politics

Japan's battle with pandemic may mark end of Abe's fiscal experiment

42 Comments
By Leika Kihara and Tetsushi Kajimoto

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© Thomson Reuters 2020.

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42 Comments
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The BOJ will buy government bonds and the government will send the people .....two masks?

12 ( +13 / -1 )

The government's stimuli and economic aid. They're designed for a rapid "V" recovery. Everything now depends on the world economy. It's the downside of living in an interconnected world.

1 ( +3 / -2 )

From my understanding, most of Abenomics limited success was due to reformed immi policies. Now that those are in jeopardy, its back to the 3rd arrow that was never used because it upset too many. Instead, I expect to see more nationalism and nutters who will once again seize this opportunity to send Japan back to its recluse state.

0 ( +4 / -4 )

Abe’s 3rd arrow went straight to the crotch

9 ( +9 / -0 )

This telling of the Abenomics story misses a key point: it was always about austerity or precarity for lower classes and fiscal and monetary stimulation for the upper tier. Not much different than the usual neoliberal trickle down approach. The wealthy could see that with a shrinking and greying population, the pie was shrinking and Abenomics is the deceptive name used to disguise a battle for a larger slice.

While the increased regressive consumption especially hit the unemployed and working poor, the progressive national tax was being reduced for those with higher incomes and growing wealth.

A lot of the government spending can be classified as corporate welfare. Basically perks for huge corporations. The move to increase defense spending and allow weapons sales abroad is a good example. Of course there is the Olympics, a huge payout of tax money for the construction industries. Quantitative easing was a way to juice the market and enrich the investing class.

There was "structural change" mainly on the labour side, that allowed for more contracting out and a growth in predatory worker outsourcing businesses. At the same time, the myriad governmental barriers to entry are still there, meaning it's hard for people with creative ideas and energy to start up and remain in business. Stats show that small and medium sized business pay a higher tax rate than larger corporations as they are granted far fewer deductions.

The virus crisis exposes Abenomics as traditional class struggle, because with mass unemployment and small business crashing and burning, we see clearly how reluctant the Abe government is to step in and really help those who need it. Rather, in the details we can see this is another opportunity to use stimulus to transfer public funds to the ever better off.

27 ( +30 / -3 )

Excellent post, warispeace. Thank you. Informative and very well written.

10 ( +12 / -2 )

what was his fiscal plan anyway? raise taxes and send SDF to wars while allowing dairy and vegetable makers to raise prices twice in the last five years? great plan. no incentive to get consumers to spend or make more babies.

if you force companies to let employees take time off, LOWER a price here and there and give tax incentives to spend money it would help the finances and increase the population

5 ( +8 / -3 )

warispeace excellently written!

7 ( +9 / -2 )

Will the virus put an end to Abe's fitful experiment? With his/her "perfect" post Warispeace presents a succinct and cogent analysis warning against overoptimism for the neo-liberal political economy is equally virulent and tenacious. There is only one known antidote (that dare not speak its name).

2 ( +4 / -2 )

Abenomics doesn't exist, it's just a phantom. As Warispeace elegantly explains, it's just traditional class war in a catchy new name.

11 ( +14 / -3 )

Abenomics - a mix of aggressive fiscal and monetary stimulus steps with structural reforms

Better describe as "a mix of aggressive fiscal and monetary stimulus for cronies and large companies with political influence, with promises of structural reforms that never come." Basically a transfer of wealth from the working and middle class to the already wealthy.

3 ( +5 / -2 )

I wouldn't worry about debt so much its in Japanese hands mostly BOJ. With strong currency you can do it over and over again, I mean print money and buy off debt, for example on countries like Africa let's say Zimbabwe it didn't work that well - you can Google why.

The worst part and most dangerous about this situation is that by printing more money you particular screw middle class that saved money for long time. Rich will always prevail, poor people already have nothing so you can't get money from them. So steal money from middle class, take their savings for college, for houses etc.

I'm actually quite happy that this period is coming the end. I was tired that everyone was working for same salary no matter of their skills.

0 ( +2 / -2 )

Abe’s fiscal experiment ! As always the comments are far more interesting, informative and honest compared to the articles and the subjects. Thank you, now I understand this economy is built on egg shells

4 ( +6 / -2 )

So, is this pandemic a way of trying to save face and make people think he was onto a winner with his 'experiment'?

5 ( +7 / -2 )

Abenomics created uncertainty fiscal experiment it should be called abecollapsized, now with covid completely Abehazardics. Politic failure and our fight continuously on the way. Well, the world is, not only Japan.

3 ( +3 / -0 )

Helicopter money is the worst case scenario for the government. That’s why they’re typically trying to avoid this at all costs. Unfortunately, this is unavoidable realistically, unless economy is prioritised over society which everyone would be disappointed over. Wouldn’t be surprised if chosen by Abenomics though...

1 ( +1 / -0 )

Whether we are stuck with Abe or the next clown who comes along, they are all the same.

