Dr. Smith, however, seems to have undergone a change of heart about the economics of the prime minister. Either that or he has a particular onus against one particular recent seemingly huge announcement: a 28 trillion yen stimulus package, the details of which will be examined in the Diet this Fall (the overal plan received Cabinet approval this week).
Japan's New Stimulus Is Just the Same Old Thing
Japanese growth is still sluggish. Consumers aren't consuming much, and businesses aren't investing. The government doesn't have many options to remedy this, and the Bank of Japan, which has sent both long-term and short-term interest rates into negative territory, has basically no more room to maneuver.
The dreaded Zero Lower Bound is starting to bite. The BOJ is buying more stocks, but this too has its limits -- eventually companies become de facto nationalized, as the government becomes the majority shareholder. That's scary both because it would affect corporate governance, and because it would be politically unpopular. It's also unclear how much of an economic boost the stock-purchasing program has given the country anyway. The BOJ could resort to policies like a higher inflation target or the much-discussed "helicopter money" approach, but so far it has been afraid to take these steps.
With the BOJ seemingly out of the game, demand-side macroeconomic policy is up to the parliament. So this week the government of Prime Minister Shinzo Abe proposed a new fiscal stimulus package. It is moderately sized: about $45 billion in U.S. dollars this year, and about $60 billion in low-interest loans, to be followed by slightly less next year.
That move might win a few halfhearted cheers from Japan's battered consumers, but it's unlikely to have much of an effect...
(Click here to read more)
Later today (inshallah) Langley Esquire will be posting to YouTube a conversation Timothy Langley and I had yesterday on exactly the same subject.
(For the Langley Esquire YouTube channel, click here)
What should be setting everyone's teeth on edge about both the stimulus package and Abe's recent Cabinet picks, aside from the knowledge that both are in-your-face I-got-mine-suckers giveaways to cronies, is that with majorities in both houses of the Diet, a prostrate opposition, an emasculated bureaucracy, a totally compromised bond market, increasingly compromised equities markets and no rival power centers within the ruling Liberal Democratic Party, the Abe government has failed to pass a single fundamental structural reform of consequence. No other G7 or OECD leader enjoys the freedom and dominance of Abe Shinzo and his LDP. Abe & Friends nevertheless remain timid and/or clueless.
Amaterasu Omikami, save this blessed land from these poseurs and legacy turkeys.