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The Abenomics Flimflam

Neoliberalism, Japanese-Style

by MIKE WHITNEY

Abenomics is largely a bunko-scam wrapped in public relations gibberish. It has no chance of producing a strong, sustainable economic recovery. The real aim of the policy is to temporarily juice GDP with a sizable blast of fiscal stimulus ($100 billion) so the Bank of Japan can stealthily transfer more money to its chiseling investor friends via its bond buying program called QE. In other words, the program works the same way it does in the US, the only difference is the scale of the operation and a number of anti-worker provisions touted as “critical reforms”. Sound familiar?

Naturally, Abenomics–which is named after right-wing loony, Prime Minister Shinzo Abe–has attracted worldwide attention for its bold “shock and awe” approach to monetary policy. Liberal economists in the US –notably Stiglitz and Krugman—are absolutely gaga over the program and just about wet themselves every time they talk about it. They seem to think that the BoJ’s bond buying blitz will fare better in the Land of the Rising Sun then it has in America where the sputtering economy is still on life support five years after the market crashed.

Why are they so optimistic? Probably because BoJ governor Haruhiko Kuroda has taken a “damn the torpedoes” approach and pledged to double the money supply in two years in an effort to pull the economy out of 15 years of deflation. Kuroda figures that raising prices will boost spending and corporate investment laying the groundwork for more activity and hiring, greater demand and stronger growth. The only bugaboo is how to get all that newly-minted money into the economy. As Fed chairman Ben Bernanke has discovered, the liquidity that flows into bond purchases stays locked in the financial system making stocks bubbly, but leaving the real economy largely unaffected. That’s why unemployment in the US is still above 7 percent and GDP is in the 2 percent-range even while the Fed’s balance sheet has ballooned by $3 trillion. It’s because trickle down doesn’t work for shit.

That doesn’t mean that Abenomics hasn’t had an impact. It has. It’s slashed the value of the yen and sent equities into the stratosphere. It’s also increased exports by many orders of magnitude. Too bad import prices have been rising at the same time or it might have made a difference. Check out this recent update from the Testosterone Pit:

“Exports did jump 14.7% in August year over year, the Ministry of Finance reported. But the rest was ugly. Exports were valued in yen, and the yen had lost 20% of its value over the year. So in most categories, export volume actually declined. But Imports jumped 16%, from a higher base, and the trade deficit soared 25% …Analysts were shocked. It was the worst August trade deficit ever. …. 27% higher than the trade deficit of August 2012….

Japan’s trade fiasco is on a steep downward slope. August was the worst August ever, July the worst July ever, June the worst June ever…. There’s no discernible turning point on the horizon.” (“Trade Is Supposed To Save Japan, According To The Gospel Of Abenomics, But In Reality… “, Testosterone Pit)

Hurrah, we shot ourselves in the foot! Our economic plan must be working!

So what was gained by cutting the yen? A big, fat nothing, that’s what. The situation for the average working stiff is worse than ever. Why? Because everything’s gone up except his lousy wages. How does a cheap yen help if gas just jumped from $4 to $6 bucks a gallon but you haven’t gotten a raise in 5 years? Explain that to me? The only way inflation can have a positive effect is if wages rise at the same time as other prices and generate more spending, otherwise it’s a bust. Here’s how Satyajit Das explains it over at Minyanville:

“Japan needs demand-driven inflation, reflecting the effect of increasing wages, higher consumption, and increased purchasing power….Higher costs may, in fact, reduce consumption unless incomes rise commensurately. But wages reached their lowest level since 1992 in January 2013…

The conventional analysis that suggests the current initiatives will increase consumption may prove incorrect. Rising costs may reduce purchasing power, unless matched by rising wages and real incomes.” (“Satyajit Das: In Japan, Neither the 2020 Olympics Nor Abenomics Will Be Magic Bullet”, Minyanville)

That’s simple enough, but the problem is that wages aren’t going anywhere in Japan. Abe has appealed to big business to raise salaries, but it’s a joke. The corporations have workers right where they want them, under their bootheel. That’s not going to change without serious tax reform and progressive legislation aimed at redistributing more of the nation’s wealth. Don’t hold your breath on that one. Here’s more from Das:

“Stagnant incomes are not offset by the wealth effect of higher stock prices. The bulk of Japanese savings are held as low-yielding bank deposits. Over 80% of Japanese households have never invested in any security; 88% have never invested in a mutual fund. …. Rising stock prices affect a very small portion of the population, boosting consumption of luxury items rather than driving broad-based increases in consumption.”

