My admiration for Yale University professor Hamada Ko'ichi, the acknowledged intellectual father of the first two arrows of Abenomics (Link), has been, for the most part, non-existent.
Until today. (Link)
And yes, my newfound appreciation is based in his seeing the data the same way I do, as unsupportive of a declaration of victory.
By contrast, thanks to reporting by the same financial news service, my faith in the economic reasoning at major financial institutions has plummeted. In a survey of 32 economists at financial giants like JPMorgan Chase & Co and Nomura Securities, 22 thought that Japanese stock markets would suffer a significant fall if Prime Minister Abe Shinzo decides next month to delay or cancel the April 2014 rise in the consumption tax from 5% to 8%. (Link)
1) It would diminish the capacity of the Bank of Japan to buy government bonds (What???)
2) Because it would reduce the credibility of the reforms in Abenomics growth package (What???)
Unless the 22 economists with a negative view can offer a mechanism that would cause the relative value of owning shares to fall vis-a-vis other investment opportunities -- which would have to be opportunities outside of Japan as the value of the main domestic alternative, Japan government bonds, will likely be crushed by any hint the government will not even attempt to keep its promises on finding a way of repaying the debt -- then those economists should not answer the phone the next time Bloomberg calls.
As for the so-called Abenomics growth strategy (which is not a strategy since strategy involves choice and sacrifice), its vacuity, not a failure to raise taxes, seems the most imminent and likely cause of a crushing of investor sentiment. In response to a massive letdown after the official Third Arrow announcement in June (Link), the government and its advisors seemingly have chosen the paths of least, or possibly no, effort:
a) Canvassing the public for ideas as to what policy changes should be in the growth strategy (Link) -- as if a grab bag of a hundred little ideas, all of which would require regulatory or legal changes, could even be implemented, much less coalesce into coherent programs, and
b) Doubling down on the announced plans, assigning to the Abe government brain trust the task of making the June proposals seem more than what they are (Link - J) -- the infamous recommendation of the "Plan B is to make Plan A work" school of management.
The strategic illusion of No First Use policy
2 hours ago