But the Progressives Told Us Abenomics Would Be Great for Japan

Tyler Durden's picture


Submitted by Robert Murphy of the Ludwig von Mises Institute of Canada,

When newly elected Japanese Prime Minister Shinzo Abe promised new deficit spending and pedal-to-the-metal monetary inflation, the progressive Keynesians were excited. And indeed, debasing the yen seemed to work for a few months, with analysts saying US policymakers should follow Japan’s lead. Yet now Japan’s recovery seems to be collapsing, leading its Cabinet to approve yet another “stimulus” package. Does anyone else have a sense of deja vu?

Abe has been Prime Minister of Japan since December 2012. You can see what has happened to the Yen/USD exchange rate under his brief tenure:


During Abe’s first year in office, the yen has fallen about 20 percent against the US dollar. Yet Abenomics was hailed as a good thing by several progressive Keynesians early on. For example, in May 2013 Paul Krugman held up “Japan the Model,” writing:

[T]he ongoing economic experiment…is so important, not just for Japan, but for the world.


In a sense, the really remarkable thing about “Abenomics” — the sharp turn toward monetary and fiscal stimulus adopted by the government of Prime Minster Shinzo Abe — is that nobody else in the advanced world is trying anything similar. In fact, the Western world seems overtaken by economic defeatism.


So, how is Abenomics working? The safe answer is that it’s too soon to tell. But the early signs are good…


The good news starts with surprisingly rapid Japanese economic growth in the first quarter of this year — actually, substantially faster growth than that in the United States, while Europe’s economy continued to shrink. You never want to make too much of one quarter’s numbers, but that’s the kind of thing we want to see.


Meanwhile, Japanese stocks have soared, while the yen has fallen. And, in case you’re wondering, a weak yen is very good news for Japan because it makes the country’s export industries more competitive.


So the overall verdict on Japan’s effort to turn its economy around is so far, so good. And let’s hope that this verdict both stands and strengthens over time. For if Abenomics works, it will serve a dual purpose, giving Japan itself a much-needed boost and the rest of us an even more-needed antidote to policy lethargy.

Other progressive Keynesians made similar pronouncements with even more confidence. For example, Matt Yglesias wrote in May: “Japan’s economic reform…has important lessons for us. Japan fell into the trap of prolonged high unemployment and zero interest rates long before the United States did. It’s in many ways fitting that they now seem to be leading the path forward to recovery.”

For a third example, in August Dean Baker wrote:

Fortunately for the Japanese people, the folks currently running their economy are more interested in sound economic policy than pushing scare stories about debt and deficits. Rather than rushing to reduce the deficit, Japan’s new prime minister, Shinzo Abe, went in the opposite direction. He deliberately increased spending to create jobs.


…While we are still in the early days of Abe’s program (he just took office at the end of 2012), the preliminary signs are positive. The economy grew at a 2.4% annual rate in the second quarter, after growing at a 3.6% rate in the first quarter. By comparison, GDP in the United States grew at an average rate of just 1.4% in these two quarters.


…At this point, America’s deficit hawks are jumping up and down screaming that the boost to Japan’s economy is just a “sugar high”, and that it will soon face a horrible collapse as payback. Of course, anything can happen in the future, but we just don’t see any real evidence of the deficit hawks’ doom story as of yet.


…In short, it is hard to tell a story about how Japan will suffer as a result of the measures its government is taking to boost growth and create jobs. These policies are 180 degrees at odds with the deficit fixation that dominates Washington policy debates.


In the quotation above, I show how Baker is explicitly contrasting Abenomics with the “deficit hawks” running US policy. I can point to plenty of examples of Krugman and Yglesias warning that budget “sequestration” in the US would hurt the tepid recovery. This is of course a natural implication of their Keynesian worldview: The US economy should have slowed, perhaps even slid back into recession, during 2013, because of idiotic budget cuts. In contrast, the deficits and monetary inflation in Japan should have bolstered their growth.

Well, as Dean Baker says, anything is possible in the future. But the current numbers say that Japan’s robust real GDP growth has fallen sharply to 1.1 percent by the third quarter, and despite the weaker yen Japan’s November trade deficit was the largest on record, with a string of consecutive monthly trade deficits not seen in decades.

In contrast, the latest estimate for US real GDP growth in the third quarter was a very robust 4.1 percent.

