Will Abenomics succeed?
BY GREGORY CLARK
SAT March 1, 2014
The prime minister, Mr Abe, claiming economic success says 'Numbers do not lie.' But one number does give the lie to his claim: Before Abenomics, GNP per head in Japan stood at 46,000 US dollars. Today, thanks to a 30 percent depreciation of the yen that figure is now only around 37,000 per head - down to the level of Italy and Hongkong. 'Japan is Back' Mr Abe likes to tell the world. Well, in one sense it really is back - all the way back to the per capita income of the early nineties.
The recovery we see now is almost entirely due to that massive 30 percent depreciation, which in turn is the result mainly of the large annual three trillion yen increase in imports of fossil fuels caused by the Fukushima nuclear disaster. That currency depreciation in turn gives the support to exporters, and to domestic producers competing with imports, that sustains the present recovery which in turn gives the psychological boost this economy needed so badly.
But depreciation is a fragile weapon. Even the tiny two percent yen appreciation we saw recently panicked the stockmarket into a ten percent fall. If the yen were to return to its previous levels (which it will as the nuclear power Mr Abe favors comes back) the result would be mayhem. Other measures to sustain the progress to date are badly needed, and what Mr Abe proposes – his so-called third arrow of reforms and innovations - is very unconvincing.
Nor is his policy of having the Bank of Japan spend trillions to buy up financial assets, mainly bank-held government debt, likely to be very effective if the banks simply continue to use much of the money to buy more government debt, at a profit. The banks say they want to push more money into the real economy but they lack borrowers. Meanwhile would-be borrowers say demand is not enough to encourage them to borrow. The government and the BOJ then say there will be more demand when inflation goals are reached. But they will not reach those goals unless there is more demand – an ugly vicious circle. The moderate inflation we have now comes in part from demand killing increases in import prices, and a pre-consumption tax buying rush bound to result in an equal or greater demand slump after April.
Japan, and now increasingly the other developed economies, face demand deficiency problems much more serious than they realise. Population aging sees more elderly cutting back on spending. Increasing inequality also cuts demand; spending by the few at the top cannot compensate for the lack of spending by the many at the bottom. With the exception of the US, the threat of population decline severely cuts investment incentives. Taken together it is recipe for chronic deflationary pressures, which even interest rates close to zero cannot counter. Add in the demand-killing effect of mistaken austerity policies and the problem is even greater.
Mr Abe, like many others, urges wage increases or more employment as an answer. But employers will not respond unless they can see higher profits and they will not see higher profits until they see the end to the demand deficiency – yet another chicken-and-egg style vicious circle.
The only way out of all these dilemmas is for governments to rely on their own increased spending to provide the needed demand - the Keynesian solution. Mr Abe has promised us a five trillion yen fiscal stimulus to do that. But that is a mere drop in the bucket, and will in any case be more than neutralised by the planned five trillion yen increase in the consumption tax. Promises of future 'fiscal consolidation' (the new word for cutting government spending) will do even more damage. We are back to the 'structural reform' vicious circle of the Koizumi years – government spending cuts depressing the economy, which cuts tax revenues, which increases official debt, which encourages more fiscal cuts, which further depresses the economy. Then, as now, disaster was only staved off by currency depreciation.
Japan lost two decades of economic growth due to these mistakes (which some of us predicted at the time – back in 1996 to be precise). The other developed economies are beginning to face the same situation. Like Japan, they think that low interest rates and some monetary expansion will solve the problem, and hold back from the Keynesian solution fearing the conventional wisdom that says high levels of government borrowing and official debt are bad. And they too puzzle over why they are still in trouble.
Like Japan, they have failed to realise that our developed economies have shifted radically from the economic paradigms of the past. Then we could assume that economies had unlimited demands needing to be filled but lacked the supply of goods needed to meet that demand; inflationary pressures were chronic and to ward them off government spending had to be strictly restrained. Only in periods of stagnation could they rely on Keynesian fiscal stimulae, it was argued.
Today the problem is almost the reverse. Thanks to IT and other new technologies, and the rise of developing economies like China, we now have few problems in the supply of needed goods. Our main problem is that chronic lack of demand for those goods. The inflationary fears of the past have gone. All that remains are its economic dogmas.
