Tuesday, August 25, 2015
Where We Go After Down
US Dollar versus JPY over the last eleven hours
After a Monday of global stock market instability and collapse the Abe government will be facing questions about what it can do to protect Japan’s economy from damage. The Cabinet will have its regularly scheduled Tuesday meeting. Afterward media organizations will ask Chief Cabinet Minister Suga Yoshihide what if anything the Abe government intends to do to restore confidence in Japanese markets. Prime Minister Abe likely faces as similar fate in the Diet, the opposition homing in on the unfair but entirely reasonable question of what he as prime minister will order his subordinates to do.
The answer Suga and Abe will not own up to is that there is virtually nothing the Abe government can do except watch the screens with dread. This government is tapped out when it comes to either deploying cash or inspiring confidence. Increased fiscal stimulus was already in the cards for this autumn; it is now a virtual certainty. Such fiscal stimulus is designed, however, to cope with the heretofore obstinate refusal of the Japanese economy to respond to the ministrations of the Bank of Japan, not to quell current market turmoil.
Liberal Democratic Party hacks will be tempted to argue that the public need not be worried, that equities markets are wrong and Japan's future is bright because of the yet-to-be realized growth effects of the Third Abenomics or robotics or some other such rigmarole. I am waiting for some peppy puppy (please, please, please let it be Liberal Democratic Party Policy Research Council Chair Inada Tomomi) to say, "Just look at how much the yen strengthened yesterday! It is a sign that global investors appreciate the opportunities and stabilities created by the Abe program!" That the effect any of the major proposals of the Third Arrow would be deflationary, exacerbating the market's fears about growth, will not trouble any part of the soft squishy heads of the Abe True Believers, of course.
Had we a ruthless, determined opposition in this blessed land, television shows this morning would feature street smart and mean-looking (yes, I am thinking of Renho) MPs complaining that the Japanese government would have the capacity to deploy assets to calm markets, making Japan the global leader Abe Shinzo always blabs about, a except of course that Team Abe robbed the national piggy bank to inflate the profits of its zaikai and construction industry friends.
That Japan lacks a serious opposition means of course the country will not be tying itself into knots, each side blaming the other. Of course it also means that the country will generate zero ideas on what it is that the government must do, as members of the parties in power will merely keep repeating the idiot mantra, "Markets go up. Markets go down. The important thing is to not panic. Wait for the government's current policies to bear fruit."
Image courtesy: Yahoo! Finance Japan