> . The result: Japan has escaped deflation. The stock market is up, growth is way up and even wages are finally starting to rise.
where?? Wages have not moved up at all. But hey, my shopping list's total price has gone up by 30% in the past 6 months, and Uniqlo has just announced that for the first time in like 20 years they are going to raise their prices in Japan, because hey, a weak Japanese yen makes commodities more expensive and they just can't continue like that anymore.
Where do you shop? My prices have gone up by about 5%. Groceries have mainly remained the same for me. The consumption tax has also been raised, do not forget. I believe Uniqlo planning to raise prices does not reflect a failed fight against inflation.
Prices have only gone up 30% if you keep all your money in Euros/Dollars. Purchasing power has only gone down something like 2% over the past year (which considering the freefall of the Yen is pretty impressive).
I've been interested to see how Abenomics has played out - it certainly started with a bold vision, but most of what I've read (and that's not a lot, I'm no expert) seems to have indicated that it hasn't really worked.
So this article excited me - I love to see a grand vision being implemented and the goals coming together. A quick look at the comments, however, (including ekianjo's immediate response here) seems to indicate that rather than demonstrating Abenomics success, all this article does is demonstrate that the author doesn't have a grasp on the facts. Oh well.
> but most of what I've read (and that's not a lot, I'm no expert) seems to have indicated that it hasn't really worked.
Well, the primary goal was reflation, so by that measure, it's been a resounding success so far. Growth, exports, and consumer spending have been boosted a lot, too. I'm a little worried that the sales tax increase will reverse this trend, but we will see.
This article sounds like a paid advertisement for Abe.
Let's see, earlier this year, he was campaigning for companies to use their piles of cash to increase wages. What does his government do? He cuts salaries for teachers.
Also, living in Japan as a foreigner, his foreign policy stances worry me. He is antagonistic. He was the first PM to visit the infamous Yasukuni shrine in 6 years provoking China and Korea. He also is currently trying to reopen the constitution so that Japan can support it's own army which will further destabilize relationships in the region.
Sure, he's cutting the corporate tax rate but he raised the consumption tax 3% a couple months ago and will go up another 2% next year. Prices are already very high in Japan and the government already receives a staggering amount of revenue. There are so many taxes and licenses and import controls here it's unbelievable.
The linked article said base pay increased 0.1% from a year earlier. Hardly an indicator that his policies are working. Plus factoring in the consumption tax increase, it means people have less disposable income.
My wife works as a homecare nurse and she has countless stories of families that are struggling to get by. A large percentage of the population is elderly and live on very fixed budgets. Abe wants to increase inflation but has no policies on addressing how to support these people during the transition. 25% of the country is already over 65 and this will keep increasing. Recently coverage for prescription drugs also went down meaning seniors need to pay more for their medicine.
Furthermore, iirc there have been longstanding talks to delay the "retirement age" (and thus the start of state pension payments) form 65 to 68.
For as long as I can remember, said state pension has been under water, and current 20 year olds are expected to be paid something like $200,000 less than what they put into the system.
The country has some good things going, but it is also littered with numerous time bombs.
>In other words, unlike everyone else in the world, Abe listened to Milton Friedman, and the results are looking good.
This is absolute horseshit. Japan has been following Friedman's proscriptions (QE forever) for the last 20 years! Look where it got them!
Abe has actually continued in these footsteps with one fairly minor difference - he's mixed in a 25% Keynesian spending kick with the QE. This has propelled a bit of inflation and wage growth, along with the business-as-usual propping up asset prices.
Now this author is trying to claim that this was thanks to cutting corporate taxes and QE. These are the policies that Japan DIDN'T change with Abe. Furthermore, these are the policies that are causing the Japanification of the West's economy.
Abe's plan would have been a major success (instead of a dribble of success) if he just cut the Milton Friedman inspired bullshit QE entirely and printed money and spent it on employing people until inflation and wage growth were up to normal levels.
> Japan has been following Friedman's proscriptions (QE forever) for the last 20 years!
I would say that Japan has been following Friedman's prescriptions until now. The major difference between monetary policy before Abe and after Abe is that Abe has made it clear that he won't jack up interest rates as soon as there is life in the economy. Past governments made it clear they would take away the punch bowl as soon as there was a hint of growth.
Basically, Abe has convincingly promised to be irresponsible. And so far, it has worked to beat deflation. Many other indicators are looking better, too, but it'll take some time before we know if it really works. (Hyperinflation? Wages? and so on)
> Japan’s top social problem is the role of women.
Says who ? Of course there are women who are aspiring for a career and this may be a problem for them, but then, most women in Japan are actually fine to leave work and go on with a life at home taking care of the children. I've seen several colleagues of mine who graduated from Tokyo University and had good jobs (with responsibilities similar to men's) and who left their career because they wanted to focus on kids instead, and had no regret doing so.
How are Japanese women doing outside Japan where they have similar opportunities as men? Given choice, do Japanese women prefer to work outside or stay home? Some data on this question can provide some insight.
From personal experience, there is some truth to what you said. My wife is Japanese. We live in US. Once we didn't need two incomes, first thing she did is to quit her $150K job with a major software company. She is much more happier staying home and taking care of household chores. Just today, I asked her if she misses her job, colleagues, and working outside. Her response was resounding No. I haven't seen her more happier, content and stress free until she quit working. We don't even have kids.
Even though it is preference of one woman, it makes me wonder if cultural upbringing influences the decision to work or not, more than the availability of opportunity.
About four years ago I was waiting for a plane in London and struck up a conversation with a former American Nissan exec who had spent a long time working at HQ in Japan.
He told me the story of countless meetings in which the senior female exec (there were very few) was expected to get up and leave the meeting for a period of time to retrieve and serve tea. He personally was disgusted and said that that was only a single example. IIRC he said in response to my question about why Japan had struggled to get out of their depression: "Employing only half their labor force might have something to do with it."
> there are women who are aspiring for a career and this may be a problem for them
Steven Pinker wrote about this in his book 'The Blank Slate'. The problem is that women here do not have the choice, as you yourself even point out. Perhaps the large majority voluntarily choose a lifestyle which does not grind against the standard but what about those which choose a career? Equality does not mean that women act the same as men, it means that women have the same choice as men.
Would those same women have made that decision if conditions were equal across the genders? Would they have tried to remain or return to the workforce if daycare supplort and career tracks were more suitable to their needs?
Hard to say without considering alternative realities.
It seems women are becoming less and less willing to marry[1].
"The second change is that, among certain groups, people are not merely marrying later. They are not getting married at all. In 2010 a third of Japanese women entering their 30s were single. Perhaps half or more of those will never marry. In 2010 37% of all women in Taiwan aged 30-34 were single, as were 21% of 35-39-year-olds. This, too, is more than in Britain and America, where only 13-15% of those in their late 30s are single. If women are unmarried entering their 40s, they will almost certainly neither marry nor have a child."
You are right, a lot of women seem to be happy getting rid of not so great jobs and stay at home with their children.
But I think it is a social problem. This means a lot of jobs offered to women are shitty because employers know they will lose them around their 30ies.
Since there is social consensus to leave after a child birth, it makes it difficult keep the woman's job but with an alternative solutions, like part time, progressively returning after the leave or going remote.
I knew couples who would have wanted to switch positions, with the man at home and the woman working. It is not impossible, but there's a lot of hurdles and there is still a social stigma associated with.
Addition:
A secundary effect of women leaving after building a family: the man in the couple has to bare all the burden. The employer knows it, and the power balance changes. This is also a reason why some couples don't want childs, or young men don't even think about marriage (they assess there is nothing good for them in the deal).
The position of women obviously shapes the whole society, and its becoming more and more a problem on a lot of very different aspects.
And there's a large stretch between trying to boost the economy by encouraging female labor force participation and feminism. By that standard, Saddam Hussein might have been called a feminist in some periods of his reign.
Opinion is sharply divided over whether Abe's economic policies make any sense. I'm in the "they're insane" camp. I've likened Abe to the captain of a ship who, seeing an iceberg looming, calls out, "Full steam ahead! We're going to smash our way through." But all observers agree on these two points:
1. Abenomics will be a disaster without large-scale structural reform.
2. The reform we've seen so far isn't nearly enough.
Optimists believe that this reform is just round the corner ... that even as we speak Abe is busy quietly building the necessary consensus in key organisations, because that's the way reform is done in Japan.
The pessimists want proof.
Finally, there is a terrible, terrible paradox at the heart of Abe's economic policies. This is a complex matter, so forgive me for skipping most of the details and implications.
No matter how you measure it, the Government of Japan is up to its neck in debt, and is still sinking. The only reason it can keep going is because it pays remarkably low interest rates. But the first "arrow" of Abenomics is to push up inflation, and you can be sure that this arrow will meet its mark because they can always "print" more yen. One of the iron laws of economics is that, when inflation goes up, so do interest rates.
Now, to cut a long story short, it looks like the government's going to get out of this bind by directing the Bank of Japan to print even more money to buy it's debt at below-market prices. In fact, if you follow the bond market news, it's clear that this is already happening. And that, my friends, is a recipe for collapse in confidence in the yen.
Speaking for myself, as a Japanese resident, I believe that the yen is an increasingly risky asset to hold. I make a point of keeping at least 50% of my savings out of yen, and away from the Japanese financial system. When the shit hits the fan, I don't want my money to be stuck behind Iceland-style capital controls.
---
EDIT: Changed "recipe for inflation" to "recipe for collapse in confidence in the yen" in response to comments below.
>No matter how you measure it, the Government of Japan is up to its neck in debt, and is still sinking.
Japan's debt is a trailing indicator of economic malaise, not a leading indicator.
>The only reason it can keep going is because it pays remarkably low interest rates.
It ought to be obvious to anybody with an ounce of sense that any country that prints the currency it borrows in can choose its own interest rates. This is precisely what Quantitative Easing does.
>But the first "arrow" of Abenomics is to push up inflation, and you can be sure that this arrow will meet its mark because they can always "print" more yen.
Yes, this is true.
>One of the iron laws of economics is that, when inflation goes up, so do interest rates.
This is totally utterly false. As long as QE continues (and so far it has continued), interest rates on Japanese bonds will be held at zero.
>Now, to cut a long story short, it looks like the government's going to get out of this bind by directing the Bank of Japan to print even more money to buy it's debt at below-market prices. In fact, if you follow the bond market news, it's clear that this is already happening. And that, my friends, is a recipe for hyperinflation.
This is not just false, it is absurdly false. Hyperinflation hyperventilators have been predicting Japanese hyperinflation since 1997 when their debt went over 80% and they continued deficit spending. What happened instead? Deflation.
They couldn't have been more wrong then just as you couldn't be more wrong now.
Like any economic variable, inflation can be targeted. In Japan, it simply wasn't targeted and it wasn't aimed for during the last 20 years. They just engaged in QE, which swapped bonds that represented Japanese savings earning subinflation interest for cash savings which also earned subinflation interest. And they thought this money was magically going to be spent?
For inflation to happen you need spending. PART of what is new about abenomics is that it actually does do a bit of that, but not very much.
No matter how you measure it, the Government of Japan is up to its neck in debt, and is still sinking.
Thing is, you need to measure the dept against some measure of economic activity ( or actually against some measure of pay back capability), and then the funny thing is that the higher the dept, the easier it is to get to sustainable levels by deficit spending. So dept goes from D to D + d and GDP goes from G to G + x d, solving for a critical multiplier x0 where the ratio stays constant,
x0 = G/D
So the more dept you have, the less productive need your stimulus program to be to reduce dept. Additionally, for this you can replace the measures by inflation adjusted measures and you get the same result, with some dependence on the real interest rate. ( Which can be negative.)
Additionally it is surprisingly hard to get hyperinflation, just printing a few percent of GDP in new money per year will not do the trick. ( Try occupation of a major industrial region, after the end of price controls plus a lost world war.)
And that, my friends, is a recipe for hyperinflation.
Perhaps, but given that the situation over the last 15 years has been deflation there is a big, big distance to cover before hyperinflation should be thought of as a significant risk.
Something needs to be done to combat the chronic deflationary cycle Japan has suffered in over 15 years. I'm unconvinced this is as bad an idea as you seem to believe.
With the moralizing about Japan's debt, you're forgetting one absolutely key fact: what Japan owes is something that Japan is the monopoly issuer of. If you leave out this fact, then everything that follows is just going to be off-base.
[+] [-] ekianjo|11 years ago|reply
where?? Wages have not moved up at all. But hey, my shopping list's total price has gone up by 30% in the past 6 months, and Uniqlo has just announced that for the first time in like 20 years they are going to raise their prices in Japan, because hey, a weak Japanese yen makes commodities more expensive and they just can't continue like that anymore.
But yeah, Abe's the Best Ever!
What a joke of an article.
[+] [-] ZirconCode|11 years ago|reply
[+] [-] rtpg|11 years ago|reply
[+] [-] JacobAldridge|11 years ago|reply
So this article excited me - I love to see a grand vision being implemented and the goals coming together. A quick look at the comments, however, (including ekianjo's immediate response here) seems to indicate that rather than demonstrating Abenomics success, all this article does is demonstrate that the author doesn't have a grasp on the facts. Oh well.
[+] [-] ChrisGaudreau|11 years ago|reply
Well, the primary goal was reflation, so by that measure, it's been a resounding success so far. Growth, exports, and consumer spending have been boosted a lot, too. I'm a little worried that the sales tax increase will reverse this trend, but we will see.
[+] [-] mattm|11 years ago|reply
Let's see, earlier this year, he was campaigning for companies to use their piles of cash to increase wages. What does his government do? He cuts salaries for teachers.
Also, living in Japan as a foreigner, his foreign policy stances worry me. He is antagonistic. He was the first PM to visit the infamous Yasukuni shrine in 6 years provoking China and Korea. He also is currently trying to reopen the constitution so that Japan can support it's own army which will further destabilize relationships in the region.
Sure, he's cutting the corporate tax rate but he raised the consumption tax 3% a couple months ago and will go up another 2% next year. Prices are already very high in Japan and the government already receives a staggering amount of revenue. There are so many taxes and licenses and import controls here it's unbelievable.
The linked article said base pay increased 0.1% from a year earlier. Hardly an indicator that his policies are working. Plus factoring in the consumption tax increase, it means people have less disposable income.
My wife works as a homecare nurse and she has countless stories of families that are struggling to get by. A large percentage of the population is elderly and live on very fixed budgets. Abe wants to increase inflation but has no policies on addressing how to support these people during the transition. 25% of the country is already over 65 and this will keep increasing. Recently coverage for prescription drugs also went down meaning seniors need to pay more for their medicine.
[+] [-] hkmurakami|11 years ago|reply
For as long as I can remember, said state pension has been under water, and current 20 year olds are expected to be paid something like $200,000 less than what they put into the system.
The country has some good things going, but it is also littered with numerous time bombs.
[+] [-] crdoconnor|11 years ago|reply
This is absolute horseshit. Japan has been following Friedman's proscriptions (QE forever) for the last 20 years! Look where it got them!
Abe has actually continued in these footsteps with one fairly minor difference - he's mixed in a 25% Keynesian spending kick with the QE. This has propelled a bit of inflation and wage growth, along with the business-as-usual propping up asset prices.
Now this author is trying to claim that this was thanks to cutting corporate taxes and QE. These are the policies that Japan DIDN'T change with Abe. Furthermore, these are the policies that are causing the Japanification of the West's economy.
Abe's plan would have been a major success (instead of a dribble of success) if he just cut the Milton Friedman inspired bullshit QE entirely and printed money and spent it on employing people until inflation and wage growth were up to normal levels.
>Boy, was I wrong. I was wrong, wrong, wrong.
He's still wrong, wrong, wrong.
[+] [-] ChrisGaudreau|11 years ago|reply
I would say that Japan has been following Friedman's prescriptions until now. The major difference between monetary policy before Abe and after Abe is that Abe has made it clear that he won't jack up interest rates as soon as there is life in the economy. Past governments made it clear they would take away the punch bowl as soon as there was a hint of growth.
Basically, Abe has convincingly promised to be irresponsible. And so far, it has worked to beat deflation. Many other indicators are looking better, too, but it'll take some time before we know if it really works. (Hyperinflation? Wages? and so on)
[+] [-] ekianjo|11 years ago|reply
Says who ? Of course there are women who are aspiring for a career and this may be a problem for them, but then, most women in Japan are actually fine to leave work and go on with a life at home taking care of the children. I've seen several colleagues of mine who graduated from Tokyo University and had good jobs (with responsibilities similar to men's) and who left their career because they wanted to focus on kids instead, and had no regret doing so.
[+] [-] akg_67|11 years ago|reply
How are Japanese women doing outside Japan where they have similar opportunities as men? Given choice, do Japanese women prefer to work outside or stay home? Some data on this question can provide some insight.
From personal experience, there is some truth to what you said. My wife is Japanese. We live in US. Once we didn't need two incomes, first thing she did is to quit her $150K job with a major software company. She is much more happier staying home and taking care of household chores. Just today, I asked her if she misses her job, colleagues, and working outside. Her response was resounding No. I haven't seen her more happier, content and stress free until she quit working. We don't even have kids.
Even though it is preference of one woman, it makes me wonder if cultural upbringing influences the decision to work or not, more than the availability of opportunity.
[+] [-] hyperion2010|11 years ago|reply
He told me the story of countless meetings in which the senior female exec (there were very few) was expected to get up and leave the meeting for a period of time to retrieve and serve tea. He personally was disgusted and said that that was only a single example. IIRC he said in response to my question about why Japan had struggled to get out of their depression: "Employing only half their labor force might have something to do with it."
[+] [-] ZirconCode|11 years ago|reply
Steven Pinker wrote about this in his book 'The Blank Slate'. The problem is that women here do not have the choice, as you yourself even point out. Perhaps the large majority voluntarily choose a lifestyle which does not grind against the standard but what about those which choose a career? Equality does not mean that women act the same as men, it means that women have the same choice as men.
[+] [-] hkmurakami|11 years ago|reply
Hard to say without considering alternative realities.
[+] [-] logicchains|11 years ago|reply
"The second change is that, among certain groups, people are not merely marrying later. They are not getting married at all. In 2010 a third of Japanese women entering their 30s were single. Perhaps half or more of those will never marry. In 2010 37% of all women in Taiwan aged 30-34 were single, as were 21% of 35-39-year-olds. This, too, is more than in Britain and America, where only 13-15% of those in their late 30s are single. If women are unmarried entering their 40s, they will almost certainly neither marry nor have a child."
1.http://www.economist.com/node/21526329
[+] [-] hrktb|11 years ago|reply
But I think it is a social problem. This means a lot of jobs offered to women are shitty because employers know they will lose them around their 30ies.
Since there is social consensus to leave after a child birth, it makes it difficult keep the woman's job but with an alternative solutions, like part time, progressively returning after the leave or going remote.
I knew couples who would have wanted to switch positions, with the man at home and the woman working. It is not impossible, but there's a lot of hurdles and there is still a social stigma associated with.
Addition: A secundary effect of women leaving after building a family: the man in the couple has to bare all the burden. The employer knows it, and the power balance changes. This is also a reason why some couples don't want childs, or young men don't even think about marriage (they assess there is nothing good for them in the deal).
The position of women obviously shapes the whole society, and its becoming more and more a problem on a lot of very different aspects.
[+] [-] Pitarou|11 years ago|reply
http://www.bbc.com/news/world-asia-25901572
And there's a large stretch between trying to boost the economy by encouraging female labor force participation and feminism. By that standard, Saddam Hussein might have been called a feminist in some periods of his reign.
Opinion is sharply divided over whether Abe's economic policies make any sense. I'm in the "they're insane" camp. I've likened Abe to the captain of a ship who, seeing an iceberg looming, calls out, "Full steam ahead! We're going to smash our way through." But all observers agree on these two points:
1. Abenomics will be a disaster without large-scale structural reform.
2. The reform we've seen so far isn't nearly enough.
Optimists believe that this reform is just round the corner ... that even as we speak Abe is busy quietly building the necessary consensus in key organisations, because that's the way reform is done in Japan.
The pessimists want proof.
Finally, there is a terrible, terrible paradox at the heart of Abe's economic policies. This is a complex matter, so forgive me for skipping most of the details and implications.
No matter how you measure it, the Government of Japan is up to its neck in debt, and is still sinking. The only reason it can keep going is because it pays remarkably low interest rates. But the first "arrow" of Abenomics is to push up inflation, and you can be sure that this arrow will meet its mark because they can always "print" more yen. One of the iron laws of economics is that, when inflation goes up, so do interest rates.
Now, to cut a long story short, it looks like the government's going to get out of this bind by directing the Bank of Japan to print even more money to buy it's debt at below-market prices. In fact, if you follow the bond market news, it's clear that this is already happening. And that, my friends, is a recipe for collapse in confidence in the yen.
Speaking for myself, as a Japanese resident, I believe that the yen is an increasingly risky asset to hold. I make a point of keeping at least 50% of my savings out of yen, and away from the Japanese financial system. When the shit hits the fan, I don't want my money to be stuck behind Iceland-style capital controls.
---
EDIT: Changed "recipe for inflation" to "recipe for collapse in confidence in the yen" in response to comments below.
[+] [-] crdoconnor|11 years ago|reply
Japan's debt is a trailing indicator of economic malaise, not a leading indicator.
>The only reason it can keep going is because it pays remarkably low interest rates.
It ought to be obvious to anybody with an ounce of sense that any country that prints the currency it borrows in can choose its own interest rates. This is precisely what Quantitative Easing does.
>But the first "arrow" of Abenomics is to push up inflation, and you can be sure that this arrow will meet its mark because they can always "print" more yen.
Yes, this is true.
>One of the iron laws of economics is that, when inflation goes up, so do interest rates.
This is totally utterly false. As long as QE continues (and so far it has continued), interest rates on Japanese bonds will be held at zero.
>Now, to cut a long story short, it looks like the government's going to get out of this bind by directing the Bank of Japan to print even more money to buy it's debt at below-market prices. In fact, if you follow the bond market news, it's clear that this is already happening. And that, my friends, is a recipe for hyperinflation.
This is not just false, it is absurdly false. Hyperinflation hyperventilators have been predicting Japanese hyperinflation since 1997 when their debt went over 80% and they continued deficit spending. What happened instead? Deflation.
They couldn't have been more wrong then just as you couldn't be more wrong now.
Like any economic variable, inflation can be targeted. In Japan, it simply wasn't targeted and it wasn't aimed for during the last 20 years. They just engaged in QE, which swapped bonds that represented Japanese savings earning subinflation interest for cash savings which also earned subinflation interest. And they thought this money was magically going to be spent?
For inflation to happen you need spending. PART of what is new about abenomics is that it actually does do a bit of that, but not very much.
[+] [-] yk|11 years ago|reply
Additionally it is surprisingly hard to get hyperinflation, just printing a few percent of GDP in new money per year will not do the trick. ( Try occupation of a major industrial region, after the end of price controls plus a lost world war.)
[+] [-] nl|11 years ago|reply
And that, my friends, is a recipe for hyperinflation.
Perhaps, but given that the situation over the last 15 years has been deflation there is a big, big distance to cover before hyperinflation should be thought of as a significant risk.
Something needs to be done to combat the chronic deflationary cycle Japan has suffered in over 15 years. I'm unconvinced this is as bad an idea as you seem to believe.
[+] [-] J_|11 years ago|reply
When the Japanese hit 2% inflation, people are going to be rushing out of JGBs if the government maintains ZIRP.
This is a complex issue, so I'm going to refer people to this talk that Kyle Bass gave last year:
https://www.youtube.com/watch?v=7kFcDKBpdII
[+] [-] kaonashi|11 years ago|reply
[+] [-] unknown|11 years ago|reply
[deleted]
[+] [-] unknown|11 years ago|reply
[deleted]
[+] [-] free2rhyme214|11 years ago|reply
"Hahahaha...far from it."
[+] [-] ChrisGaudreau|11 years ago|reply