True, some economists are starting to realise a new paradigm has arrived. New York Times commentator, Paul Krugman, has spoken of 'depression-like conditions' that might last for decades. 'Secular stagnation' has also entered the vocabulary. And investment banker, Daniel Alpert, sounds a warning in his book “The Age of Oversupply: Overcoming the Greatest Challenge to the Global Economy.” But I doubt whether any of these warnings will penetrate the thick walls of dogma surrounding Mr Abe's advisers. And few seem to realise the solution – that without inflation dangers the standard anti-Keynesian fears of rising official debt and deficit spending disappear. Why? Because governments no longer have to borrow the funds they want to spend; they are free to create their own funds.
The few who realise this in the US are called deficit owls (as opposed to the majority deficit hawks) and can be found on the Internet. In Japan they focus on a small group called the Association for Japanese Economic Recovery. But neither expect any early breakthroughs, even though such thinking could well be the key to China's economic success.
BY GREGORY CLARK
SAT March 1, 2014
The prime minister, Mr Abe, claiming economic success says 'Numbers do not lie.' But one number does give the lie to his claim: Before Abenomics, GNP per head in Japan stood at 46,000 US dollars. Today, thanks to a 30 percent depreciation of the yen that figure is now only around 37,000 per head - down to the level of Italy and Hongkong. 'Japan is Back' Mr Abe likes to tell the world. Well, in one sense it really is back - all the way back to the per capita income of the early nineties.
The recovery we see now is almost entirely due to that massive 30 percent depreciation, which in turn is the result mainly of the large annual three trillion yen increase in imports of fossil fuels caused by the Fukushima nuclear disaster. That currency depreciation in turn gives the support to exporters, and to domestic producers competing with imports, that sustains the present recovery which in turn gives the psychological boost this economy needed so badly.
But depreciation is a fragile weapon. Even the tiny two percent yen appreciation we saw recently panicked the stockmarket into a ten percent fall. If the yen were to return to its previous levels (which it will as the nuclear power Mr Abe favors comes back) the result would be mayhem. Other measures to sustain the progress to date are badly needed, and what Mr Abe proposes – his so-called third arrow of reforms and innovations - is very unconvincing.
Nor is his policy of having the Bank of Japan spend trillions to buy up financial assets, mainly bank-held government debt, likely to be very effective if the banks simply continue to use much of the money to buy more government debt, at a profit. The banks say they want to push more money into the real economy but they lack borrowers. Meanwhile would-be borrowers say demand is not enough to encourage them to borrow. The government and the BOJ then say there will be more demand when inflation goals are reached. But they will not reach those goals unless there is more demand – an ugly vicious circle. The moderate inflation we have now comes in part from demand killing increases in import prices, and a pre-consumption tax buying rush bound to result in an equal or greater demand slump after April.
Japan, and now increasingly the other developed economies, face demand deficiency problems much more serious than they realise. Population aging sees more elderly cutting back on spending. Increasing inequality also cuts demand; spending by the few at the top cannot compensate for the lack of spending by the many at the bottom. With the exception of the US, the threat of population decline severely cuts investment incentives. Taken together it is recipe for chronic deflationary pressures, which even interest rates close to zero cannot counter. Add in the demand-killing effect of mistaken austerity policies and the problem is even greater.
Mr Abe, like many others, urges wage increases or more employment as an answer. But employers will not respond unless they can see higher profits and they will not see higher profits until they see the end to the demand deficiency – yet another chicken-and-egg style vicious circle.
The only way out of all these dilemmas is for governments to rely on their own increased spending to provide the needed demand - the Keynesian solution. Mr Abe has promised us a five trillion yen fiscal stimulus to do that. But that is a mere drop in the bucket, and will in any case be more than neutralised by the planned five trillion yen increase in the consumption tax. Promises of future 'fiscal consolidation' (the new word for cutting government spending) will do even more damage. We are back to the 'structural reform' vicious circle of the Koizumi years – government spending cuts depressing the economy, which cuts tax revenues, which increases official debt, which encourages more fiscal cuts, which further depresses the economy. Then, as now, disaster was only staved off by currency depreciation.
