Abe economy
  • It says a lot about the degree to which Japan's economy has been stagnating for years when the young lady TV announcers set out, in the context of the Seven Eleven across the board wage increase to its employees, to explain to each other what ベア (Japlish for 'base up') means.

    For years now most of the very few salary improvements have been in the form of bonus increases which can be withdrawn if economic conditions fail to continue to improve.

    7/11 Chairman Suzuki says with pride he is responding to Abe's call for companies to share the wealth (they are said to be sitting on 500 trillion worth of retained profits) as crucial to sustained recovery, and ultimately to increased company profits. Another knock-on effect is the wealth effect from rising stock prices, with the rich already making significant increases in purchases of luxury products. Next it will be luxury condos, and so on.

    The reason I welcomed Abenomics right from the beginning (and those believing me could have made a lot of money in the process) was realising how one determined move to break the deflation deadlock has chain effect knock-on effects that keep the momentum going. Far northern hemisphere people will appreciate the analogy: faced with a frozen river just tapping at the ice will get you nowhere. But make a decisive break and the rest of the ice will start to move, rapidly.

    Japan's economy has been waiting more than a decade for that all important decisive break.

    Incredibly the conservatives, with Nikkei in the lead, are still carping and critical because they failed completely to predice what we are seeing now. They still keep thinking that innovations, structural reforms and fiscal discipline are the key to growth.

    These things are important of course. But often they can only be effective AFTER growth is under way. Getting it underway is the key, and Mr Abe, thanks mainly to the rightwing Keynesians I have been dealing with and writing about now for several years, has realised that crucial truth.

    The DPJ which wasted its years in power by listening to the bureaucrats and failing to do what Abe has done is finally beginning to understand how they missed the bus. But for a while they wanted to stay on the Nikkei bus.

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