Now I haven’t seen our Keynesian pundits address Japan recently, but I think I know their position without even looking: The US economy would have grown even faster still had the Congress not foolishly cut spending or engaged in the pointless and destructive government shutdown. Furthermore, Abenomics really is working out great, just like they said, only Abe hasn’t run deficits quite big enough, or debased the yen quite enough. But trust them, they have science on their side.

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Wed, 01/01/2014 - 17:04 | 4291424 Calidreaming
Calidreaming's picture

Honest Abe said  " I cannot tell a Rie" 

Wed, 01/01/2014 - 17:18 | 4291452 max2205
max2205's picture

Venezuela without the inflation. ..Abe should have been man of the year

Wed, 01/01/2014 - 17:50 | 4291510 Beam Me Up Scotty
Beam Me Up Scotty's picture

Isn't this Keynesianism about the same as a stock split?  All they are doing is diluting the value of real assets by more dollars in circulation.  You aren't any richer if your 1000 shares of XYZ at $100 becomes 2000 shares at $50.  Double the dollars in circulaton, double the price of oil (or more).  Gasoline was about a buck a gallon in 2000, now its triple that and has been as much as quadruple that.   The jokes on US.

Wed, 01/01/2014 - 18:00 | 4291528 NotSure2505
NotSure2505's picture

According to Lord Keynes:

Animal spirits.

Wed, 01/01/2014 - 18:12 | 4291566 Boris Alatovkrap
Boris Alatovkrap's picture

Maybe is cause for more ad for Asian "woman" in ZH side bar? Yen is slide, Bhat is implode, so asia "woman" is look for direct acquisition of fiat petro dollar...

Yu aru so handosomu amerikan boi, you raiku Michiko sho mo-a? Yu pei in amerika do-ra fo shi mo-a! Japan banku isu meiku japani-su garu so po-a.

Wed, 01/01/2014 - 18:39 | 4291621 Canadian Dirtlump
Canadian Dirtlump's picture

That kind of paranoia will drive you nuts my friend. Imagine the reaction of the guy who sees an ad for columbian concubines after a couple of lines. It'll drive you mad.


To your other point, based on some limited but statistically significant research, western men with wives from to be general "parts unkown" tend to smile more, work harder, and walk with a certain "je ne sais quoi" in their step versus others.

Wed, 01/01/2014 - 21:53 | 4292187 Boris Alatovkrap
Boris Alatovkrap's picture

Only paranoia is survival.

(Alway, alway check under hood before leave with Thai waitress.)

Thu, 01/02/2014 - 07:34 | 4292759 Freewheelin Franklin
Freewheelin Franklin's picture

Hey Joe! You wanna hand relief? You Joe? Twewnty dolla. Ooo, you have-a biga penis, Joe! 

Wed, 01/01/2014 - 19:26 | 4291689 Alethian
Alethian's picture

Wow, those Japanese phonetics are spot on!

Wed, 01/01/2014 - 19:54 | 4291732 Canadian Dirtlump
Canadian Dirtlump's picture

Cyrillic languages and Japanese are phonetic no? Disregarding the obviously high IQ of boris, one might expect the nature of the languages would ensure that he would not wing the wong number.

Wed, 01/01/2014 - 21:55 | 4292189 Boris Alatovkrap
Boris Alatovkrap's picture

Uai aru yu so meiku fuan obu Borisu? Yu aru no raiku japani-su supiku raiku rashia akusento?

Wed, 01/01/2014 - 22:19 | 4292251 Canadian Dirtlump
Canadian Dirtlump's picture

translation: If it ain't rough it ain't rugged, either you're a bum with none or you're stacked and star studded.

Wed, 01/01/2014 - 18:14 | 4291568 markmotive
markmotive's picture

Seems like it's never enough...no different to USA.

The destruction of the Japanese economy was fully documented by Christine Hughes:



Wed, 01/01/2014 - 18:18 | 4291577 TheRedScourge
TheRedScourge's picture

It's not just a stock split, it's a stock split but where all the new shares are given to the banksters.

Wed, 01/01/2014 - 18:20 | 4291587 Boris Alatovkrap
Boris Alatovkrap's picture

When stock split on board exchange, more share is created, but every share is double, so if you are hold 100 $10 share, you are now hold 200 $5 share. In Central Bank fiat scam, bank is print money and you $1 is now to be worth of 50¢, but you only have same number of dollar (share of gross domestic product) in bank account when go to sleep night before. If lucky in Cyprus, you are get free haircut.

