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Abenomics' Legacy: Japan's Greatest "Misery" In 33 Years

Tyler Durden's picture




 

Back in early 2013, in article after article, we warned that Abenomics would be an epic disaster. Actually we take that back: we said it would be an epic disaster for most of Japan's citizens. A select very few, just like in the US, would benefit greatly from the unprecedented asset reflation to follow the massive currency devaluation that the prime minister had just launched.

Over a year later, we find that we were yet again accurate in our forecast.

Meet Mieko Tatsunami, a 70 year old retired kimono dresser from Tokyo. Unlike the scores of paid actors ordered to pitch Abenomics and to spread the gospel of rising asset prices, Mieko shares a most rare commodity in this day of pervasive propaganda: the truth.

The price of everything we eat on a daily basis is going up,” Tatsunami, 70, a retired kimono dresser, said while shopping in Tokyo’s Sugamo area. “I’m making do by halving the amount of meat I serve and adding more vegetables.”

Ironically, that's what Americans are doing too. Only here the "halving" of the food is done by the food producers, while the consumers rarely if ever notice that they are being jobbed, and are paying the same amount for ever lesser amounts of food. At least in Japan they are honest about food inflation.

As Bloomberg shows, Tatsunami’s concerns stem from the price of food soaring at the fastest pace in 23 years after April’s sales-tax increase. Rising prices helped push the nation’s misery index to the highest level since 1981, while wages adjusted for inflation fell the most in more than four years.

Ah yes, the title. We weren't kidding. As of this moment, Japan's misery has not been higher in an entire generation! Its Misery index that is, which combines unemployment (3.6%) and inflation (3.4%), and results in an unprecedented 7.0%: the highest in 33 years!

 

To be sure, we warned explicitly about Japan's soaring food prices. And now, here they are:

With food accounting for one quarter of the consumer price index and the central bank looking to drive inflation higher, a squeeze on household budgets threatens consumption as Abe weighs a further boost in the sales levy. The prime minister may be forced to ease the pain with economic stimulus, cash handouts or tax exemptions championed by his coalition partner.

 

Price hikes without confidence that wages are going to rise will hurt appetite for spending,” said Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo. “Abe has to raise people’s belief that the economy will improve.”

 

Food prices rose 5 percent in April from a year earlier, with fresh food climbing 10 percent. Onions soared 37 percent, and salmon -- a staple of the nation’s lunch boxes -- jumped 30 percent. Abe lifted the sales tax by 3 percentage points on April 1.

To be sure, it didn't take a rocket surgeon to figure out what would happen to food and energy prices in a country that is actively depreciating its currency and which is only 39% self-sufficient on a calorie basis and more reliant on inbound shipments of fossil fuels after the Fukushima disaster in 2011 - hence, would be forced to spend that much more (and pass through these costs) on food and energy imports.

Yet apparently not a single economist in the Abe cabinet couldn't comprehend what was sure to follow a 20% devaluation in the Yen.

The result is clear:

The cost of imported beef rose to 230 yen ($2.24) for 100 grams at stores in central Tokyo in April from 187 yen a year earlier, government data show. Growing vegetables in greenhouses is more expensive as a result of increased energy prices, according to Naoyuki Yoshino, the Tokyo-based dean of the Asian Development Bank Institute.

 

Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo, said food inflation likely accelerated in May and will remain high.

But it is not soaring food and energy prices that are crushing the Japanese economy under Abe more than under any of his predecessors: it is the collapsing wages. As we reported two days ago, base Japanese wages excluding bonuses (which are a benefit to just 20% or less of the workforce), have now declined for a near-record 23 months in a row. As Bloomberg, logically, adds, "the prime minister’s drive to fatten paychecks more than inflation is at risk of stalling, with wages excluding overtime and bonus payments falling for a 23rd straight month in April. "

 

So what are the "non-1%ers" like Tatsunami to do in this slimate of near record "misery"? According to the chief market strategist at Mizuho, Yasunari Ueno, an option for Abe would be to provide more cash handouts to help low-income households: something the US president has gotten the hang of quite well courtesy of his relentless debauching of the world's reserve currency (unknown for how much longer). Sadly, the Yen is nowhere near a reserve, and such a move would run counter to the government’s effort to reel in the world’s largest debt burden: considering Japan's debt/GDP is running around 240% these days, the last thing Japan can afford is even a faint hint of a debt crisis.

Which means no way out: with higher food prices, people will cut back on durables, luxury goods and eating out as they did after the sales tax was last increased in 1997. Japan then ended up in a recession. A recession in a time of Abenomics would crush the prime minister and promptly put an end to the BOJ's $70 billion per month liquidity injection, the proceeds of which mostly end up in the US stock market anyway.

