Abenomics Crucified With Lowest GDP Since Abe, Worst Current Account Deficit On Record

Tyler Durden's picture

"It's the weather" That's all Abe has left to pretend that 'recovery' is right around the corner. Japan just printed its worst current account deficit on record and its worst GDP growth since Abenomics was unveiled - both missing by the proverbial garden mile and both confirming that all is not well in Asia. As for the perpetual hope of a J-curve (or miracle hockey-stick reversal)? There won't be one! As Patrick Barron noted, "monetary debasement does not result in an economic recovery, because no nation can force another to pay for its recovery." 

 

Worst current account deficit ever - and a chart that shows absolutely no hope of a turn anytime soon...

 

and the worst GDP growth since Abenomics was unveiled and 2nd quarter missed in a row...

 

 

On the terrible missing J-Curve (via Patrick Barron of the Ludwig von Mises Institute of Canada):

Perhaps I can shed some light on Japanese Prime Minister Abe’s missing J-curve; i.e., why Japan’s trade deficit seems to be increasing rather than decreasing after massive monetary intervention to reduce the purchasing power of the yen. Monetary debasement does NOT result in an economic recovery, because no nation can force another to pay for its recovery.

 

Monetary debasement transfers wealth within an economy by subsidizing exports at the expense of the entire economy, but this effect is delayed as the new money works it way from first receivers of the new money to later receivers. The BOJ gives more yen to buyers using dollars, euros, and other currencies, as the article states, but this is nothing more than a gift to foreigners that is funneled through exporters. Because exporters are the first receivers of the new money, they buy resources at existing prices and make large profits. As most have noted, exporters have seen a surge in their share prices, but this is exactly what one should expect when government taxes all to give to the few.

 

Eventually the monetary debasement raises all costs and this initial benefit to exporters vanishes. Then the country is left with a depleted capital base and a higher price level. What a great policy!

 

The good news is that Japan does know how to rebuild its economy. It did it the old-fashioned way seventy years ago–hard work and savings.

And the latest joke from Asian trading floors: "when asked what he thought of the recovery, Shinzo Abe responded "Depends!""

 

The result of all this total and utter disaster for the Japanese economy - a melt-up in JPY crosses (i.e. JPY weakness with USDJPY back over 103) supporting US equity futures into the green... because what do you do when Chinese credit markets are collapsing, the Japanese economy is imploding, and the fate of Germany (and therefore Europe's) economy lies with Russia... you BTFATH...