Side note, Japan lady is now advertise marriage, not just free peek at web cam. Japan is become "beri beri desupareito". Boris maybe can hire Japanese lady maid for apartment cleaning detail, but first must always to check gender first.

Wed, 01/01/2014 - 18:56 | 4291641 RafterManFMJ
RafterManFMJ's picture

As a bonus Boris, Japanese maid is already radiation hardened and can this clean your porch refrigerator sans unflattering radiation smock or radiation badge.

Wed, 01/01/2014 - 21:56 | 4292200 Boris Alatovkrap
Boris Alatovkrap's picture

Maybe, you are good idea, but presently, Boris mother-in-law is clean refrigeration unit on balcony. But,... maybe Boris is bring many Japanese lady to mine for copper...? Maybe can use Japanese snaggle tooth to remove polymer contaminant from copper.

You are very smart business professional, you are like invest in Boris' copper venture?

Wed, 01/01/2014 - 20:36 | 4291810 The Wisp
The Wisp's picture

I am waiting for Japanese lady Robot friend.. but my Bet is Spare Parts will be very Expensive, and Best parts will wear out First.

Wed, 01/01/2014 - 21:54 | 4292197 StychoKiller
Thu, 01/02/2014 - 00:30 | 4292507 The Wisp
The Wisp's picture

Oh Know i am definitely waiting for the can't tell they are not human, all parts working  Model..  :)


Wed, 01/01/2014 - 18:34 | 4291607 Canadian Dirtlump
Canadian Dirtlump's picture

I've said it before in my view, based on reading smarter people than I, is that Abenomics is only a part of what Honest Abe will consider a proper legacy.


Abe's roots lie in rabid nationalism. Post WW2 Japan has been somewhere ( military / nationally ) between toothless and a vassal extension of the United States. Their booming export economy is finished permanently.Their resource base is almost non existant.  They are increasingly an irratiated wasteland. Their xenophobic nature has them as one of the most homogeneous countries in the world, with closed markets and a shrinking population. With this comes essentially exceptionalist racism which can been seen in other largely homogeneous countries like south korea and israel . To the gum chewing masses this is hidden or misinterpreted as "national pride." This means their fiscal and monetary shellgame is mathematically doomed to failure.


Before their greatness in the massive export economy ( cars, electronics, high tech ) which is gone forever, Japan's greatness was their imperial prowess - replete with the requisite warcrimes that come with occupation - which China and Korea for example know all too well. Furthermore their WW2 exploits were made possible by a national identity of strength mixed with economic hardship ( some of it through overt western efforts ). In other words, through economic hardship the west knew this flegdling but proud imperial power would do exactly what they did.


To get to the money shot in my view Abe is buying time to try to re-establish Japan as a strong independent power and this is simply by looking at what he has done and is doing. No prophecy. A country with a rich history of being strong which at this point stares into oblivion won't go out with a whimper in my view. Not without trying to go out with a bang anyways. So fuck the progressives, this is buying time for a country which is too embarrassed / proud to open their kimono for anyone, to regroup and try to regain their former greatness. The fact that it's a fool's errand to you and I is of material note, but we're not drinking the kool-aid. To them, it is what needs to be done, and abenomics is a means to an end - and the guys in the walnut libraries in the west indulge them because, well, they want a good laugh or an excuse to do something without any initial blood on their hands.

Thu, 01/02/2014 - 02:23 | 4292625 Lost My Shorts
Lost My Shorts's picture

I can't help but think your are over-thinking it.  Maybe it's simpler.

Japan has been living way beyond its means, piling up debt with the help of a perversely overvalued currency.  It can't go on.  In fact, their situation is very difficult to unwind.  (Says me and approximately everyone.)  But not conceptually difficult.  People living beyond their means need to get poorer to reach any sort of sustainable condition.  They do that by devaluing their currency, earning less, paying more for imports, etc.

Perhaps all the nationalist posturing is just a way of reconciling the older generation to loss of their savings (much in the form of unpayable government debt) to inflation, and perhaps trying to motivate the younger generation to be less fussy and expect less.

No doubt the Japanese have thought 39 moves ahead thorugh every scenario involving their pissing match with China over various rocks in the sea.  But perhaps they aren't actually angling for kamikaze war.  Nowdays the battles are fought over currency values and market access, and Japan's scheme might be just to give China a lot of rope to hang itself from a PR perspective.  With China the bad guys, the US and Europe are more likely to accept Japan's devaluation and give Japan preferential market access.  It's not true that Japan's export capability is never again (though perhaps it will never get outsized again).  They can still manufacture and export, if their wages fall enough.

