politics

Abenomics struggles to deliver public works boom

51 Comments
By Antoni Slodkowski and Junko Fujita

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51 Comments
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Building stuff isn't the answer to recovering the economy, maybe after WW2 it was effective, but this isn't the Japan of the 1950's and 60's.

9 ( +12 / -3 )

We could all see this coming.

5 ( +8 / -3 )

Supposing you had a little shop, with a small apartment above it where you live.

The shop used to do well, but a new supermarket opened a few streets away and, what with one thing and another, business has dropped off considerably.

So, in order to get the shop back to solvency, you decide to redecorate the living room and put in a new bathroom in your apartment above the shop.

Is it going to make a difference?

Is it going to bring the customers back in droves?

Hardly!

This is what new tunnels and bridges are going to do for us?

Abe's elevator only goes in one direction . . .

Straight DOWN!

7 ( +10 / -3 )

There was quite a lot of euphoria over Abenomics which raised hopes for the future of the Japanese economy. It seems that euphoria (as quite a few international economic experts predicted) was built more on illusion than substance. From April, sales will plummet from the highs of February and March, the full disadvantages of a very weak yen will become more and more apparent, and all the present nationalistic rhetoric (intended to stimulate and unify the masses through stirred-up national pride) will eventually be seen to be the own goal that it is really is. There will be prices to pay on various levels for taking this path, but apart from anything else, the reality is Japan just cannot economically afford to alienate its neighbors. Sorry Mr. Abe and Mr. Aso.....it's 2014 not 1934.

8 ( +11 / -3 )

Wow! Whodathunk that Abe's Keynesian experiment would fail so extraordinarily? The only thing he has succeeded in doing is currency devaluation and setting up the entire economy for a huge crash accelerating on April 1st. In the future that date may be known as Abe's Day, similar to UK's Guy Fawkes Day, complete with burning effigies.

5 ( +9 / -4 )

zoot, the yen is not week. do some research longer than going back a couple of years.

0 ( +4 / -4 )

So, in order to get the shop back to solvency, you decide to redecorate the living room and put in a new bathroom in your apartment above the shop.

Putting it ALL on your already overextended credit cards.

5 ( +5 / -0 )

Abe's elevator only goes in one direction . . .

Straight DOWN!

Wow, you're so... deep! Your analysis of bussiness which you never had is so... superb! What a great guy and visioner who wastes his entire days on the Internet writing how bad Japan is or how bad it's economy is! According to you it should be down for a few years now, exactly from the time when you started your Internet 'career'.

-9 ( +4 / -13 )

" Wow, you're so... deep! Your analysis of bussiness which you never had is so... superb! What a great guy and visioner who wastes his entire days on the Internet writing how bad Japan is or how bad it's economy is! According to you it should be down for a few years now, exactly from the time when you started your Internet 'career'."

Textbook ad hominem.

5 ( +8 / -3 )

“Wages and material costs are rising, and that’s why we failed to attract bidders the first time we tried,” said Koji Ishii

I see more the construction cartel to align in not bidding under a super profitable offer. Open the bid to foreign companies and let see. Waste of tax payer money again.

4 ( +4 / -0 )

Ah, cry me a river Abe! Abenomics has always been destined to fail and fail at the expense of the middle class. If he wants to increase public works he has to support the public first!

3 ( +5 / -2 )

"Whodathunk that Abe's Keynesian experiment would fail so extraordinarily?"

Did you read the story? The reasons for the Tsukiji problem is that "material costs and wages are rising." Let's see, inflation and higher wages...the original goals of Abenomics! The other "problem" is the labor shortage, and that's thanks to pick up in the recovering economy.

What's more, Japan's economic growth is the highest it has been in three years. Now this is an odd "failure," isn't it.

-4 ( +3 / -7 )

Great metaphor, Bertie!

2 ( +3 / -1 )

@JeffLee- smoke and mirrors is all I have to say.. But hey believe what u want..

@Chenchan- Do u know Bertie personally? I doubt u do so who are u to pass judgement on his character?!

4 ( +7 / -3 )

In just about every other advanced country's economy, when construction cycles slow down, workers are laid off. I think there are two things too many of you are missing: the comments, “It’s very risky to employ people in Japan. The lifetime employment system means you can’t fire them easily,” and, "about a fifth of all construction workers were over 60 years old." Those are the real destroyers of private industry stimulus in Japan. Both are solved with relatively simple policy changes, certainly not more public debt.

2 ( +3 / -1 )

It is far from over, funny to see those quick to jump on the passing doomsdayers bus. As Jeff says higher wages and material costs were both goals of Abe's so I'd say his plan is working just has some by products such as shortages and some sceptical so wont invest in plant and bid to win contracts.

Some problems that can be overcome.

-3 ( +2 / -5 )

Did you read the story? The reasons for the Tsukiji problem is that "material costs and wages are rising." Let's see, inflation and higher wages...the original goals of Abenomics! The other "problem" is the labor shortage, and that's thanks to pick up in the recovering economy.

