Abenomics remains a dumb idea. It has failed.
Rather than admit the stupidity of the idea, Financial Times writer Robin Harding says Japan Will Have to Double Down on Stimulus to Save Abenomics.
Like a man selling ice creams in a snowstorm, Haruhiko Kuroda could not have timed his late January move to negative interest rates any worse. Within a few days of the Bank of Japan governor’s shock decision came weak data on the US service sector, a Mario Draghi pledge of “no surrender” on fighting deflation and a fresh bout of fear about eurozone banks.
Such signs of global weakness quickly overwhelmed Mr Kuroda’s latest bazooka; far from falling, the yen burst out of its Y118-Y125 range to trade at Y114. For the first time since prime minister Shinzo Abe launched his Abenomics stimulus in 2012, he cannot rely on rising foreign demand.
The logic for Mr Kuroda to ease again is powerful. If markets stay weak and the yen stays strong, Japanese consumers and companies could lose their faith in inflation ever reaching 2 per cent. Given that Mr Kuroda has the ammunition for a further cut, it makes sense to use it straight away.
Mr Abe and Mr Kuroda’s determination to revive Japan’s economy now faces a test. If they no longer have the will to double down on stimulus, it will be RIP Abenomics, 2012-2015.
Japan Flirts With Deflation Again
As obvious proof of the stupidity of Abenomics Japan Back to Flirting with Deflation.
Japan is flirting with deflation again as a fresh slide in commodity markets left prices flat in January over the last year.
In a worrying development for the Bank of Japan, there were also signs of weakness in broader prices beyond energy, although preliminary data for February pointed to a rebound. However the services index, an important part of domestically generated inflation, was up by 0.4 per cent on a year ago.
Mr Kuroda is battling to shore up public confidence in his inflation target of 2 per cent as weakness in the global economy pushes up the yen, reducing demand for Japan’s exports, and lowering the price of imports.
Instead of attempting to shore up confidence in sheer economic stupidity, I suggest a different tact: Bury Abenomics on the ash heap of failed policies as soon as possible.
Mike “Mish” Shedlock