And while the 1%ers will be fine in any situation, the elderly, many of whom are on fixed incomes, will be hit the hardest, said Hideo Kumano, executive chief economist at Dai-ichi Life Research Institute in Tokyo. Kumano estimates households headed by people over age 60 accounted for nearly half the nation’s consumption last year. “If prices keep rising, there is a risk that consumption by seniors may be damped as they don’t enjoy the benefit of wage increases,” Kumano said cited by Bloomberg.

We close with Tatsunami: “Abenomics may be helping the big corporations, but life’s tough for people like me,” said Tatsunami, who has seen her pension shrink. “We don’t go out as much as we did -- we’re having to cut back."

Ironically, this is precisely what we said over a year ago. And now even the common Japanese man has grasped it. In fact, everyone else too. Everyone expect Abe and Kuroda.

Which brings us to the next steps: we have said it before, so we will give Bloomberg the honors:

The squeeze on households could damage support for Abe’s administration, whose approval rating fell to 53 percent in a Nikkei survey in May from 62 percent when he took power in December 2012.

That's right: just like Abe's reign ended in humiliation (and diarrhea) the first time around, so to his second attempt to fix the Japanese economy will be a disaster: it is just a matter of time before someone finally admits that yet another emperor is wearing no kimono. The only question is when.

Ironically, this is the same question we asked in February of 2013:

And just like that Japan is about to learn that soaring stock prices always have a trade off, a lesson which even GETCO's S&P ramping algos will not be exempt from when the latest bout of soaring food inflation results in central banks scrambling to withdraw liquidity, just as they did in early 2011. The results will naturally be the same.

 

As for how long Abe's government will remain in power after energy and food inflation sweep through the net importing nation, that is anyone's guess.

We hope - for their sake - that Japan's ordinary citizens,  not the 5-10% who benefit from the Nikkei's surge, but the 90% or so who couldn't care less what the stock market does but have no choice but to care very much about the price of food, make the right decision and get rid of their catastrophic government soon, before it is far too late.

 

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Thu, 06/05/2014 - 22:03 | 4828827 DoChenRollingBearing
DoChenRollingBearing's picture

I have briefly visited Japan twice, but am nowhere near an expert.  I can tell you that everything there is very expensive, and if "demography is destiny", they are cooked...

Europe and the USA then follow...

Thu, 06/05/2014 - 22:18 | 4828855 markmotive
markmotive's picture

The misery index is highly correlated with the rise of nationalism and fanaticism.

http://www.planbeconomics.com/2014/01/new-nationalism-far-right-voices-g...

Thu, 06/05/2014 - 22:43 | 4828903 disabledvet
disabledvet's picture

I thought it read "long time Kimodo dresser."

I thought "why would a dragon need clothes?" and "what's wrong with a man with no Kimodo'"?

Of course "only real men have dragons for pets"...and then...

Fri, 06/06/2014 - 08:02 | 4829427 thisisjustarand...
thisisjustarandomusernameicreatedforzerohedge's picture

japan is fucked

 

Japanese are the most apathetic complacent lethargic people i've ever met

and the worst part is they do it with such a in-denial fake sense of politeness that gives them a sense of excuse for all their social historic and ecomic poisons that only grow their lethargy and apathy each year.

 

just see their demographic and marriage/sexual relationship trends

 

it's no wonder Abe is trying to to turn to nationalism to inject any resemblance of life into the country

and it's no wonder that it's always failing miserably

 

i liked how Kyle Bass quoted the common expression over there: "it cannot be helped"

 

that sums up Japan perfectly. especially when you picture it with a big fake smile.

Thu, 06/05/2014 - 22:52 | 4828918 booboo
booboo's picture

That is to say the rise of nationalism and fanaticism is highly correlated with misery, yes.

Fri, 06/06/2014 - 04:35 | 4829264 newbie vampire
newbie vampire's picture

"That is to say the rise of nationalism and fanaticism is highly correlated with misery, yes."

Nationalism and fanaticism is often used to divert blame from the ruling political leadership. Let the populace focus their attention on the disputed rocks in the South China Sea and pretty soon they will believe all that hullabaloo with the Chicoms is the cause of their misery.

Thu, 06/05/2014 - 22:48 | 4828911 gimme-gimme-gimme
gimme-gimme-gimme's picture

I lived there for 3 years from August 2008 to August 2012. I basically lived there when the Yen shot up in value and left before Abenomics.