Wed, 01/01/2014 - 17:07 | 4291430 Soul Glow
Soul Glow's picture

Gold prices are about to get back on its upward trend.

Hear me now!

Wed, 01/01/2014 - 17:31 | 4291467 Peter Pan
Peter Pan's picture

In Yen, Rupees or what and for what reason?

Wed, 01/01/2014 - 18:15 | 4291578 Boris Alatovkrap
Boris Alatovkrap's picture

Gold, Silver, and specially is copper to rise price against world fiat currency. Print more, more dollar, yen, rupee, yuan, bhat, et cetera is chase gold, silver, and specially is copper.

You are come work for Boris extract sub-terranean copper ore deposit in urban proximity. Please is bring thick leather work glove and rubber boot.

Wed, 01/01/2014 - 18:33 | 4291605 TruthInSunshine
TruthInSunshine's picture

You strike good point, Boris. Forget not that Kazakhstan is number one exporter of potassium. Other Central Asian countries inferior potassium have.

Wed, 01/01/2014 - 17:14 | 4291437 wisehiney
wisehiney's picture

From Cash to krugman....http://www.youtube.com/watch?v=guocvS7XQW0.


You can run for a long time,
Run on for a long time.
Run on for a long time:
Sooner or later gotta cut you down.
Sooner or later gotta cut you down.

Go tell that long tongued liar,
Go an' tell that midnight rider.
Tell the rambler, the gambler, the back-biter.
Tell 'em that God's gonna cut 'em down.
Tell 'em that God's gonna cut 'em down.

Wed, 01/01/2014 - 17:10 | 4291439 phoolish
phoolish's picture

Where do they get the yen for this stimulus?  LOL.  Must be nice.

Wed, 01/01/2014 - 17:17 | 4291448 suteibu
suteibu's picture

There has been no economic reform in Japan.  Abe has simply dusted off and re-marketed Koizumi's economic plan from the early 2000's and then pushed it into overdrive.

Wed, 01/01/2014 - 17:22 | 4291461 Atomizer
Atomizer's picture

Building new Fukushima visitor sites could spark innovative tourism revenues to offset stimulus investment.


Wed, 01/01/2014 - 17:42 | 4291488 Dick Buttkiss
Dick Buttkiss's picture

Or just stay put and wait for Fukushima to come here:

Persons residing on the west coast of North America should IMMEDIATELY begin preparing for another possible onslaught of dangerous atmospheric radiation from the Fukushima nuclear disaster site in Japan.

Turner Radio Network is warning of preparatory measures that should be taken by those living on the West Coast of America because after the “releasing 89 tons of deadly radioactive fuel directly into the air”, it would be a matter or 2 to 3 days before the deadly material would fry North America “by [the] levels of airborne radiation and ‘hot particles’ which could kill.”

Some of the recommendations to mitigate damaging effect of radiation exposure include:

• Keep up-to-date on developments via the Internet
• Buy Duct tape, masking tape and self-adhesive weather stripping
• Cover windows and doors with plastic
• Cover electrical outlets and light switches with plastic
• Cover vents in bathrooms and stoves with plastic
• Purchase a NIOSH N100-certified filter mask for each member of the family
• Purchase disposable TYVEK suit for going outside
• Wash obsessively


Wed, 01/01/2014 - 17:46 | 4291502 Beam Me Up Scotty
Beam Me Up Scotty's picture

Sadly, all the duct tape and plastic won't keep atomic molecules out of your house forever.  Unless you plan on staying in there until you die, in which case you are dead either way.   Might as well eat, drink and be merry and party like its 1999, until you kick the bucket.

Wed, 01/01/2014 - 18:03 | 4291533 Dick Buttkiss
Dick Buttkiss's picture

Not saying you're wrong but aren't all molecules atomic?

Wed, 01/01/2014 - 19:07 | 4291661 RafterManFMJ
RafterManFMJ's picture

Check out the big brain on Buttkiss...

Wed, 01/01/2014 - 21:22 | 4291774 Dick Buttkiss
Dick Buttkiss's picture

I get that a lot; it comes with the territory, as it were. 

That said, see my reply to Bobportlandor below.

Wed, 01/01/2014 - 19:22 | 4291682 Bobportlandor
Bobportlandor's picture

A molecule consists of two or more atoms.

