Can Abenomics save the Japanese economy? (Click the graphic to see a larger, clearer version.)

Here’s a useful “infographic” as they’re called on Abenomics, produced by investment group Saxo Capital.

abenomics

Read the whole thing at Abenomics, Shinzo Abe, Bank of Japan Infographic – Saxo Capital Markets.

The main points:

  • How does Abenomics work?
  • Structural reforms key to Abenomics success
  • Abenomics lifts consumer sentiment
  • The dangers of Abenomics

And a few excerpts. These should be read in conjunction with “This Inflation is Supposed to be GOOD for Japanese Workers?” which I’ll comment on in a minute. As the mainstream seem to be harping on how “fresh” and “exciting” Abenomics is and how it has led to a surge in the Japanese stock market, I’ll focus here on some more sobering, long-term aspects of it.

  • For Abenomics to succeed, Japanese households will need to reverse the recent deflationary trend of excess saving and encourage consumers to spend more.
  • Further problems await Japan: the unsustainable ratio of the elderly to the working population, fallout should fiscal stimulus fail, and snowballing costs for imports.
  • Abe’s structural reforms carry with them several risks. The domestic agriculture sector could suffer from increased marketplace competition should tariffs on imports be removed. Any agreements with the TPP would mean greater dependency on government support among Japanese farmers, adding a further load on finances.

Read the whole thing at Abenomics, Shinzo Abe, Bank of Japan Infographic – Saxo Capital Markets.

Now, are Japan’s workers all excited about inflation and Abenomics? Wolf Richter writes this article on Zero Hedge. “This Inflation is Supposed to be GOOD for Japanese Workers?” Key points:

  • The Japanese Statistics Bureau just reported incomes and expenditures of households with two or more persons. This is by far the largest category of households in Japan. Due to the cost of housing in large urban areas – and due to remnants of tradition – a large number of singles live with their parents. This category is further divided into “workers’ households,” “no occupation” households, and “other” households.
  • Incomes of the all-important “workers’ households” rose a measly 0.1% from a year ago to ¥482,684. In nominal terms. But adjusted for inflation – yes, here is where the benefits of Abenomics are kicking in – incomes fell 1.3%. Disposable incomes fell 1.4%. The details were ugly: “Current income” (salaries and wages) dropped 1.2% and “temporary bonuses” plunged 19.5%. Income from self-employment and piecework plummeted 20.8%.
  • Spending rose a scant 0.4% in nominal terms from a year ago – but adjusted for inflation, spending fell 1.0%.
  • And this despite rampant frontloading of big-ticket purchases. The consumption-tax hike from 5% to 8%, to take effect on April 1, is motivating households to buy big-ticket items now and save 3%. It has turned into a frenzy. Durable goods purchases, the primary target of frontloading, jumped 40.4% in October from a year ago. While it’s goosing the economy now, it will create a hole starting next spring. Japan has been through this before [w]hen the consumption tax hike from 3% to 5% was passed in 1996
  • frontloading of a few big-ticket items is hitting day-to-day expenditures.
  • This is the benefit of inflation without compensation! A process that ever so slowly hollows out the middle class and pushes the lower classes deeper in the quagmire. It’s hurting workers and consumers. It’s constraining the real economy. Yet, holders of assets that the central bank inflates into the stratosphere benefit.

Doesn’t look good, does it, boys and girls?