8 ( +8 / -0 )

QE in reality is counterfeiting! Central banks are still getting away with it! No doubt Abenomics was fundamentally based on this fake economic policy!

3 ( +3 / -0 )

"The government and the BOJ were complacent. They're responsible for this mess."

Who is responsible for voting for the government and not forcing them to fix public finances?

0 ( +1 / -1 )

particularly dangerous for Japan given its 1.13 trillion yen debt pile

That should be quadrillion, not a meager trillion, no?

"Crisis times like now are exactly when we need to deploy helicopter money," said Shoji Nishida, a senior ruling party official who has regular interaction with Abe. "Fiscal reform should be thrown out the window."

Agree with the first part, but government incompetence is evident that they never had any fiscal discipline when times were better.

You are supposed to save your firepower for when the crises strike, not every single year so you can get yourself elected.

1 ( +2 / -1 )

A lot of the government spending can be classified as corporate welfare. 

Keeping things in perspective, as the article notes: “debt-servicing and social welfare costs together make up 60% of Japan's annual spending, compared with just 5% for education.”

Corporate welfare should be slashed, but that will mean lost jobs, and no less spent on social welfare.

The scale of Japan’s debt problem is far, far greater than anyone’s pet peeves with corporate welfare.

0 ( +2 / -2 )

This telling of the Abenomics story misses a key point: it was always about austerity or precarity for lower classes and fiscal and monetary stimulation for the upper tier. Not much different than the usual neoliberal trickle down approach.

Shinzo just borrows ideas from any British and American President that he remembers. Abenomics is just Reaganomics rehashed!

4 ( +6 / -2 )

@warispeace excellent post and can I just add.

PM Abe is not an economist. He is, was and always will be a nationalist first.

4 ( +4 / -0 )

PM Abe is not an economist. He is, was and always will be a nationalist first.

Reagan also was a nationalist and a racist!

4 ( +5 / -1 )

Reckless,

Love your comments on JT.

Always spot on.

Has your son left self-isolation yet?

I remember you said you went to pick him up in a rental car.

The reason I remember it is because my daughter is studying at UCLA and she had the opportunity to return home during the same window as your son but she chose to stay because she loves it over there and I,personally,cannot trust the Japanese government especially after being here in 3/11.

4 ( +4 / -0 )

Abenomics was dead and a disaster before it started, and got even worse later. The saddest part is that now he's just going to blame the failure on Corona and insist he can't resign so as to "ensure a fair, stable, and transparent government that will lead to economic recovery" until he gets article 9 changed.

1 ( +4 / -3 )

Peace is war?

0 ( +0 / -0 )

Pensions and other payments that benefit the retired and such entitlements that were granted before any of us were even born will need to be rethought.

Indeed the systems need a rethink to be made affordable even with aging population dynamics.

A transition period towards such a system would be a possibility, but really need to get started on this ASAP.

-1 ( +0 / -1 )

OK, debt hawks, this is the reckoning. For years, you’ve been telling us that Japan’s fiscal spending and BOJ stimulus were “unsustainable.” Well, were about to go waaaay beyond that point into meltdown levels with the latest money injections.

According to your narrative,. that means sovereign default, bond market meltdown, skyrocketing interest rates, hyper-inflation, etc. Stay tuned, it's coming very, very soon!

Right? Well, if those things don’t happen, and then if and when the virus fades and Japan returns basically to pre-virus economic performance – strong yen, low rates, low inflation, albiet with a bigger national debt, then, simply, you will be wrong. Wrong big time, as in your basic assumptions about money and debt in a country that borrows from itself will be fatally flawed.

If that is the case, I expect all of you to ditch your worldview once and for all and find one that is line with reality.

2 ( +3 / -1 )

Experiment? Is that what it was?

And then, what are we, Abe-san? Guinea pigs?

3 ( +3 / -0 )

Maybe it's time to find a patch of land, buy it and become a self-sufficient Farmer ?

Anyone doing that at the moment and wish to share your experiences todate ?

0 ( +0 / -0 )

Well, I don't think Japan's Communist party will make any headway, even after disowning connections to the CCP. I do, however think, Abe is on his way out - but who will replace him, is anyone's guess - Koike ?

Only the Japanese people/passport holders can help make that decision.

0 ( +0 / -0 )

One thought... relating to this support for big Business:

https://english.kyodonews.net/news/2020/04/11148434d408-coronavirus-outbreak-latest-april-10-2020.html

It would be wishful thinking here, were the Government to be smart enough to place a condition upon the release of funds to those Big Businesses ; For example - all staff should be retained, and to be fair, should be paid equally, the same amount as the lowest paid worker of that Company - (and that includes the CEO too). Dividend payments, should also be suspended, and the Government will take an ownership stake in that Company as a % ratio of funds given to the Company in terms of % of outstanding Capitalization of that Company - this should then reward the Government & the Tax Payer after the crisis has ended with value/return as those Companies that it supported as and when they start producing results. Now, that I feel... would be smart use of tax payers monies.

