Is “Abenomics” producing a revival or a bubble? The jury’s still out, and probably will be for some time, but Shukan Post (June 14) fears the worst. It sees prices rising but not salaries. What can that portend, it wonders, if not that dreadful-sounding word “stagflation” – soaring prices in an economy that continues to stagnate?
A lot of the numerical indicators look good, so far. Japan seems to be moving again after two “lost decades.” Stocks are generally up, the yen is down, business leaders are optimistic, companies have started hiring again.
But for the average citizen, Shukan Post sees only hardship. The rise in prices of everything from utilities to toilet paper, food to furniture, necessities to luxuries, has already begun and will accelerate through the summer. The cheap yen is excellent for exporters, but Japan imports massively too. It’s a trade-off whose ultimate impact is, one concludes from widely varying predictions, unpredictable.
The magazine offers a wide-ranging survey of recent sudden price increases. Bread: up 2 to 6%. Pasta sauce: 9 to 11%. Mayonnaise: 6%. Canned tuna: up to 345 yen from 330 yen in April. A McDonald’s 100-yen Mac is now 120 yen. Kaitenzushi has spiked from 94 yen a plate to 105 yen.
Trivial stuff, item by item, and yet it adds up. The rich won’t mind so much, but they too are affected: Louis Vuitton bags, to cite just one example, are up on average 12% since February.
An across-the-board price rise is of course what "Abenomics" was designed to achieve, so we should be celebrating, right? Deflation stymied the Japanese economy for two decades. Higher prices signal recovery. That’s the theory. But what if in fact it doesn’t work that way? There’s no guarantee that it will, and some experts see disturbing signs that it won’t.
“International grain prices have been rising for the past year,” observes economic journalist Hiroko Ogiwara. “Until recently, the high yen kept domestic grain prices down. Now, with the yen down, that no longer applies ... and if grain is expensive, so is animal feed, which drives up the price of meat.”
Similarly with imported oil and gas – necessary in increased quantities with all but two of Japan’s nuclear reactors shut down. The low yen means more expensive fuel, which leaves few corners of the economy unaffected.
Shukan Post sees another problem with textbook "Abenomics." The low yen was supposed to fuel Japanese exports, whose surge would ripple through and animate the entire economy. Exporters are indeed posting higher net profits – but only because, the magazine says, of a more favorable exchange rate; not because they have suddenly started out-innovating and out-selling their foreign competitors; on the contrary, the magazine complains, they haven’t, so their slightly rosier situation has failed to spread to other sectors.
To return to the question we began with: in Shukan Post’s view, the answer is: It looks like a bubble. Meanwhile, it reminds us, next April the consumption tax is due to rise to 8% from 5%. “When that happens,” it concludes, “unless things change, we’ll be getting hit from all sides.”© Japan Today