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Source: Bloomberg

Category: Bailouts, Economy, Taxes and Policy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

2 Responses to “Abenomics Illustrated”

  1. Gestalt says:

    I really question if the Japanese QE will accomplish much, especially when it comes to exports.

    Because the Japanese economy has been so export heavy (read manufacturing), I think it is experiencing an inevitable decline just like the entire western world as manufacturing is taken over by China, Taiwan, Malaysia & Indonesia. Japan due it’s rigid culture, has even lost it’s innovative edge given the iconic rise of Samsung vs. Sony. Also Hyundai is slowly beginning to pass Toyota on the lower end in terms of quality and innovation.

    If it can’t lead in innovation, or manufacturing, and is fighting a losing battle on both these fronts, coupled with an ageing demographic, it’s hard to find anything structurally positive going forward.

  2. gemmoo11 says:

    Nice illustration but irrelevant. We need to key in on the growth of the Bank of Japan balance sheet, which was more or less stagnant under former Governor Shirakawa, and on the velocity of money. BoJ Governor Kuroda is aggressively expanding the BoJ balance sheet. It is already at a record 60 trillion yen on its way to 175 trillion yen by the end of December 2014.

    The $64,000 question is, will this be enough to boost the velocity of money? Velocity is now around 0.5 times. The BoJ is pumping money into the system like crazy but it is either stuck in the banking system in the form of excess reserves on deposit at the BoJ or it is being hoarded as cash. In a deflationary environment, cash increases in value and is the best risk-free investment one can make. Why take the risk of buying a 2-year JGB yielding only 0.15%? You are not giving up much yield by keeping your cash and you are avoiding a lot of risk.

    Prime Minister Abe has made several statements over the past couple of days saying that he fears creating price inflation without creating wage inflation. Back in the day, we called it stagflation. The government is trying to pump up wages by offering tax incentives to companies that increase pay for their employees and by increasing the wage allotment when letting contracts for public works projects.

    We will know if Abenomics has succeeded if wages start to rise. If prices go up and wages remain stagnant, then the policy will have failed. It’s still early days though. The jury is still out on this.