Prices were very reasonable, and I had no issue living pretty comfortably. That said it's balls warm in the summer and freezing cold in the winter. Since there is poor insulation/no central heating, that can get $$$ unless you just layer instead.

When I went back for a visit last year things weren't that bad either. Prices were still reasonable.. Of course if you want to stay in the big city and waste your money on expensive hotels, restaurants and prostitutes it will cost you.

Thu, 06/05/2014 - 23:40 | 4829033 DoChenRollingBearing
DoChenRollingBearing's picture

I was a short-term visitor both times on business (that I had to pay for myself) and did not know Japanese nor where to stay in the cities.  Perspective...  You had time to learn the ropes, I did not.

Thu, 06/05/2014 - 22:08 | 4828835 stinkhammer
stinkhammer's picture

me love you long time

Fri, 06/06/2014 - 03:47 | 4829249 The Blank Stare
The Blank Stare's picture

Grow up

Fri, 06/06/2014 - 09:57 | 4829805 JamesBond
JamesBond's picture

voted todays dumbest comment award

Thu, 06/05/2014 - 22:36 | 4828888 NoDebt
NoDebt's picture

Why would they ever include food prices in CPI?  That's their mistake right there.  The US foresaw that disater decades ago.  We just don't count food prices in CPI.  They are specifically excluded.  Therefore, inflation doesn't exist for us.

Problem: solved.

Thu, 06/05/2014 - 23:06 | 4828946 sangell
sangell's picture

Why is it I suspect ZH's concern for poor Japanese pensioners is motivated more by Abe's military build up and foreign policy than anything else. We certainly don't hear any criticism of Putin's actions and the damage they are causing the average Russian.

Fri, 06/06/2014 - 04:41 | 4829270 newbie vampire
newbie vampire's picture

"Why is it I suspect ZH's concern for poor Japanese pensioners is motivated more by Abe's military build up and foreign policy than anything else."

If that is ZH's intention, I applaud it.  Fukushima Abe's military build-up and foreign policies stink.

And if ZH has the influence to prevent American servicemen coming home in body bags, I support what it is doing.

Thu, 06/05/2014 - 23:10 | 4828958 Spungo
Spungo's picture

Thank god the USA is energy dependant with huge trade surpluses and therefore does not experience problems of currency debasement

Thu, 06/05/2014 - 23:11 | 4828962 Spungo
Spungo's picture

" We certainly don't hear any criticism of Putin's actions and the damage they are causing the average Russian."

The difference is that Putin didn't publicly declare war on the middle class the way Kuroda and Bernanke did.

Fri, 06/06/2014 - 05:45 | 4829298 Martel
Martel's picture

I guess Putin is happy with the $200 billion he has siphoned from the Russian middle class. You didn't think he would have bought those numerous $100K watches with his annual $100K+ presidential salary?

Fri, 06/06/2014 - 09:59 | 4829818 JamesBond
JamesBond's picture

those were gifted by thankful ukranians

 

 

jb

Thu, 06/05/2014 - 23:15 | 4828973 TheMeatTrapper
TheMeatTrapper's picture

I’m making do by halving the amount of meat I serve and adding more vegetables.”

Ironically, that's what Americans are doing too.

----------

 

Uh not exactly. They are doubling up on McNuggets and Ramen. Vegetables aren't any good. 

Fri, 06/06/2014 - 19:09 | 4831508 Hugh_Jorgan
Hugh_Jorgan's picture

Exactly, in the US fruits and vegetables that aren't nutritionally inert and/or laced with pesticide and roundup residue are wildly expensive and going up every month.

Thu, 06/05/2014 - 23:23 | 4828990 earleflorida
earleflorida's picture

2014 - 33yrs = 1981

Mao dies 9/9/76 *{During the Vietnam War,... that, the USSR wanted and threatened Mao & China with Nuclear annihilation if they ever tried to interfere. It was then that Mao realized China must reinvent [20th Century] itself militarially}.

Nixon ( start of Kissinger era) visits China 2/2/72 -- Nixon resigns 8/9/74 **{Note: during the Nixon political debacle [Watergate] the [MFN] Most Fovored Nation trade agreement was postponed and the Vietnam war escalated?]}

VP Ford replaces Nixon's remaing 2nd term 1974- 1977

Carter  (start of Brzezinski era) 1977- 81                                                    ***{China MFN 1979 US-China trade agreement}

... now the timeline above can be connected to Japan's economic downfall? China's MFN/NTR is signed in 1979 and updated many times since with moar lucrative terms for China's special economic zones? It had become a one-way-street since 1982! Japan was fucked!, as the lost decades never cease piling-up...'