Of course, sadly, something like that, will never happen - in any Country.... I wonder why though ?

Tax payer helps you... to survive as a Company, and to keep the Employees you need to run your business. What do we get in return ? A stake in your Company, as a shareholder - maybe even, if only as one with non-voting rights...

1 ( +1 / -0 )

I disagreed. Abenomics was actually successful....For foreign investors and a small clique of neoliberal Japanese capitalists at the peril of Japanese people and Japan itself. Years of stimulus spending and monetary printing from Koizumi to Abe completely liberalized the Japanese economy in the most favorable for the capitalists. After the Plaza Accord and Japanese assets bubble crash, Japan's economic dominance declined so greatly that the deflationary nightmare became permanent to this day.

Koizumi and Abe probably saw there was no other way of saving Japan. Of course, the old boys within LDP are old school neoliberals trained in the United States, students of Milton Friedman and Reaganites. The only way is to salvage whatever left of Japan and sell the deflationary assets to foreigners. The monetary policies try to inflate the Yen currency at an acceptable level that would attract foreign investors. The fiscal policies try to make Japan attractive enough for foreigners to work and invest. Also, the fiscal policies make sure that Japanese workers are capable enough for the international ways.

From this perspective, Abe and LDP have sold the nation for the Americans, Europeans, Arabs, Chinese and more. Neoliberalization of Japan is almost complete if it wasn't for the Covid-19 Pandemic. Tokyo Olympics 2020 intends to portray Japan as an attractive destination for foreigners to work and pour their capitals into the country. Apparently, it is failing.

-1 ( +0 / -1 )

A lot of the government spending can be classified as corporate welfare. Basically perks for huge corporations. The move to increase defense spending and allow weapons sales abroad is a good example. Of course there is the Olympics, a huge payout of tax money for the construction industries. Quantitative easing was a way to juice the market and enrich the investing class.

Another big winners and possibly the most dominant forces in the future = Foreign investors.

Shinzo Abe has been largely making the country receptive towards foreign investments via relaxing strict rules. That was how Nissan was owned by the French or Sony was owned by the Americans and other Western investors. Softbank is clearly the next target of American hedge funds and equity firms.

If Americans are taking over Japanese economy, expect the national insurance program or other socialist perks of Japan being gone in the next decade. No more permanent employment or unions, Americans can just fire any Japanese worker or liquidate any Japanese company to make massive profits. Abe administration created a wormhole for these people coming into right now. All of these that I just said are happening all over Japan.

-2 ( +0 / -2 )

Maybe it's time to find a patch of land, buy it and become a self-sufficient Farmer ?

Anyone doing that at the moment and wish to share your experiences todate ?

Actually yes. Still in phase 1 though (remodeling phase). New vapor barrier, subfloor, double pain windows, R19 fiberglass insulation (imported), tearing out the stairs right now making it longer with bigger treads.

1 ( +1 / -0 )

Well, I don't think Japan's Communist party will make any headway, even after disowning connections to the CCP. I do, however think, Abe is on his way out - but who will replace him, is anyone's guess - Koike ?

LDP is in charge because the Americans want them in charge. The Japan Communist Party would pursue a similar path of Vietnam Communist Party. Multipolar diplomacy. JCP would try to formulate a relation with Russia and China under an effort of setting the country free from the American domination. CIA would not want the JCP because they would jeopardize the historical multi-billion dollars investment of turning Japan into an unsinkable carrier. An independent, multipolar Japan is never the plan that American overlords have in mind.

JCP could win the elections if they do not face the American neocon ostacle.

-1 ( +1 / -2 )

Actually yes. Still in phase 1 though (remodeling phase). New vapor barrier, subfloor, double pain windows, R19 fiberglass insulation (imported), tearing out the stairs right now making it longer with bigger treads.

Are you doing this in Japan? If so, has it been much of a pain to get modern building materials imported here?

I ask because I am loathe to buy a Japanese house given they are the equivalent of tar-paper shacks.

0 ( +0 / -0 )

Are you doing this in Japan? If so, has it been much of a pain to get modern building materials imported here?

Yes and Not really. R19 fiberglass insulation and water based primers have all arrived. They won’t ship oil based products though. Of course these days it could take awhile. Plan ahead.

I ask because I am loathe to buy a Japanese house given they are the equivalent of tar-paper shacks.

No doubt. You have to be prepared to gut the place and start over. I’m lovin it! FYI Just bought a $400. Makita impact driver. They blow away regular drills. We are doing everything ourselves and NO reform company. They will rip you apart. It’s odd we can’t get private contractors so easily here. Rules are you can do anything inside your home, but once you put a roof on anything over 3 square meters outside the taxes and inspectors come. Glad to help if you roll the dice.

invalid CSRF

0 ( +0 / -0 )

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