Merkel, Abe differ on how to fix world economy

Abe—known for his “Abenomics” attempts to stimulate economic growth through increased public spending

I'm not sure how he expected people to spend when he increased the sales tax. I'm on team Merkel.

With the many refugees we took in last year, we saw a boost to domestic demand which, in my view, was a good contribution to the development of the world economy

Sorry Merkel, this makes no sense. If a boatload of people moved from point X to point Y, they also moved all the "demand" from point X to Point Y.

And since all of these "refugees" didn't show up with sacks of cash, all that "stimulation" was EXACTLY like Abenomics, print a bunch of money and spend it on a bunch of stuff,

Unless you're talking the frequently disproven "broken window theory."

Here's to hoping that it's just talk.

There are homeless people sleeping at Shimbashi station who have better ideas than these two on how to "fix" the world eeconomy.

"With the many refugees we took in last year, we saw a boost to domestic demand which, in my view, was a good contribution to the development of the world economy..."

The lady is certifiably crazy and needs to go.

Abe stressed the importance of currency stability, adding: “We are watching currency markets and if needed we need to act.”

He is correct. If US wants to penalize Japan as currency manipulator for wanting currency stablility, it would be US that is a currency manipulator.

@Wontand -- you do realize that the sales tax rate in Germany is 19%?

The last thing the world economy needs is even more government spending after the failure that has been.

Abe talks and talks but if he wants to implement productivity boosting structural reforms, it's not like he needs G7 to rubber stamp his getting his own act together. By all means lead the way by actions, rather than endless talk.

@Seapig I didn't know that the German sales tax was so high, but that not what I was agreeing with anyway. I see Germany's intake of refugees as having the same effect as a public works project. Money will have to be spent to shelter, clothe, feed, etc. the refugees. Some of it will come from donations, but some of it will also have to be bought. All of this will require jobs to execute.

None of their dumb ideas will help the economy. They entirely miss the point that the situation is because the banksters run the economy and not the politicians. Further the politicians take taxes and spend them on themselves so its got nothing to do with stimulus and plans, they are just plain wasting what they are taking from us.

I always greatly enjoy readng reports from the locals (ie Kyodo) vs. the globals (ie AFP, Reuters, AP), and how they present the Japanese leader and his counterparts in other countries.

World leaders disagree, that se can be sure of. If they didn't, what would be the need for different countries? Abe's ideas (even though he tries to portray himself as a man of action) are at a standstill. I don't believe Japan really knows what to do anymore. They try to intervene, weakening the yen, only to helplessly watch as it strengthens. Germany has enough power not to be intimidated or impressed by Japan's economic might, and Merkel knows this. It's interesting to see.

The sales tax (that so many of you JT commenters believe is the origin of all evil) is not the problem. 8% vs. 5% doesn't really make any difference. Not even raising it to 10% would. If something, I think it's necessary for Japan. The problem instead is wages that are too low, 34% of the population doing the arubaito routine, and goods that are overpriced. Japan should take a listen to other economies instead of just trying to appear strong and go on in the same tracks as since the 60's.

"debilitating decline in consumer prices that has suppressed spending for years" this does not make any sense. Decline in consumer prices is because the consumer goods are made cheaper in out of Japan relocated factories but that means the consumers can buy more with their money. The problem is that more import and less export as well as less quality employment decreases the buying power and in the country that depends more and more on distribution than production that is a cause of general living standard erosion. World economy is over regulated and run by the governments controlled by the banks instead of being driven naturally by the producers and consumers. Unlike manufacturing, goods transfer, distribution and public utilities, Banks are no value added entities, they are very aggressive leaches that thrive on nonexistent money manipulation and skim off the biggest part of the product of the actual producers and consumers. Getting rid of the banking system would free the world of the most negative element of world society.

I'm OK with stimulus spending. But indiscriminate stimulus spending without a strategic purpose and raising sales taxes far too high are not the answers. How about also taking a scalpel to Japan's bloated budget and cutting some wasteful spending ?

Abenomics = Stimulus spending in their own pocket and raise taxes for everybody else, will hardly benefit the world.

The sales tax (that so many of you JT commenters believe is the origin of all evil) is not the problem. 8% vs. 5% doesn't really make any difference. Not even raising it to 10% would. If something, I think it's necessary for Japan. The problem instead is wages that are too low, 34% of the population doing the arubaito routine, and goods that are overpriced. Japan should take a listen to other economies instead of just trying to appear strong and go on in the same tracks as since the 60's.

Quite a number of professional economists including at least one Nobel Prize winner are on record as saying raising the sales tax now would be singularly dumb. Not saying they are right, just saying that opinion is divided.

Japan has a large fraction of people working part time for a number of reasons including a high labor force participation rate by women who do not want full time jobs and people past the retirement age who want some income but not a full time job.

