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Will Abenomics be good for Japan's economy?

Will Abenomics be good for Japan's economy?

  • Yes

    Votes: 8 25.8%

  • No

    Votes: 16 51.6%

  • Undecided

    Votes: 7 22.6%
  • Total voters
    31
Today the Nikkei 225 closed at 13,014.87...down 518.89.

Two weeks ago it was almost 16,000.

Is the debt-fuelled, mega-Keynesian stimulus starting to fade?

IMO, it inevitably will...disastrously so. I believe Japan is on a desperate, rocket powered, market stimulation that will eventually come crashing down as the West continues it's monetary 'Race to the Bottom'.


And remember, what Japan is doing now is in many ways exactly what America is also doing right now...but on a much larger and more extensive scale.

And, if the rumours are true about Bernanke leaving soon; then Janet Yellen will probably take over.
And her views on what Japan is doing seem to indicate she will try and implement them (to an extent) in America:

'Federal Reserve Vice Chairman Janet Yellen said the Bank of Japan (8301)’s plan to double its monetary base is appropriate to end the country’s deflation.
“What Japan is doing is something that is in their own best interest,” Yellen said today in response to audience questions after a speech in Washington. “It’s something that, if successful, will be good for stimulating growth in the global economy and will be good for us too.”
The BOJ will double the monetary base by the end of 2014 through buying government bonds, in Japan’s biggest round of quantitative easing, the central bank said in Tokyo. At stake is the credibility of Prime Minister Shinzo Abe’s economic program -- dubbed Abenomics -- and the chances of ending two decades of stagnation and meeting a 2 percent inflation goal.
“Taking an aggressive approach to try to end deflation is something I certainly understand,” Yellen said.'

http://www.bloomberg.com/news/2013-...an-s-easing-appropriate-to-end-deflation.html
 
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DA60 said:
Today the Nikkei 225 closed at 13,014.87...down 518.89.

Two weeks ago it was almost 16,000.

Is the debt-fuelled, mega-Keynesian stimulus starting to fade?

IMO, it inevitably will...disastrously so. I believe Japan is on a desperate, rocket powered, market stimulation that will eventually come crashing down as the West continues it's monetary 'Race to the Bottom'.


And remember, what Japan is doing now is in many ways exactly what America is also doing right now...but on a much larger and more extensive scale.
Click to expand...

I agree and believe the stock market is due for a big correction eventually.
 
Japanese shares tumble to two-month low as Abe growth plan disappoints

'Japan's Nikkei share average sagged 3.8 percent to a two-month low on Wednesday after a speech by Prime Minister Shinzo Abe on his growth strategy to revive the world's third-largest economy failed to enthuse investors.

Abe pledged to boost incomes by 3 percent annually and set up special economic zones to attract foreign businesses in the latest tranche of measures, the "Third Arrow" in his "Abenomics" to spur sustainable growth.'


Japanese shares tumble to two-month low as Abe growth plan disappoints | Reuters
 
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UBS Warns of 'Abegeddon' Risk in Japan

'Japan risks facing stagflation - where accelerating inflation is not met by higher growth rates - if "Abenomics" fails to restore momentum in the world's third largest economy, warned Alex Friedman, global chief investment officer at UBS Wealth Management.

"It's possible we could see a stagflation scenario, where you see inflation in asset prices but no real growth. The ultimate story is you need a hand off to real growth - in Japan there's a real question of whether that's possible," Friedman told CNBC Asia's "Squawk Box" on Wednesday.

"If you don't have growth, then you end up with a potential Armageddon story, something we would call Abegeddon," he added.

In an "Abegeddon" scenario, Friedman said investors may grow increasingly concerned about the sustainability of Japanese debt levels that could lead to a "stampede" out of government bonds.


Under these circumstances, Japan's debt to gross domestic product ratio would rise above 300 percent from 226 percent currently, and the 10-year government bond yield could approach 5 percent, he predicted, from 0.86 percent.

"This would damage the financial system significantly, and regional bank capital would be severely impaired," Friedman added.'

...

'It will take years before the success of Abe's policies can be fully judged, said Friedman, noting that the worst case scenario he outlined is unlikely to play out in the coming months.'


UBS Warns of 'Abegeddon' Risk in Japan
 
Like everything, the whole macro economic plans are so full of randomness. You can't possibly know what is what. We'll have to wait and see what the outcome will be.
 
For the record monetary policy is not Keynesian, but Friedman who advocated helicopter money.

So yes I think Abenomics will not work, monetary policy never works. But good old fiscal Keynesian policies would be a welcome surprise to developed nations.
 
JP Hochbaum said:
For the record monetary policy is not Keynesian, but Friedman who advocated helicopter money.

So yes I think Abenomics will not work, monetary policy never works. But good old fiscal Keynesian policies would be a welcome surprise to developed nations.
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Japan is doing everything in its power to devalue its own currency so investors will no longer hold onto it. I think that's a reasonable goal, but it falls short of reality in that inflation is driven by the average consumer having too many dollars yen chasing too few goods. Seeing that they've levied consumption taxes, which we know to be regressive, as the primary method of balancing their budget, I think their inflation targeting is almost sure to fail.

An austrian irony in so many ways.
 
gavinfielder said:
Japan is doing everything in its power to devalue its own currency so investors will no longer hold onto it. I think that's a reasonable goal, but it falls short of reality in that inflation is driven by the average consumer having too many dollars yen chasing too few goods. Seeing that they've levied consumption taxes, which we know to be regressive, as the primary method of balancing their budget, I think their inflation targeting is almost sure to fail.