See? Abenomics is just like QE. All the money goes to rich a**holes who play the stock market. All working people get bupkis. There’s nothing here for here for workers or the economy. It’s all just smoke. Here’s a little more background on Japan’s gloomy wage situation from Bloomberg:

“Japan salaries extended the longest slide since 2010 in July, raising the stakes for Prime Minister Shinzo Abe’s decision on whether to increase a sales tax. Regular wages excluding overtime and bonuses dropped 0.4 percent from a year earlier, marking a 14th straight month of decline, according to data released today by the Ministry of Health, Labour and Welfare. …

Boosting workers’ incomes is key to the success of Abe’s efforts to resuscitate the economy after doses of fiscal and monetary stimulus helped weaken the yen and start a recovery, boosting corporate profits. …

“Companies aren’t confident enough on the sustainability of the economic recovery,” said Yoshimasa Maruyama, chief economist at Itochu Corp. (8001) in Tokyo.” (Japan Salaries Extend Longest Fall Since ’10 in Threat to Abe”, Bloomberg)

“Confident”? When did confidence ever have anything to do with raising wages? The way you get a raise in the real world is by having your union rep put a gun to managements’ head. That’s the only way your going to squeeze a fair wage out of these yahoos. But since we’ve done away with unions, labor’s share of revenues is going to continue to plunge. And it has.

Okay, so wages are in the toilet, we know that, but what about growth? At least GDP is improving, right?

Sure, it is, in fact, second quarter GDP was just revised upwards to an impressive 3.8 percent. But that’s mainly because the wily Abe frontloaded his program with $100 billion in old fashioned fiscal stimulus. Unfortunately, the fiscal component is a one-shot deal scheduled to run out next year, so the wheels of activity should slow considerably in the months ahead.

None of the knucklehead analysts talk about the Keynesian part of Abenomics because it detracts attention from Kuroda’s QE-fireworks. We can’t have that! The media wants everyone to believe that it’s actually possible to grow the economy by pumping up bank reserves and stuffing the pockets of shady speculators with more boodle. Isn’t that what QE amounts to; a big freaking giveaway to silk stocking plutocrats and their fatcat buddies?

Abe doesn’t give a hoot about the real economy which is why he’s just about to initiate a sales-tax increase that will reduce consumption even more. According to CNBC, the presumed “consumption tax is due to rise from 5 percent to 8 percent next April and Abe is widely tipped to approve the hike on October 1, when his decision on the matter is due.” The absurdly regressive tax is another hammerblow to working people who are being asked shoulder the entire burden of Japan’s soaring national debt which ballooned to gargantuan proportions because of fiscal mismanagement, “old boy” cronyism, and lavish bailouts for zombie financial institutions. Here’s more from CNBC:

“A rise in the sales tax is a done deal,” said Bank of Singapore Chief Economist Richard Jerram. “[Policymakers] have more or less said they will go ahead with the rise and a stimulus package to buffer the impact.”

According to recent media reports, the government could unveil an economic stimulus package worth about 5 trillion yen ($50 billion) next week with possible corporate tax cuts to offset any negative impact on the economy from a sales-tax hike.” (“Japan’s Abe to rule on sales tax rise: Will he, won’t he?” CNBC)

Can you believe the nerve of these guys? They freeze wages, force working people to pay for their gambling debts (via the consumption tax), and then–just for hell of it–cut themselves another fat check in the form of corporate perks and more money printing. It’s infuriating.

One last thing: Abenomics was supposed to boost Japan’s economic vitality by increasing capital investment. At least on that score, the strategy has succeeded. Here’s the scoop from Reuters:

“Japanese Prime Minister Shinzo Abe got an early sign of how his blueprint to revive Japan’s industrial vim and economic vigor was working when two of his country’s biggest car makers unveiled $900 million worth of investments to boost production.

There was one drawback: the new assembly plants and expanded factories announced by Mazda Motor Corp (7261.T) and Honda Motor Co Ltd (7267.T) are not in Japan, but more than 2,000 miles away, in Thailand.”

HA! Thailand! How do you like that? Great program you got there, Shinzo.

The sad fact is that no one is investing in Japan anymore. According to Reuters: “capital expenditures in Japan fell 4 percent in the first six months of this year” “manufacturing investment is still contracting” and “companies are investing abroad.” Also “Japanese companies socked away roughly $144 billion in cash” in the last year “bringing their total cash pile to $2.24 trillion.” (“Abenomics speeds corporate investment, but not in Japan”, Reuters)

Can you see how sick and ridiculous this is? Abe has basically launched a program that creates incentives for the outsourcers, the offshorers, the big money banks and the other corporate cutthroat vermin to continue their inexorable search for cheap labor, cheap resources, and higher profits ABROAD!

Abenomics has nothing to do with rebuilding Japan’s economy, that’s just public relations fluff. The real objective is to suck as much lucre as possible out of the public purse before moving on to the next victim. And that, my friend, is just the way this stinking system works.

MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. Whitney’s story on declining wages for working class Americans appears in the June issue of CounterPunch magazine. He can be reached at fergiewhitney@msn.com.