying - Owning Week 2 - 17th Jan 18
Bitcoin and Stock Prices, Both Symptoms of Speculative Extremes! - 17th Jan 18
So That’s What Stock Market Volatility Looks Like - 17th Jan 18
Tips On Choosing the Right Forex Dealer - 17th Jan 18
Crude Oil is Starting 2018 Strong but there's Undeniable Risk to the Downside - 16th Jan 18
SPX, NDX, INDU and RUT Stock Indices all at Resistance Levels - 16th Jan 18
Silver Prices To Surge – JP Morgan Has Acquired A “Massive Quantity of Physical Silver” - 16th Jan 18
Carillion Bankruptcy and the PFI Sector Spiraling Costs Crisis, Amey, G4S, Balfour Beatty, Serco.... - 16th Jan 18
Artificial Intelligence - Extermination of Humanity - 16th Jan 18
Carillion Goes Bust, as Government Refuses to Bailout PFI Contractors Debt and Pensions Liabilities - 15th Jan 18
What Really Happens in Iran?  - 15th Jan 18
Stock Market Near an Intermediate Top? - 15th Jan 18
The Key Economic Indicator You Should Watch in 2018 - 15th Jan 18
London Property Market Crash Looms As Prices Drop To 2 1/2 Year Low - 15th Jan 18
Some Fascinating Stock Market Fibonacci Relationships... - 15th Jan 18
How to Know If This Stock Market Rally Will Continue for Two More Months? - 14th Jan 18
Everything SMIGGLE from Pencil Cases to Water Bottles, Pens and Springs! - 14th Jan 18
Land Rover Discovery Sport Very Bad MPG Fuel Economy! Real Owner's Review - 14th Jan 18
Gold Miners’ Status Updated - 13th Jan 18
Gold And Silver – Review of Annual, Qrtly, Monthly, Weekly Charts. Reality v Sentiment - 13th Jan 18
Gold GLD ETF Update.. Bear Market Reversal Watch - 13th Jan 18
Stock Market Leadership In 2018 To Come From Oil & Gas - 13th Jan 18
Stock Market Primed for a Reversal - 13th Jan 18
Live Trading Webinar: Discover 3 High-Confidence Trade Set-Ups - 13th Jan 18
Optimum Entry Point for Gold and Silver Stocks - 12th Jan 18
Stock Selloffs Great for Gold - 12th Jan 18
These 3 Facts Show Gold Is Set to Surge in 2018 - 12th Jan 18
How China is Locking Up Critical Resources in the US’s Own Backyard - 12th Jan 18
Stock futures are struggling. May reverse Today - 12th Jan 18
Three Surprising Places You See Cryptocurrency - 12th Jan 18
Semi Seconductor Stocks Canary Still Chirping, But He’s Gonna Croak in 2018 - 12th Jan 18
Land Rover Discovery Sport Panoramic Sunroof Questions Answered - 12th Jan 18
Information About Trading With Alpari And Its Advantages - 12th Jan 18
Stock Market Investing 2018 - “I Hope I’m Making a Bad Buy” - 11th Jan 18
S&P 500 Fluctuates As Stock Market May Be Topping, Or Not? - 11th Jan 18
SPECTRE Microprocessor Security Flaw - Big Brother = You - 11th Jan 18
7 Market Forecasts 2018 from the Brightest Financial Minds I Know - 11th Jan 18
It’s Not Enough to Be Contrarian - 11th Jan 18
Stocks That Take One for A Roller Coaster Ride Through the Thick And Thin Of Every Single Investment Made - 11th Jan 18
Police Arrest Tree Protester on Meersbrook Park Road, Sheffield - 10th Jan 18
Stock Market Aggressive Sell Signals - 10th Jan 18
The 2018 Decline in Precious Metals - 10th Jan 18
Gold Hits All-Time Highs Priced In Emerging Market Currencies - 10th Jan 18
TMV : 3X Leveraged Short on US Treasury Bonds - 10th Jan 18
Here are the Key Levels in Gold & Gold Miners - 10th Jan 18

Market Oracle FREE Newsletter

6 Critical Money Making Rules

Abenomics Stalls, So What’s Japan Supposed To Do Now?