Japan lost two decades of economic growth due to these mistakes (which some of us predicted at the time – back in 1996 to be precise). The other developed economies are beginning to face the same situation. Like Japan, they think that low interest rates and some monetary expansion will solve the problem, and hold back from the Keynesian solution fearing the conventional wisdom that says high levels of government borrowing and official debt are bad. And they too puzzle over why they are still in trouble.
Like Japan, they have failed to realise that our developed economies have shifted radically from the economic paradigms of the past. Then we could assume that economies had unlimited demands needing to be filled but lacked the supply of goods needed to meet that demand; inflationary pressures were chronic and to ward them off government spending had to be strictly restrained. Only in periods of stagnation could they rely on Keynesian fiscal stimulae, it was argued.
Today the problem is almost the reverse. Thanks to IT and other new technologies, and the rise of developing economies like China, we now have few problems in the supply of needed goods. Our main problem is that chronic lack of demand for those goods. The inflationary fears of the past have gone. All that remains are its economic dogmas.
True, some economists are starting to realise a new paradigm has arrived. New York Times commentator, Paul Krugman, has spoken of 'depression-like conditions' that might last for decades. 'Secular stagnation' has also entered the vocabulary. And investment banker, Daniel Alpert, sounds a warning in his book “The Age of Oversupply: Overcoming the Greatest Challenge to the Global Economy.” But I doubt whether any of these warnings will penetrate the thick walls of dogma surrounding Mr Abe's advisers. And few seem to realise the solution – that without inflation dangers the standard anti-Keynesian fears of rising official debt and deficit spending disappear. Why? Because governments no longer have to borrow the funds they want to spend; they are free to create their own funds.
The few who realise this in the US are called deficit owls (as opposed to the majority deficit hawks) and can be found on the Internet. In Japan they focus on a small group called the Association for Japanese Economic Recovery. But neither expect any early breakthroughs, even though such thinking could well be the key to China's economic success.
“アベノミクス”の問題点
“アベノミクス”は成功するのか。安倍晋三首相は、経済は成功しているとして、“数字は嘘をつかない”という。ところが一つの数字が、彼のいうことをくつがえす。： アベノミクス以前は日本の一人当たりGNPは4万6千ドルまで行っていた。
