Edward Hugh has a sharp review of the negative view of Abenomics, or perhaps more properly the dismissive-as-irrelevant-and-possibly-quite-harmful view of Abenomics:
The Real Experiment That Is Being Carried Out In Japan
Particularly thought-provoking are the quotations from Keynes, showing both the incredible brilliance of the man and the continuing validity of the old saw, "There is nothing new under the sun."
I agree with almost everything in the post, particularly with the quotations from the speeches of former Bank of Japan governor Shirakawa Masaaki, whom the Kool Kids in this blessed land's business and media elites all feel free to disdain and revile. Shirakawa is revealed to be who he is and what he always was: a central banker blessed with intelligence, humility and a conscience.
With all that is good (and there is a lot of it) I think Hugh does himself a disfavor with the cheap shot at the what may be the most important goal of the creation of inflationary expectations: pressing savers to convert their assets in to real goods or put them into higher risk/higher return investments. A critic would point out that "Uh, that's sort of the point of the program. Duh."
The demographic angle of the story is that while there is a vast pool of cash that could be deployed in lifting the economy to a higher level of activity, almost all of it is in the hands of persons over 60 years of age. Seniors are very, very conservative about their assets and cash, clinging to low-or-negative return real estate or money kept in bank accounts...or in the safe at home.
The government is trying some direct methods to get older citizens to turn over their savings to younger citizens, the most famous/infamous being the tax free accounts for the education of grandchildren (a plan which has been widely derided as just a tax avoidance scheme for the extremely wealthy). Increased taxation of the assets of retirees would be the one, absolutely effective, politically lethal (those damn retirees vote, a lot) solution.
Debasing the currency and creating the desire to convert cash into something that is meaningful and useful is an actual, non-ridiculous goal of induced inflation...the caveat being "but what if instead of increased consumption and domestic investment the result of debasing of the yen is capital flight, with savers sheltering the current value of their money in overseas accounts and assets?"
I guess we have to keep an eye on the yen. I am sure if someone popped an inquiry into Richard Katz's mailbox he would have something to say about what the yen level should be, using trade-adjusted figures.
Later - Richard Katz responds in comments. He corrects my incautious claim that he would know at what level the yen should be.
No one knows this, save, supposedly Mr. Market.
What Richard Katz can tell you is what the long-term average real exchange rate has been, and whether or not the Abe governments disengenuous program to crush the "high yen" has firm intellectual roots.
Nota Bene: All comments to Shisaku are moderated, except my own.
The macro/micro validity tradeoff
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