I don't know what goods are overpriced in Japan. I spend part of each year in Britain. Just about everything except meat and dairy products are similar in price or more expensive in the UK. And, VAT (aka sales tax) is 20% in Britain.

What economies should Japan listen to? Southern and eastern Europe is a mess. France isn't doing well. The so called BRICS countries are in a bad way, especially Brazil and Russia. Real income for median income families in the US has been flat for decades and actually declined in the last couple of years. Only families with high incomes (100,000 and up in inflation adjusted terms) have seen an improvement.

tinawatanabe: "He is correct. If US wants to penalize Japan as currency manipulator for wanting currency stablility, it would be US that is a currency manipulator."

No, it's a syllogism from a person crying foul because they are caught in the wrong. If Japan is manipulating currency and are called up on it, and stopped, it is NOT the person who calls them on it manipulating currency; they are stopping the nation in question from doing so.

What you're suggesting is like saying a policeman who catches a criminal in the act of committing a crime is somehow therefore the criminal. You can comment however you like on the apt analogy of the US as world police, but it wouldn't stop Japan from being the criminal in currency manipulation. It would also not be the first time Japan did it, either.

Abenomics has been a complete failure, save for some companies making a bigger buck in the short term, and yet the man is still here pushing it (but not using the term "Abenomics" quite so much). Then you have Merkel, who's country is experiencing growth in more ways than one (another article today points to Japan's baby rate dropping for the 35th straight year!), saying she'll stick to what works, and Abe is begging again for other nations to support Japan's currency manipulation 'for the sake of the world'.

The man is a failure.

" Merkel suggested Germany was already doing enough, pointing to the extra economic activity brought by the arrival of one million refugees and migrants last year. "

That has got to be the mother of all stupid euphemisms. Massive use of taxpayer more for illegal welfare-payments is now "extra economic activity"?? Good grief.

Germany adopts a policy of protecting its own industrial technology and prevents the hollowing-out of domestic industry. It also benefitted from cheap euro thereby increasing the ratio of export to GDP at 40% (Japan’s being at 11%) and bringing about huge trade and current account surpluses as if they entered in its Fourth Reich. It sticks to the principle of fiscal balance which German Constitution obliges them to keep. They sell goods to near sovereign default countries in Southern Europe but do not financially support them. Even when the global economy is slowing down, Germany keeps its austere fiscal policy unwilling to expand its domestic demand. Abe may want to suggest to Ms Merkel that too good a model performer can be a disservice to grasshopper neighbors.

Why all these pols and central bankers think they can "fix" the world economy is beyond me. Its not a machine. and anyway all previous attempts to "run" and economy or "plan" for economic growth or "fix" these things ended in abject failure.

abe's had half a decade to make improvements. nothing he has done has succeeded, except for his militaristic policies and destruction of relations with japan's neighbors.

agree with smith, abe is a complete failure and it's backed up with hard numbers. he needs to go.

smithin, If Japan is currency manipulating, why is the yen high? why does US know Japan was manipulating unless US was manipulating to make the yen stronger but couldn't achieve the intended strength?

you do realize that the sales tax rate in Germany is 19%?

This probably makes Abe salivate with greed at the thought of how much money he could spend on his cronies if Japan's rate was the same. Probably has wet dreams about it too.

While Abe made his characteristic pitch Merkel was rather charismatic?

Anyway G7 means 4 Europe, 2 America, 1 Asia.

Tinawatanabe

I strongly agree with you,Yes Abe is right when saying"we are watching currency markets,and if needed we will act" yes Abe,its needed needed urgently and badly now to act.Now means now!What does it mean on earth,yen goes up as a rocket,while what should happen is the opposite?!i prefer to talk in an objective technical way.Yen as i indicated several times before-according to technical analysis-will reach level of 100 yen against Dollar in the near future,once it breaks vibonacci ratio level of 106.63,already happened this week.Economists agreed before down level of 115 means beginning of hardship to Japan economy,now its below 106,not 115,its clearly and simply catastrophic situation.BOJ must intervene,no other solution and urgently.All other suggestions,ideas,or opinion wont be a substitute to intervene,simply because export sector is the biggest and most important source of Japanese income.i would appreciate if i can read an objective technical specialized talk,not just colorful ideas.i would appreciate as well if those who attacks Abe and his cabinet would tell us in a realistic way,what should be done in such a situation,but again,i dont wanna read romantic opinions has nothing to do with reality or facts on the ground.Abe is doing good job as usual.ALL the best for him in his mission in Russia.

If Japan is currency manipulating, why is the yen high?

Tina, the yen was at ~80 to the dollar before the LDP got elected, and is around 106 now.

Perhaps you are letting Taro Aso do your math for you, because a decline of more than 30% is the very opposite of "high".

James Burke,

I guess history might prove me wrong, but I seriously believe abe's (and his backers) first priority is to change the constitution into a 'Japanese' one. To be able to get away with that, he need a populace believing in thir country and their society being able to stand strong and powerful. A successful economic upturn would certainly help with that.