The reason for the "Tsukiji problem" is one of the main problems Japan has always faced; there are only a handful of construction companies, and like all other large Japanese companies, they are colluding with each other to drive up the bidding.

Funny that after decades of not enforcing anti price fixing laws, the Tokyo government must now take the same dose of medicine the rest of us have been forced to eat.

1 ( +5 / -4 )

@HB714

"smoke and mirrors is all I have to say.. But hey believe what u want."

The information I cited is the info reported in the story as well as published data. Um, hello?

"Great metaphor, Bertie!"

Indeed, simplistic homespun metaphors are always the best way of gaining complete comprehension of complex issues.

1 ( +3 / -2 )

“It’s very risky to employ people in Japan"

This is foreboding...

3 ( +3 / -0 )

Thumbs up if you saw this coming.

2 ( +3 / -1 )

Shortsightedness is a hallmark of bad economics, as is clearly seen in Abenormalnomics.

" The reasons for the Tsukiji problem is that "material costs and wages are rising." Let's see, inflation and higher wages...the original goals of Abenomics! The other "problem" is the labor shortage, and that's thanks to pick up in the recovering economy. What's more, Japan's economic growth is the highest it has been in three years. Now this is an odd "failure," isn't it."

The inflated material and labor costs may benefit the government in the form of taxes, but the costs are on the backs of the working class(the same that liberals proclaim to help) who pay for it all. As for the labor shortage, there's the combination of shrinking workforce (graying population and nonparticipants) and reluctance to do physical work for modest wages. What you see in a massive market distortion.

Moreover, an increasing percentage of public works projects are either starting significantly delayed or not getting off the ground at all. As the article mentioned,

" Japan had to roll over to the next budget 3.7 trillion yen it failed to spend out of the 9.8 trillion yen earmarked for public works in the last fiscal year to March 2013." That means that those funds devalued while in the coffers and now will produce even less result.

"Government-funded construction projects contributed only a third as much to growth in the fourth quarter as they had in the previous two quarters."

Like a sugar high, the law of diminishing returns takes effect.

As any rise in wages will (and are already) lag the rises in prices compounded by increasing taxes significantly, even the near term result is the reduction of average wealth. The longterm result is much uglier.

0 ( +6 / -6 )

Basically there are too many medium sized companies. This raises overheads. A whole bunch of them need to merge. Redeploy those workers elsewhere then open up the construction industry to international competition. Also they should make better use of materials. Japan is obsess with concrete.

-3 ( +2 / -5 )

@ JeffLee - missed that my bad ..

-1 ( +1 / -2 )

Bertie, the little shop's paradigm finally arrived. Everything has a paradigm. Japan will have its won paradigm soon.

0 ( +1 / -1 )

Do u know Bertie personally? I doubt u do so who are u to pass judgement on his character?!

Do you know any of your country or Japanese politician personally? So how can you judge?

-5 ( +0 / -5 )

@ Chenchan- What?????

4 ( +6 / -2 )

"but the costs are on the backs of the working class"

So....rising wages among construction and others workers are BAD for the working class, eh? Well, Jean, what can I say? You've outdone yourself yet again.

0 ( +4 / -4 )

" So....rising wages among construction and others workers are BAD for the working class, eh? Well, Jean, what can I say? You've outdone yourself yet again."

Are you thick? As you quoted me, " "but the costs are on the backs of the working class" clearly referred to the combined costs of inflated materials as well as lagging, but increase labor costs. Pop quiz: How long is the delay in worker wage increases?

1 ( +4 / -3 )

Koji Ishii states, “Wages and material costs are rising . . . ”

Prices are certainly increasing. I see that in supermarkets, gasoline, etc.

But I'm not aware of any wage increases.

I wonder.

Has anyone had a wage increase?

3 ( +4 / -1 )

Bertie, I got a wage increase. It's less the half of one percent for "excellent " performance. Fortunately, my in-country income is sufficient for a modest living. But, for very many they've gotten a 3-5% effective pay cut thanks to Abe's foolishness.

3 ( +6 / -3 )

“Wages and material costs are rising, and that’s why we failed to attract bidders the first time we tried,”

Ummm... I'd say the reason is more likely that Abe promised more construction works and therefore more money for companies, so they know they can sit back and wait for higher offers. If the 'top companies' aren't coming forward, allow lesser known companies to do the job and tell the ones who demand more to stuff themselves.

0 ( +3 / -3 )

@ Chenchan- What?????

This - I can judge people without meeting them based on what they do/write/talk. And why are you so concerned about that user?

