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Abenomics? What Abenomics? August 11, 2014

Posted by hslu in Economics, Japan.
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Politicians say things to grab power and to get votes. They don’t necessarily
know how to govern.

Abe of Japan called for higher inflation in Japan and demanded a devaluation of yen before the general election. This was his second time around for the top job in Japan. His first term ended in disgrace and he was ousted in a year. He wanted government stimulus to revive Japanese economy and promised changes in out-dated regulations.

He called his strategies ‘three arrows.’ Others dubbed it Abenomics.

Abe was ushered into power. Long time dovish BoJ chief was replaced. The new chief banker started the printing press and flooded the economy with lots of cash. Yen lost 25% of its value. Nikkei soared. Government stimulus spending was easily passed. Abe’s party then won the majority of the upper house of the Diet in an election.

All ducks are in line now and Abe has no execuse. He has to go to work.

Abe asked for a cheaper yen. He got it. Well, with a cheaper yen, inflation comes with a vengeance. Everything gets more expensive in a hurry. All Japanese people are suddenly poorer. Abe then raised the sales tax to 8% from 5% and promised to raise it again to 10% next year. He diddled around the edges on his 3rd arrow and passed some new laws to reform govrrnment regulations.

With all that accomplishments in the rear view mirror now, what did Abe manage to accomplish?

This chart says it all:

image

Real wages came down hard and Japanese workers are losing the battle against the three arrows released by Abe.

The 3.6% unemployment rate looks like a miracle in the making. Well, it’s not that Japan all the sudden created many new jobs. The low rate was caused by a shrinking population and a shrinking labor force.

Abenomics is doomed to fail. I said it before in this space. I still don’t see any hope yet.

Abenomics looks more like Abedisaster now.

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