G7means 4 Europe, 2 America,1Asia

tinawatanabe: "smithin, If Japan is currency manipulating, why is the yen high?"

Add to ThonTaddeo's easy brushing aside of your comment the fact that when the government INTENTIONALLY, and despite denying it at first, devalued the yen so that it became even weaker than it is now, for the sole intent of increasing exports and despite the cries of importers and mid-sized businesses that it hurt.

"why does US know Japan was manipulating..."

EVERYONE knows it was manipulating currency, that's why it was so funny when they turned around and told China not to do EXACTLY as it had just done. Why is it not as high? Because the BOJ and government failed, despite their manipulation. Now they are preparing to do it again and asking other governments to 'cooperate'.

You may be letting the government manipulate you while buying into everything they say, tina, but the rest of the world knows Japan is manipulating and won't put up with their "please cooperate or it'll be regrettable" bull that they force on people domestically. And don't fall back on your "Japan is the victim of bullying" garbage either, please.

ghoneim - interesting comments.

Could you elaborate a little on the success stories of Abe and his -nomics. Especially a few facts and data showing how Japan has improved markedly over the last 4 years and in particular how the ordinary good citizens of Japans lives have prospered?

Thon taddeo

Am afraid your talk about 30%down and opposite high up,has nothing to do with technical analysis in any way.My question is like that,if Japan economy is troubled,how comes yen is high rocketing?it should be hurry on down down down,but is this the case now?sure not,ok.What does it mean?simply,mere speculations.What should be done in such a case?sure Government should,must,and have to intervene,this is not for discussion. Tina didnt let Taro Aso do math for her,but i wonder who made your math,because it has nothing to do with economy or stock markets.

Take more refugees to boost demand - Merkel.

browny1

I mentioned,Abe is doing good job as usual,on purpose,because i was pretty sure,many posters will forget about what i said,and just concentrate on whatever about Abe,hunting as usual and attacking,just to attack,but non-answer my posts in an objective technical way as i did,simply they have no answer.ok,i understand that.,can see ABE COMPLEX as well.You asked me to give example of Abe good job,yes?i would appreciate as well if you can answer objectively and technically my post,if you have an economic background,but if not,then its fair enough.

Time to stop rewarding failure with endless trolling of taxpayer dollars/yen.

ghoneim - thanks for your reply.

No I don't have a background in economics so I won't offer any insider suggestions. But I'm a willing listener and learner - so please tell me what you think Abe has got right (technical is ok - I like learning) and how the people of Japan are benefiting from his programs?

I live in regional Japan - as do most Japanese - so what goes in Tokyo & major urban-opolises does not necessarily go for the other 80+,000,000 of us.

Thanking you in advance.

does anyone know what MONEY really is and how its been created? if you would we wouldnt have a financial system by tomorrow morning!!!

endless taxpayer bailouts effectively make the economy a nationalized public asset, and profits should go back to the taxpayers not the companies or CEO's who want it continued

@smithinjapan : you are both wron and right about Germany. But as always your look is very one sided. What Germany is doing now in funnel huge sums of government money out into the country, this helps the country for maybe a year or two. After this they will crash and burn, Denmark already tried the same but stopped before it became critical. Now then take a look at Germany's rapes and murder statistics which is going up like a rocket. I know a lot of companies in Germany, and all of them are going through a slow death. I'm not saying Abenomics works, I'm just telling you Germany is standing on a knifes edge.

Merkel is an accomplice in creating the refugee crisis, only that the Americans can run away and she has to swallow it.

Then you have Merkel, who's country is experiencing growth in more ways than one (another article today points to Japan's baby rate dropping for the 35th straight year!), saying she'll stick to what works ....

I've never heard of a "baby rate." It is the absolute number of births that has gone down. The fertility rate (average number of children born to a women) is 1.42. That is the same as Germany and Italy and higher than more than a score of other countries. Moreover, the fertility rate has actually come up from a low of 1.26 in 2005.

From one of many reports on Germany in mid-2015.

Germany’s birth rate has collapsed to the lowest level in the world and its workforce will start plunging at a faster rate than Japan's by the early 2020s, seriously threatening the long-term viability of Europe’s leading economy.

http://www.americanthinker.com/blog/2015/06/no_babies_no_germany.html

The birth rate in the citation above is the "crude birth rate." Germany is lower than Japan. The fertility rates are essentially the same.

According to the New York Times (2016 April 6):

Now, Germany, which accounts for the largest share of the European economy, is looking like the laggard. Compared with the economies of other countries in the region, Germany’s has been more deeply tethered to emerging markets. ,,,, Against that backdrop, the country’s export engine is sputtering, while business confidence is eroding.

http://www.nytimes.com/2016/04/06/business/international/german-economy-once-europes-leader-now-looks-like-laggard.html