An austrian irony in so many ways.
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Not only that, but they are printing tons of money and it is not going to spending but to savings. So more proof that printing doesn't equal inflation.
 
JP Hochbaum said:
Not only that, but they are printing tons of money and it is not going to spending but to savings. So more proof that printing doesn't equal inflation.
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JP, if monetary policy isn't the answer to getting people to spend, then how could a government get people to spend more, other than through welfare?
 
gavinfielder said:
Gee, well, the job guarantee comes to mind.
Click to expand...

That would be great, but I was hoping someone was going to suggest lower taxes for the middle class because it would be a lot easier to implement and possibly more politically feasible.
 
imagep said:
That would be great, but I was hoping someone was going to suggest lower taxes for the middle class because it would be a lot easier to implement and possibly more politically feasible.
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Oh, well that works too.
 
SO I am changing my vote after reading the latest information on Japan. They had great annulaized growth:

"Of course, not everyone is convinced: though Japan reported a robust 3.5 percent annualized growth rate for the first quarter of this year, the stock market has dipped from a five-year high amid doubts about whether “Abenomics” will go far enough. But we shouldn’t read anything into short-term stock fluctuations. Abenomics is, without a doubt, a huge step in the right direction."

I was operating under the assumption that it was solely based on monetary stimulus, but in fact they are using fiscal stimulus as well.

So early signs show it is working.

Japan Is a Model, Not a Cautionary Tale - NYTimes.com
 
I knew there was some fiscal stimulus, but whenever I hear "stimulus" now I think of the paltry $50B in stimulus spending that was proposed as a part of the grand bargain. After all, if it was significant enough to make a difference, why aren't the conservatives making a big fuss over it?

The only explanation I can find with a few minutes of googling is that stimulus spending was well received. Japanese conservatives must be a heck of a lot smarter than American ones.
 
So does this mean when this crashes and burns you won't blame Austrians?
 
I mean apart from fiscal stimulus, the whole thing reeks of austrian economics from the start. From the start, the idea that monetary policy can cause inflation is an austrian myth, and why the hell would they levy regressive taxes on consumers as well? It's like Shinzo Abe's policy was raised on austrian assumptions and now he's suddenly a wannabe Keynesian while missing a few details.

I hope their stimulus does something but if it's not enough, yes, their inflation targeting will fail because it's entirely premised on fallacy.
 
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gavinfielder said:
I mean apart from fiscal stimulus, the whole thing reeks of austrian economics from the start. From the start, the idea that monetary policy can cause inflation is an austrian myth, and why the hell would they levy regressive taxes on consumers as well? It's like Shinzo Abe's policy was raised on austrian assumptions and now he's suddenly a wannabe Keynesian while missing a few details.

I hope their stimulus does something but if it's not enough, yes, their inflation targeting will fail because it's entirely premised on fallacy.
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You know nothing of Austrian Economics. Quantity theory of money is accepted by all schools of economics. Austrians don't think it's perfect nor assume money supply is the only cause but rather.. fails to explain the mechanism of variations in the value of money.
 
austrianecon said:
You know nothing of Austrian Economics. Quantity theory of money is accepted by all schools of economics. Austrians don't think it's perfect nor assume money supply is the only cause but rather.. fails to explain the mechanism of variations in the value of money.
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No one denies quantity theory of money, but most people don't understand that increasing the money supply (demand) also increases production (supply). It is the belief that "ceteris Peribus" is actually real, that all things stay equal, when they don't.
 
JP Hochbaum said:
No one denies quantity theory of money, but most people don't understand that increasing the money supply (demand) also increases production (supply). It is the belief that "ceteris Peribus" is actually real, that all things stay equal, when they don't.
Click to expand...

And I've never stated what you are saying isn't true. What I am saying is that production would have to grow at the rate of money supply increase for there to be no inflation. US economy isn't doing that.. and Japan certainly isn't. What Abeconomics is doing is just devaluing (inflation) the Yen to make it unattractive for savers.
 
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'Following last night's 'surprising' upward GDP revisions, Japan's trade balance plunged to near-record deficit levels (but that didn't matter) and while China's trade data is questionable at best (and now proven 'false'), Japan is facing a much more considerable worry at home. Abenomics' goal to reduce the value of the JPY to improve competitiveness and spur a renaissance has had a rather nasty side-effect for all the Japanese people who eat, drive, or in any way use energy. The cost of Japan's crude basket has risen 35% in the last six months and is now at its highest for the domestic energy user since 2008 (which sparked the last collapse into deflation). As Bloomberg notes in this brief clip, this surge is not related to demand or the price of oil, but to the devaluation of the Japanese currency and leaves both the refiner crushed on margins and the consumer more cash-strapped.'

The Painful Side Of Japan's "Growth Strategy" | Zero Hedge
 
DA60 said:
'Following last night's 'surprising' upward GDP revisions, Japan's trade balance plunged to near-record deficit levels (but that didn't matter) and while China's trade data is questionable at best (and now proven 'false'), Japan is facing a much more considerable worry at home. Abenomics' goal to reduce the value of the JPY to improve competitiveness and spur a renaissance has had a rather nasty side-effect for all the Japanese people who eat, drive, or in any way use energy. The cost of Japan's crude basket has risen 35% in the last six months and is now at its highest for the domestic energy user since 2008 (which sparked the last collapse into deflation). As Bloomberg notes in this brief clip, this surge is not related to demand or the price of oil, but to the devaluation of the Japanese currency and leaves both the refiner crushed on margins and the consumer more cash-strapped.'

The Painful Side Of Japan's "Growth Strategy" | Zero Hedge
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It's true because a video says so?

Yeah, ok, I expect that from you.
 
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