Atomic relates to 1 atom or to splitting apart of one atoms

aren't all molecules atomic? doesn't make sense.

aren't all molecules MADE up of atoms does

And if your referring to size then by definition an atom is smaller



Wed, 01/01/2014 - 21:54 | 4291758 Dick Buttkiss
Dick Buttkiss's picture

"A molecule consists of two or more atoms."

Yes, well, that I know.

"Atomic relates to 1 atom or to splitting apart of one atoms."

Trying my best to get beyond your fractured (split) syntax, is an "atomic molecule" one that is not only coming apart atomically but subatomically? If so, then is the nature of the particles in question the problem, i.e., that they are not only highly radioactive but, on account of their particularity, extraordinarily invasive?

Seriously, I don't understand what you're saying.

Please enlighten me.

Wed, 01/01/2014 - 22:01 | 4292208 StychoKiller
StychoKiller's picture

Snorting Plutonium is not advisable.

Wed, 01/01/2014 - 23:43 | 4292430 Tall Tom
Tall Tom's picture

Went to Subway Sandwiches today. I was hungry. Hmmmm....Foot Long Tuna Fish Sandwich for $5.00???


I asked, "Where is the Tuna from?"

The clerk replied, "Malaysia."

I said, "Fukushima? No thank you. I will pass."


i never thought that I would have to ask questions like that.


Japan is toast.

Wed, 01/01/2014 - 18:39 | 4291624 SKY85hawk
SKY85hawk's picture

What's with the black smoke?

Steam is always white.  .   .   !!!


Wed, 01/01/2014 - 20:23 | 4291644 HardlyZero
HardlyZero's picture

Could Be Melting Down NOW  

TEPCO is just trying to rouse the animal spirits to get more fiat funding to pour into the problem.

*Keynesian broken window alert*

The picture in the article is from a few years ago after #3 blew up, when a real catastrophe occurred.

NOTE: it is very cold outside now (like 5 degC) so any heat and water will cause steam at 7AM in the morning.

Without actual information (or some radiation readings) this appears to be a tempest at this time.

The only pictures of this latest 'event' show white steam off a pipe on #3...without any other information.

The white steam then goes away later as the morning gets warmer (during this Winter time in Japan).

But of course at any moment there is very dangerous fuel that migt become a critical problem.

It is dismal.   TEPCO needs a (new) crisis to get more funding and profit.  Dismal.

Wed, 01/01/2014 - 19:00 | 4291647 A Nanny Moose
A Nanny Moose's picture

Look at all the demand this will create. The Kruggybear luvs it!

Wed, 01/01/2014 - 20:21 | 4291765 HardlyZero
HardlyZero's picture

(new) crisis creates new demand for fiat.

The fiat machine then supplies the crisis funding.

Dismal solution rince and repeat.


The US will take notes and Melon Yellin will open the crack of doom to fund every crisis without limit.

Now they have a working light-speed fiat machine.

Wed, 01/01/2014 - 17:58 | 4291522 JohnG
Wed, 01/01/2014 - 20:42 | 4291819 The Wisp
The Wisp's picture

Lead covered Viewing Tunnels ?

Wed, 01/01/2014 - 17:31 | 4291468 Greenskeeper_Carl
Greenskeeper_Carl's picture

That's where we are all headed. "Too much debt dragging the economy down? No problem, more debt will fix that. " they will never admit they were wrong either. While it is impossible to find a society that collapsed because their currency was too strong, dozens throughout history have collapsed due to too much debasement.

Wed, 01/01/2014 - 17:33 | 4291474 Peter Pan
Peter Pan's picture

Japan is energy poor, young people poor, it has a neighbour that hates its guts, sells more adult diapers than baby diapers and has a problem in Fukushima that potentially threatens the whole planet.

Now which of those problems can printing money fix?

Wed, 01/01/2014 - 17:39 | 4291480 GreatUncle
GreatUncle's picture

The problem for Japan is whatever they do has an equivalent monetary value.

The return must be greater than whatever this value is for it to do any good.

NOT A CHANCE! If there is any profit in the game somebody else wants it "undercut every time".

Wed, 01/01/2014 - 17:38 | 4291485 Alethian
Alethian's picture


Wed, 01/01/2014 - 17:44 | 4291490 toadold
toadold's picture

I read in the English version of the Japan Times online that they are floating the idea of using the "homeless" as a labor force to clean up the FuKishima area contaminated sites. Looks like Serfs up in Japan.  Next the return of the Shogun?

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