0 ( +0 / -0 )

@gogogo Indeed. I would have to agree with you. In addition to that, it is also mentioned in the article that "Japan's construction workforce, is shrinking and aging", which can be considered as one of the few problems that the Abe administration must resolve. Most of us know that rehabilitation is the primary concern in Touhoku region due to the aftermath of the Great Tohoku Earthquake and Keynesian economics might be useful in this matter. My point is that this article somehow emphasizes that the demand for skilled laborers in Japan is slim or even crippled at some sort of way.

1 ( +1 / -0 )

build what is expected to be the world’s largest fish market

They think there will still fish to be sold when they finish building it ?

4 ( +5 / -1 )

So two of the three "arrows" are failing? And a tax hike looms on the horizon. Good luck with that.

3 ( +4 / -1 )

Anybody that has lived in Japan for an extended length of time or has been following Japanese politics and culture knows that, Japan is extremely reluctant to change their conservative and right-winged policies. Abenomocs is based on a 40 year old economic environment that doesn't exist any more. The manufacturing and technogy markets have been taken by other countries. The Japanese culture and industry have refused to evolve to accommodate international trends and, as a result, the Japanese economy is left to wallow in its own exriment. Until Japanese companies realise the only way to survive and to rebuild the economy is through innovation and not through recycling the same old crap. Japan will endure a further degradation into a third world country with a failed economy. They have the man-power and have the manufacturing expertise, but producing the same old shit is it not gonna save their economy.

0 ( +3 / -3 )

The First Arrow hit the heart of Japan. The Second Arrow hit the heart of Japan. The Third Arrow will kill Japan. Banzai! Shinzo Abe! Banzai!

0 ( +0 / -0 )

@zootmoney the yen isnt weak, it still strong, over the last 30years the Yen has only been below the 100yen/$1 for about 5 of those years, 3-4 of those years was because the $1trillion/year US money printing caused the dollar to crash. take away all the US QE and the yen would be around 110-120 level. so on historical levels the yen is still strong!

0 ( +2 / -2 )

The most dangerous thing for any economy is rising wages in the lower tax brackets. The money needs to stay at the top, where it will be spent on large ticket items and services. Abe is turning Japan around, and the more successful he is, the more we will hear the media (and amateur commenters) claiming the opposite.

-2 ( +1 / -3 )

Moving Tsukiji fish market out of central Tokyo to the outskirts of Toyosu is one of the saddest and most short-sighted moves ever. All the usual lousy players are involved. Everyday people who work there, eat, shop, and visit are out of luck. So very, very sad.

2 ( +2 / -0 )

"The most dangerous thing for any economy is rising wages in the lower tax brackets. The money needs to stay at the top...,"

I hope you're being ironic. Mind you, given the bizarre assertions from some of the cynics here, nothing surprises me anymore.

3 ( +3 / -0 )

Will the cost include cleaning up the Toxic Waste ? there are so many important matters Before the government goes on a spending spree for constructing this market.

1 ( +1 / -0 )

Its fairly easy to inject money into the economy. Nothing heroic about that. Deregulation...Also easily done. Announcing structural reforms...No problem... Making them work when you've just embarked on deregulation is a lot harder. The construction cartel in Japan has always been tight. Abenomics means they have even more leverage to be even more selective about the projects they choose. That third arrow isn't going to be landing anywhere near the new fish market any time soon.

1 ( +1 / -0 )

Real reform is breaking through the vested interests that hamper growth with their huge monopolies. Deregulation, not public works projects, is the pathway to economic recovery. This is 2014, not 1954.

2 ( +2 / -0 )

" The most dangerous thing for any economy is rising wages in the lower tax brackets. The money needs to stay at the top…"

Wow. Not related to Leona Helmsley, are you?

2 ( +2 / -0 )

Jean Valjean,

for very many they've gotten a 3-5% effective pay cut thanks to Abe's foolishness.

Yes. That's the story in Okinawa too. No increases, quite the opposite. And since we weren't inundated with huge numbers of people writing, "Well, I got a 20% pay rise, so I'm laughing," I assume that pay rises are probably not happening.

So, why do they say that they are?

1 ( +1 / -0 )

The only people getting a pay rise are government workers.

0 ( +1 / -1 )

gogogo: government workers are not getting a pay rise, in fact civil servants had an 8% pay cut the year before last, allegedly to pay for reconstruction work in the north east.

0 ( +1 / -1 )

Abe should make Bitcoin (or NEM) the official currency. Then we would have a huge boom in the economy.

-1 ( +0 / -1 )

gogogo and Scrote,

Government workers had an 8% pay cut when, in 2012?

Not this year.

Also, government workers get bonuses.

I must say I can never figure that one out.

Profit sharing?

Businesses are hiring more and more part time workers in an attempt to cut down on expenses.

I know many people who have experienced pay cuts and many highly qualified younger people who are unable to find permanent employment.

At the same time, prices are most certainly going up.

If things are getting better, why is there no indication of this?

1 ( +1 / -0 )

Abenomics is dead in the water. Those who marketed its success has already made their money and gone away. Those left behind ; too bad.

0 ( +0 / -0 )

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