今日、円が３０％安くなったおかげで、その数字は一人当たり約3万7千ドルに下がった。── これはイタリア、香港レべルだ。“日本はカムバックした”と安倍は世界に対して胸を張っている。そう、ある意味で確かにカムバックした── 90年代初めの一人当たり所得水準へはるばるカムバックした。
いま見られる回復は、ほぼ完全に、３０％という大幅な円安によるものだ。そして、それはといえば、主に福島の原発事故の結果生じた年3兆円という大量の化石燃料輸入拡大によるところが大きい。── この通貨安は、次には、目下の経済回復を支える輸出と、輸入と競争する国内生産者を助け、それが次にはこの経済が緊急に求めている心理的なバイタリティーをもたらす。
しかし通貨安は弱い武器だ。つい最近も円が僅か２％上がっただけで株式市場は10％落ち込んだパニック振りをわれわれは目にしたばかり。円が元のレベルに戻ったとすれば（原子力推進派の安倍が進めようとしている原子力が戻ってくればそうなる）結果は大混乱だ。いままでの成長を続けるために、他の諸方策が緊急に必要で、安倍が提唱するもの── 彼のいわゆる改革とイノベーションの“三本の矢”── では頼りにならない。
また、日銀が金融資産、主に銀行が持つ政府債、を買い上げるために数億円使わせるという方針も、銀行がその金を使ってさらに多くの政府債を、利益を出して買い続けるだけでは、効果が薄い。銀行はもっと金を実経済に注ぎ込みたいというが、借り手不足だ。
一方、潜在的借り手は、借りを促すには需要だけでは十分でないという。すると、政府・日銀はインフレ・ターゲットが達成できれば需要は伸びる、という。ところがこのターゲットは、需要が拡大しなければ達成できない。── これは悪循環である。
現在の穏やかなインフレは、一つには需要を殺す輸入価格の上昇と、（4月に消費税が上がれば同等もしくはより大きな需要落ち込みをもたらすはずの）駆け込み需要から来ている。
日本は、そして今やますます他の先進国経済も、自分たちが考えている以上に深刻な需要不足問題に直面している。高齢化によって高齢者はますます支出を控えようとする。拡大する格差もまた需要を減らす： 上層にいる僅かの人の支出は、底辺にいる多くの人の支出不足の埋め合わせにはならない。
アメリカは例外として、人口減少の危機感で投資のインセンティブは大きく削がれている。これらを合わせて考えれば、待っているのは慢性的なデフレ・プレッシャーで、それにはゼロに近い金利でさえ太刀打ちできない。
ここに、需要を殺す効果を持つ誤った緊縮政策を持ち込めば、問題はさらに深刻になる。
安倍は他の多くの人と同様、賃上げか雇用拡大でこれに対抗できるという考えだが、雇用者はより大きな収益が見込めなければ、動かないだろう。そして需要の不足が解消する展望が見えない限り、収益拡大は見込めないだろう。── ここでまた、もう一つの悪循環だ。
こうしたジレンマを全て脱却する唯一の方法は、政府が自分自身で支出を拡大して必要な需要を作る── つまり、ケインズ流の解決方法だ。安倍はそのために5兆円の財政刺激策をとると約束。けれども、これでは大海の一滴。しかも、いずれにしろ、予定の消費税5兆円値上げによって帳消しプラスになる。
彼の将来の“財政固め”（財政削減を意味する新語）の約束で、ダメージはさらに大きくなるだろう。また小泉時代のあの“構造改革”の悪循環へ戻ってしまう。── 財政削減が経済をみじめにする── 税収が落ち込み、公的債務が拡大し、それがさらに財政削減を促し、さらに経済をみじめにする。あの時もいまと同じように、通貨安のおかげでかろうじてそれを避けられることになった。
日本はこのようなあやまちのために20年にわたり経済成長を失った、（その当時─ 1996
年─ われわれ幾人かはそれを予想した） 他の先進国経済も同じ状況に陥り始めている。
日本と同じように、彼らは低金利といくばくかの金融拡大で問題は解決すると考えており、政府の借金と公的債務が高レベルだということは悪いことという通俗的知恵で怖がって、ケインズ流の解決をしり込みしている。彼らも、自分たちがなぜいまだにトラぶっているのか、思いあぐねている。
また日本と同じように、彼らは、われわれ先進国経済も過去の経済パラダイムから急激にシフトとしたことを認識できないでいる。あの時われわれは、満たされるべき需要が無制限にあるのに、その需要に見合うだけの供給がないのだと考えてきた。インフレ圧力は慢性的だった。そこでそれをかわすために、政府支出は厳しく抑制しなければならなかった。経済低迷のときだけケインズ流の財政刺激策に頼ることができる、という議論だった。
今日、問題はその逆だ。情報その他の新技術と、中国などの途上国躍進のおかげで、われわれは必要な商品を入手するのに問題はなくなった。われわれの主問題はこれらの商品に対する需要が慢性的に不足していることだ。インフレの心配は過去のものである。今残っているのは経済学的ドグマのみだ。
たしかに一部の経済学者は新しいパラダイムの到来を認識し始めている。ニューヨークタイムズの論説委員ポール・クラッグマンは、何十年か続くかもしれない“経済停滞状況”について語っている。また“長期にわたる低迷”ということばが聞かれるようになった。投資銀行のダニエル・アルパートが著書「供給過剰時代： グローバルエコノミーにとって最大のチャレンジの克服」で警告を発している。しかし、これらの警告を少しでも安倍のアドバイザーたちを包み込むドグマの厚い壁を突き破って彼らに届くかは、疑問だ。
そして、解決法をわかっている人間はごく少ない。── つまり、インフレの問題がない場合、公的債務と赤字支出を拡げることに対する反ケインズ的なお決まりのおそれはなくなる、ということ。なぜか？ それは政府が、支出するための資金を借りる必要がなくなるから； 政府は必要な資金を自分で作れるからだ。
アメリカでこのことを認識した少数の人間は “赤字フクロウ” （大多数の赤字タカの反対語として）と呼ばれており、インターネット上で検索できる。日本では「日本経済を復活する会」と呼ばれる小グループに結集している。だが、どちらのグループも早期に道が開けるとは期待していない。それが、中国経済成功を解き明かすカギである可能性が大きいのだが。
（筆者は日銀ほかの諸機関の公的諮問委員会委員を歴任）