Economics / Japan Economy Sep 08, 2015 - 05:25 PM GMT

By: John_Rubino

Economics

It was just three years ago that new Prime Minister Shinzo Abe promised to pull Japan out of its “lost decades” by printing epic amounts of new yen. He got what he wanted from the Bank of Japan, which bought up pretty much all the available government debt with newly-created currency. After hardly changing at all in the previous seven years, the BoJ’s balance sheet — a proxy for its money creation — tripled.


That’s a lot of yen, and you’d think that, other things being equal, such a cash tsunami would get some animal spirits going. It did pump up the Nikkei stock index, which more than doubled between 2012 and July 2015. But that’s about all Abe has to show for his bold plan. GDP growth is now negative in the aggregate over the past five quarters.

And the list of other bad numbers is comprehensive:

• Government debt hit yet another record in July, at ¥1.057 quadrillion.
• The Nikkei is down by 10% since August.
• Inflation has fallen perilously close to zero.

• And China, the engine of Asian (and globlal) growth, just reported August trade numbers that are apocalyptic: Imports down 14.3% y-o-y, exports down 6.1%, overall trade down 9.7%.

Part of the problem is that beyond a certain point, debt is debilitating and (as the world is finding out) money printing on the current scale can’t overcome today’s liabilities. The other, perhaps much more serious problem is demographics. Japan’s population is the oldest in the world and the culture isn’t open to the tens of millions of young immigrants it would take to reverse the trend. As the Daily Times amusingly put it in August:

BOJ still not printing babies as Abenomics stalls

What is the word for spending 3 percent of output on stimulus but only generating 2 percent growth over nearly three years? Abenomics. A central bank can print money, as Japan is learning, but it can’t print babies or loosen immigration controls.

Japan’s output slid into negative territory again in the April-June quarter, contracting at a 1.6 percent annualized clip. Private consumption fell, no surprise given that real wages have increased only sporadically. One more quarter of economic contraction, a development not currently forecast by most economists, and Japan will suffer its fifth recession since 2008.

Bad luck too that this is happening just as less-than-chummy neighbor China is seeing its own economy splutter and experimenting with allowing its currency to fall in value. Since its rise with the advent of Prime Minister Shinzo Abe in December 2012, Abenomics, a combination of fiscal stimulus, radical monetary policy and economic reform, has proved itself good at doing some things, mostly in financial markets, but less good at others, such as in the real economy.

Abenomics, an all-out attempt to break Japan from the grip of malaise, has very effectively driven corporate profits and the stock market higher, at the same time the value of the yen lower, the latter phenomenon driving the former. Yet all of this has not created the virtuous circle of investment, spiking exports and rising wages its architects expected.

Public sector debt is close to three times as large as annual output, interest rates have no room to fall and the BOJ is buying bonds faster than the government is issuing them. There is some brave talk about further stimulus from the Abe government, especially if the economy remains in contraction in the current quarter. What is less clear is why what hasn’t worked so well thus far will begin to work in the future.

The choices facing Abe and the BOJ are not easy. More yen depreciation cuts both ways. It may only further fatten profits at corporations without increasing the volume of exports. A weaker yen will also raise the price of imported goods and may make consumers less willing to spend. Demographics are the real story, and other than encouraging more women to work, little is being done to help. Japan, a country which is taking children’s restaurant meals out of the basket of goods to measure inflation, replacing them with hearing aids, is not addressing the fundamental issues.

If doing nothing as the big macro trends deteriorate isn’t an option then, as the above article notes, it’s not clear what comes next. Tax cuts will balloon an already record-breaking deficit. More QE would require the purchase of other, lower-quality debt and equities, turning the government into the world’s biggest hedge fund (though it’s arguably already there). “Helicopter money” would be taking the same medicine via injection rather than pill, probably not likely to produce a different response.

Or just give up, let the market liquidate the bad debt in a five-year Depression, and start over.

Or…keep on promising the (increasingly senile) voters that you’ll fix things eventually, retire from office before it blows up, and let the next generation of politicians worry about the consequences. Guess which they’ll choose.

By John Rubino

dollarcollapse.com

Copyright 2015 © John Rubino - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules