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The Slow and Painful Death of "Abenomics"

 
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raspberry-blower



Joined: 14 Mar 2009
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PostPosted: Fri Jun 24, 2016 12:50 pm    Post subject: The Slow and Painful Death of "Abenomics" Reply with quote

In another thread on the EU referendum I wrote:

Quote:
One of the biggest losers in this referendum is, oddly enough, Japan. Which deserves another thread of its own..


So here is that thread on Japan.
It had a monumental stock market and housing price crash in 1991 and since then has been relying on the Bank of Japan to keep pumping more money into its economy, along with virtually zero per cent interest rates to encourage more borrowing to get the economy growing again.

It hasn't worked as advertised though.

Prime Minister Shinzo Abe has implemented more "Neoliberal" policies - which are effectively a rehash of what has already failed. Unsurprisingly this too has come off the rails

There was an interesting article in Off Two Minds that caught my attention:

Charles Hugh-Smith: Japan: A Future of Stagnation

Charles Hugh Smith wrote:
Demographics matter. As the populace ages, older people spend less and sell assets to raise cash for their non-earning retirement years. As young families have fewer children, consumption declines accordingly.

Take a declining population with declining rates of productivity growth and load it up with debt, and you get a triple-whammy recipe for permanent stagnation. There are Degrowth strategies that make sense because they're designed to be sustainable, but first the systems that have been designed to fail--Keynesian stimulus policies and the banking system--must be allowed to fail.



This last bit is key: A few years ago I posted this

The bottom line is that there is far too much debt around and no-one has a clue how to deal with it
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Little John



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PostPosted: Fri Jun 24, 2016 1:42 pm    Post subject: Reply with quote

The way to deal with it is to let it fail. Which is why no-one wants to deal with it.
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fuzzy



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PostPosted: Fri Jun 24, 2016 2:15 pm    Post subject: Reply with quote

You need to recognise the difference between Western huge debts and Japanese huge debt. The Japs have have almost zero immigration and are working through the hardest change possible in demographics with more old/less young. This stage will give them population declines over 50 years etc. We and others have huge debts while only accepting what used to be the 'Brazilian' model - just keep cramming more young to compensate for the old. To run up huge debts under that 'free lunch' period is disgraceful government. When the money stops we will be far worse.
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raspberry-blower



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PostPosted: Wed Jun 29, 2016 11:55 am    Post subject: Reply with quote

fuzzy wrote:
You need to recognise the difference between Western huge debts and Japanese huge debt. The Japs have have almost zero immigration and are working through the hardest change possible in demographics with more old/less young. This stage will give them population declines over 50 years etc. We and others have huge debts while only accepting what used to be the 'Brazilian' model - just keep cramming more young to compensate for the old. To run up huge debts under that 'free lunch' period is disgraceful government. When the money stops we will be far worse.


Yep, It's why some commentators say that Japan is stuck in the 1980s.

Meanwhile, Zero Hedge: Kuroda is trapped as BoJ can't ease any further

Quote:
While the BOJ is reportedly meeting with the government today, itís going to be addressing a situation that just got more difficult with a poor menu of policy options. It can purchase more assets and lower interest rates, but it canít change a world economy thatís running out of inflationary gas.

Brexit now makes it almost impossible for BOJ policy to stand out. Not only did the U.K. referendum take a Fed rate increase off the table, it pulls the Bank of England to the table with its easing options.

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raspberry-blower



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PostPosted: Fri Jul 29, 2016 3:53 pm    Post subject: Reply with quote

There appears to be doubts in the mind of BoJ Governor Kuroda about the effectiveness of Abenomics as the latest stimulus underwhelms:

Quote:
In an unexpected development, Kuroda has ordered an assessment of the effectiveness of BOJ policy, to be undertaken at the next meeting, which is scheduled for Sept. 20-21. The central bank also doubled the size of a U.S. dollar lending program


Source

More on the assessment:

Zero Hedge: Is the BoJ about to overhaul its Entire QE policy?
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raspberry-blower



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PostPosted: Mon Jul 03, 2017 10:53 am    Post subject: Reply with quote

In light of the recent Tokyo elections, it is time to resurrect this thread.

Zero Hedge: Abe "Plunges into crisis" following historic Tokyo election defeat

Quote:
According to Bloomberg, the ruling LDP party was projected to win its lowest number of seats ever in the capital, a crushing blow for Abe, which sent the USDJPY sliding after suddenly the very fate of Abenomics is in question, as past Tokyo elections have been bellwethers for national trends. A 2009 Tokyo poll in which the LDP won just 38 seats was followed by its defeat in a general election that year, although this time no lower house poll need be held until late 2018.


Abe still holds power until 2018 however following this setback he will be little more than a lame duck president.

Quote:
But potentially more devastating - according to Reuters - is "the impression among many voters that Abe and his inner circle have grown arrogant." Perhaps it is because instructing your central banker to monetize all your GDP in debt, and boost the stock market takes some serious skills?

Same old, same old. There is a growing rejection of the increasingly out-of-touch old political order. Japan is not immune to it
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Lord Beria3



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PostPosted: Mon Jul 03, 2017 9:09 pm    Post subject: Reply with quote

For twenty years I have been reading warnings on the impending debt crisis of Japan.

It seems to me that the country is gracefully ageing into maturity without the social crisis or tensions within the West (e.g. the mass migration of people from very different cultural backgrounds).

I'm not saying that Japan doesn't have big challenges in the future but I suspect it may do better then some of us think in the coming decades.
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Little John



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PostPosted: Mon Jul 03, 2017 9:50 pm    Post subject: Reply with quote

Yes.

That is to say, in the event of a global economic meltdown, Japan would clearly suffer. But, because of its cultural and accompanying racial homogeneity , one could argue it is far less likely to cause their society to collapse than many Western states.
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raspberry-blower



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PostPosted: Thu Jul 06, 2017 1:29 pm    Post subject: Reply with quote

Lord Beria3 wrote:
For twenty years I have been reading warnings on the impending debt crisis of Japan.

It seems to me that the country is gracefully ageing into maturity without the social crisis or tensions within the West (e.g. the mass migration of people from very different cultural backgrounds).

I'm not saying that Japan doesn't have big challenges in the future but I suspect it may do better then some of us think in the coming decades.


Therein lies the crux of the issue. Abenomics - as it has been dubbed - is all about trying to stimulate growth in an economy that has reached its own growth limits. The diminishing returns of said policy is palpable.

Listening to economists, however, they clearly do not even register this fact.
For example, the clueless talking heads that were on Bloomberg:

BOJ needs a new face - Kuroda "out of ideas"

No acknowledgement of TLTG or that Japan has got to that state

BTW: Would pursuing Steady State economics constitute structural reform?
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Little John



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PostPosted: Thu Jul 06, 2017 2:32 pm    Post subject: Reply with quote

Yes, because it would require an entirely different system of money creation. But, our existing system of money creation is specifically engineered to favour existing power structures.

So, those running the show are not going to facilitate change voluntarily.
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raspberry-blower



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PostPosted: Fri Mar 16, 2018 2:21 pm    Post subject: Reply with quote

Shinzo Abe is fighting for his political life:

Guardian: Cronyism scandal linked to Abe and wife worsens with suicide note

Quote:
In a sign of the growing pressure on the government, Taro Aso, the deputy prime minister, cancelled his appearance at a meeting of G20 finance ministers in Argentina next week to fight for his political future. Aso is a key factional powerbroker so there would be risks to the prime minister’s own support base if Aso is forced out as finance minister.

Abe has previously said he would resign if he or his wife were shown to be personally involved in the land deal with school operator Moritomo Gakuen. On Wednesday he again denied any involvement.

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raspberry-blower



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PostPosted: Wed Mar 28, 2018 11:11 am    Post subject: Reply with quote

As Abe says sorry but still clings to power Japanese pensioners turn to shoplifting *

A sign that decades of NIRP and XIRP have impoverished the retirees - a problem exacerbated by aging demographics. With the numbers of births, numbers entering the Japanese workforce and overall population in decline, Japan is a lot further along the Long Emergency than Western Countries.

What is interesting to note is the still hard-line approach Japan has on immigration.

* also posted in Death of the High Street thread
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raspberry-blower



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PostPosted: Wed Oct 10, 2018 12:30 pm    Post subject: Reply with quote

Wolf Richter: Despite repeated speeches to the contrary, QE Party is drying up in Japan

Wolf Richter wrote:
Japan, by far the most over-indebted country in the world in relationship to its economy, has decided that there will be no debt crisis. A debt crisis would force Japan to brutally cut its budget for social services and raise taxes by large amounts to make ends meet. Japan has decided that it would never come to that. Instead, there may be a currency crisis or an inflation crisis, or both, which would spread the pain more evenly.

Japan can weather this type of crisis better than other countries because it has a large trade surplus and a large pile of foreign exchange reserves, though it would whittle down the wealth and purchasing power of the people. So this type of crisis will be kicked down the road for as long as possible. And that could be quite a while.

What Japan will never have is a debt crisis since the government bond market is in total control of the BOJ. Given the extent of its control over the market, the BOJ can now ease up on buying these JGBs. But market forces will never be allowed mess with that market.


The decline of purchasing power is underlined in my previous post about octogenarian shoplifters who have seen the value of their pensions decline.
Actually Japan's demographics are very interesting - an aging population that has been declining by around 300,000 last year alone.
Japan has a highly restrictive immigration policy whereas both Europe and even the USA are less so (certainly in comparison to Japan)
Will Japan weather the decline better than Europe or the USA? One to discuss..
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kenneal - lagger
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PostPosted: Wed Oct 10, 2018 12:47 pm    Post subject: Reply with quote

raspberry-blower wrote:
....With the numbers of births, numbers entering the Japanese workforce and overall population in decline, Japan is a lot further along the Long Emergency than Western Countries. .....


The decline in population in the EU, in original ones at any rate, is masked by immigration. The UK's population dropped below the replacement rate in the early 1950s which is why the Windrush Generation was born, to keep population and economic growth growing.

The indigenous birthrate is still well below replacement so the increase in population from the 42 million of those days to the 64 million of today is entirely due to immigration. The proportion of our population of immigrant decent today is about 34% and growing with the population growth.
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raspberry-blower



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PostPosted: Fri Oct 12, 2018 10:11 am    Post subject: Reply with quote

kenneal - lagger wrote:
raspberry-blower wrote:
....With the numbers of births, numbers entering the Japanese workforce and overall population in decline, Japan is a lot further along the Long Emergency than Western Countries. .....


The decline in population in the EU, in original ones at any rate, is masked by immigration. The UK's population dropped below the replacement rate in the early 1950s which is why the Windrush Generation was born, to keep population and economic growth growing.

The indigenous birthrate is still well below replacement so the increase in population from the 42 million of those days to the 64 million of today is entirely due to immigration. The proportion of our population of immigrant decent today is about 34% and growing with the population growth.


Precisely, Ken. Which is why I posed the question.
Which society do posters here feel will manage the Long Emergency - as Kunstler puts it - the best (as in the least worst scenario?)

Here's another highly pertinent article from Wolf Richter: I was asked: Why did all this massive money printing NOT cause consumer price inflation?

Wolf Richter wrote:
So central banks, while they try to stimulate some asset price inflation, are worried when it goes too far. The Fed has expressed this worry in various forms for two years. The ECB is now murmuring about it. And even the Bank of Japan is suddenly fretting about the ‚Äúsustainability‚ÄĚ of its QE program, and its impact on the financial markets.

This is why QE cannot be maintained without setting the stage for another, and much bigger and even more magnificent collapse of the financial system, the Big One if you will, and all the real-economy mayhem it would entail.

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