So, yes, Abenomics has sent stocks into the stratosphere and chopped the yen into mincemeat, but as far as ending deflation, the results are not so good. And the reason is simple -- wages in Japan have been drifting lower for the last 20 years and they're still falling today. Get a load of this from Bloomberg:
"Ending consumer price declines would give companies and households more incentive to borrow, and boost revenue for businesses and the government in a nation that saw its third recession in five years in 2012.
"'The key is wages,' said Nobuyasu Atago, principal economist at the Japan Center for Economic Research and a former BOJ official in charge of price data. 'Without pay increases, the economy won't recover and households will only suffer from inflation...'
"Japan's main business lobby signaled it won't endorse pay rises at regular wage negotiations with labor unions this spring, Kyodo News reported Dec. 20. Prime Minister Shinzo Abe's Liberal Democratic Party is considering tax breaks for companies that raise pay or expand hiring." ("Japan Learned to Love Deflation in Wage Malaise Facing BOJ," Bloomberg)
And here's more from The Economist:
"Keidanren, the main big-business lobby, has remained cool, saying it wants to see more sustainable profit growth before its members agree to basic-pay increases, which are harder to reverse than bonus payments.
"Masamichi Adachi of J.P. Morgan says overtime and bonus payments are likely to rise before core salaries do. He says that, rather than higher inflation expectations, the country needs higher growth expectations before companies commit to permanent wage increases. As it is, a planned rise in the consumption tax next year is likely to offset some of the effect of a big fiscal stimulus this year, which means growth may flatten in late 2014.
"There is a danger, Mr Adachi adds, that the popularity of Mr Abe's policies will quickly decline if the public perceives they are getting "cost-push" inflation caused by rising prices, rather than 'demand-pull' inflation, caused by rising wages. 'A reflationary policy is initially quite well received until inflation actually comes.'"
Do you see the pattern here? Profits before wages. Bonuses before wages. Growth before wages. Anything before wages. It's the same in America, except worse. Big Business may recognize the importance of higher wages in revitalizing the economy, but they're not going to give ground unless someone puts a gun to their head and forces them to comply. Class war takes precedent over everything, even the health of the economy.
Now check this out from economist Frances Coppola who thinks that QE is a big fraud that neither "increases inflation" nor "debases the currency":
"There is zero chance of domestically-generated inflation while wages are falling, contractionary fiscal policy is depressing real incomes, banks are not lending and corporates are failing to invest. Externally-driven inflation is possible, and we are of course seeing inflation in asset prices as a consequence of QE. But the core trend is disinflation in developed countries -- I hesitate to say 'deflation,' since inflation is still above zero, but core inflation is on a downwards trend in nearly all developed countries..."
Repeat: "There is zero chance of domestically-generated inflation while wages are falling."
Amazing, isn't it? Bernanke is pumping $85 billion per month into the financial system and the arrow on the inflation-dial is still headed for the red. Unbelievable. Now everyone can see that QE was just another bubble-making farce that has no impact on the real economy at all. The Fed's credibility is in a shambles.
No wonder Bernanke is thinking about early retirement.
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
1
1
1
