In response to an FT article by Lionel Barber, Robin Harding, and Kana Inagaki on 26th March 2015, entitled 'Japan: Abe bids to end economic burden'
http://www.ft.com/cms/s/0/b3707c5a-d305-11e4-b7a8-00144feab7de.html#ixzz3VXWELSia
ABENOMICS - THE PLAN:
Arrow 1 - Monetary: Print money, if that doesn't work, print more. Act tough so people will not question the unproven assumption that money printing is effective, and will instead concentrate on the amount - more is good, more is tough, more will work
Arrow 2 - Fiscal: Raise taxes but telegraph it in advance so people can make the most of the bargains available before the tax kicks in. Pray that this newfound habit of spending a lot for the first time in years will overcome their 'deflationary mindset', or at least remind them where the shops are. If that doesn't work, scrap the idea but tell them it's been 'paused' and go back to arrow one
Arrow 3 - Structural: Be vague on this one, talk about it as little as possible, since few people really understand it and the ones who do, don't really have the appetite for it. Take credit for anything that looks like a structural change, e.g. when women go to work because they can't afford not to, this will be a great achievement to trumpet. Never talk about population, demographics, immigration or anything else that real change depends on - remember, we're trying to bluff our way through this, or at least make it through the election cycle
Arrow 4 - Foreign policy (top secret - not to be spoken about). Act tough and pick arguments with China and anyone else who looks like they will provide a good bogeyman for the population, who will need a distraction, and someone to blame when 1 to 3 don't work
ABENOMICS - THE RESULTS SO FAR:
1. Japan is financing 100% of its government deficits with central bank credit. Its debt is equal to 240% of GDP, and even at today’s interest rates, the cost of servicing that debt requires more than 40% of tax receipts. If interest rates ever returned to normal, debt service would take 100% of tax receipts
2. GDP is still flat, as it has been for the last 20 years
3. The latest torrent of digital confetti has taken the USD exchange rate to 120, which has undoubtedly benefitted the exporters. However, domestic companies have received little other than a lecture that amounts to 'try harder and don't complain'. Something every hard working business person who has his life's savings on the line wants to hear from an academic or a bureaucrat who has never done a real job, hasn't had to make a payroll, and hasn't got his or her life's work invested in an endeavour that exists independently of a spreadsheet
4. Having realised that buying bonds will not do the job, the BOJ has accelerated its program of buying Japanese ETFs, which we now learn it has been doing in smaller amounts since 2010. According to the WSJ, it has gone into the market one in every three days since 2010, bought $23 billion dollars worth in the last 2 years, and is now the single largest holder of Japanese stocks in the world, with 1.5% of total capitalisation. Of course, this fulfils a dual function - when it buys the dips it can boast of getting good value for the people, whilst masking the real intention, which is to juice the stock market and maintain the myths of the 'wealth effect' and 'trickle down', which have thus far proved to be illusory, mainly because they don't exist
5. They got Professor Krugman to tell them they are doing the right thing, but guess what? They need to do more....Go straight to jail, do not pass go, do not collect 2 trillion yen...I'm sorry, that should say 'go back to arrow one’