Abenomics Failure In Six Charts
” Those who believe in Abenomics are suffering from amnesia. This is nothing new ” Yasunari Ueno (Mitzuho)
A few months ago in this blog I commented that the policy implemented by Japan to fight deflation is nothing new, and as such would not meet the expectations that consensus gave to the supposed magical solutions. And so it has been. In my post “Japan and Manga Money“I explained that the country has made tremendous stimulus plans since the mid-90s and expansionary policies since 2001 without exiting stagnation.It is curious that the monetarist policies are defended as being social and redistributive. However, there is nothing social in money printing. Marc Faber explained it clearly: “Printing money does not benefit other than those who have access to such funds, ie, the financial sector, the government and the upper classes, never to workers.”Now, a year after the implementation of Abenomics we can check the fallacies used to justify these measures:. Printing generates magic growth
“Japan will grow at 4%,” said the economists of consensus. Nope. Someone should say sorry for making a mistake of more than double in their estimates. The chart below, courtesy of Juan Rallo, shows almost no impact of the expansionary policies on quarterly GDP.
. Printing money reduces debt
Increasing the money supply more than the United States, Japan’s public debt reached a record volume of 1,018 trillion yen in December 2013. About 7.3 trillion euros after six stimulus plans since the 90s.
The amount exceeds the 1,011 trillion yen of September and is more than twice the nominal GDP. Debt grows not only in absolute terms but also relative to GDP. All I hear is “we must give some time” … after only 25 years of Keynesian experiment, it “was not enough”. However, the Ministry of Finance estimates that the volume of debt will reach 1,039 trillion yen in March.
Japanese debt is owned by… the Japanese. 85% of it. Despite paying 0.6% interest on their ten year bonds, Japan spends 22% of their annual budget to pay interests on debt. One thing to remind to those economists like Stiglitz, who say that the volume of debt is not important, but that the cost is low. Krugman has the nerve of saying in his column that “such 22% includes repayment of principal” …. When Japan only increases its net financing needs!. No debt is repaid, but refinanced and issue more.
Printing money does not create jobs. Otherwise, the countries that do it would have had full employment for years. But it’s still worth noting that the labour participation rate in Japan has also plummeted, rebounding slightly when real wages have collapsed -especially for women- to 1994 levels.Japan, unlike the United States, has a shortage of workers due to the effect of the low birth rate (1.4 children per woman) and an ageing population. And yet, if we remove the pensioners effect, nearly 17 million people of working age have been taken “out of the charts” of unemployment.A year of Abenomics can not have thrown a worse outcome and further away from its promises. Atrocious.But don’t doubt it. When Abenomics or its equivalent number 35 continues to generate pedestrian growth, more debt and more holes in the pockets of citizens, some will say that it “would have been worse”, “not enough was done” and “we need to repeat “. And mistakes shall be supported by a social veil that neither you nor the Japanese people will see. Then we will read “we have to be patient, improvement comes next year,” while the average citizen feels another hand in the pocket.