Ref:   "Most-Favored-Nation Status of the People's Republic of China"    (Jackson-Vanik waiver)        http://congressionalresearch.com/RL30225/document.php

92094 updates:   12/6/96         http://www.fas.org/man/crs/92-094.htm  

jmo

thankyou Tyler

Thu, 06/05/2014 - 23:27 | 4829005 iamtheeggman wh...
iamtheeggman whooooooooooooo's picture

please do not worry

Thu, 06/05/2014 - 23:30 | 4829012 Osmium
Osmium's picture

So what are the "non-1%ers" like Tatsunami to do in this slimate of near record "misery"?

Get a shitgum of course.  That was easy.

Thu, 06/05/2014 - 23:32 | 4829014 Nue
Nue's picture

The answer to Japans problem is deflation. Which would create a wealth effect for the consumer. Which would get them spending again. It may as sound Zen but some times the only way to win the war is to surrender the battle. Of course then no politician could take credit for "fixing" the economy as it would have in truth fixed itself.

Thu, 06/05/2014 - 23:57 | 4829066 Wild Theories
Wild Theories's picture

And deflation was what Japan had, and it was good for the average people... but since politicians only worship at the altar of 'growth' they had to turn it into inflation.

Thu, 06/05/2014 - 23:32 | 4829019 AdvancingTime
AdvancingTime's picture

 Japan continues to slide towards an economic abyss with each passing day. The writing is on the wall. Japan is facing a wall of debt that can only be addressed by printing more money and debasing their currency. This means paying off their debt with worthless yen where possible and in many cases defaulting on promises made. Japan's public debt, which stands at around 230% of its GDP and is the highest in the industrialized world.

 The moment the Japaneses stock market fails to rise enough to offset inflation this will turn into a tsunami of  money fleeing Japan and constitute the end of the line for those left holding both JGBs and the yen. This has been a long time coming and I contend the cross-border flow of money leaving Japan is why some stock markets have remained so resilient . When Japan crumbles it will be felt across the world. More on this subject in the article below.

 http://brucewilds.blogspot.com/2014/05/japan-sliding-towards-abyss.html

 

Fri, 06/06/2014 - 03:52 | 4829252 The Blank Stare
The Blank Stare's picture

Could you PLEASE stop posting this same shit every time an article on Japan comes up.

Fri, 06/06/2014 - 00:01 | 4829074 williambanzai7
williambanzai7's picture

But are their bankers happy?

Fri, 06/06/2014 - 00:39 | 4829124 besnook
besnook's picture

inflation is too new to push wages up but when it does(as it always does) abe will be seen as kamiokane.

Fri, 06/06/2014 - 02:19 | 4829203 JPMorgan
JPMorgan's picture

There will be some some serious wage lag on that kind of run away inflation.

If the gap becomes to big what is left of their economy will stall.

But that's basically what we have been witnessing in Japan over the years... a slow motion car crash. 

Fri, 06/06/2014 - 03:08 | 4829232 besnook
besnook's picture

it is still way too early to draw any conclusions. the tax increase was stupid but only for the timing.

i think japan might be the test case for a round of abenomics coming to an economy near you.

Fri, 06/06/2014 - 10:02 | 4829824 JamesBond
JamesBond's picture

" but only for the timing"

====

no, the tax increase was just plain stupid, period

Fri, 06/06/2014 - 19:20 | 4831531 Hugh_Jorgan
Hugh_Jorgan's picture

Of course no one proposed restoring stability by taking their medicine and starting to slowly raise interest rates, not raise taxes. No one is borrowing like thier philosophy would suggest, anyway. Japan is the canary in the coal mine. When they finally tip over, it is going to be spectacularly horrific for all of us.

 

Fri, 06/06/2014 - 01:08 | 4829155 BullyBearish
BullyBearish's picture

Ordered something on Amazon and was surprised when viewing shopping cart to see a notice that a number of items (all of them) had just received price increases.  Ah, the beauty of inflation, hurry hurry hurry and consume before the prices get higher!!

Fri, 06/06/2014 - 01:43 | 4829181 damicol
damicol's picture

I don;t see a problem here.

 

 Surely GS will soon be there with cape flying  and suggesting offering PIK bonds to sell to the Great American Morons so he doesnt need to raise more debt

Fri, 06/06/2014 - 03:50 | 4829251 Magooo
Magooo's picture

In the US instead of shifting to vegetables you get pink slime added to your GMO fed meat which adds low cost volume which allows people to continue to jam epic amounts of rubbish into their fat guts washed down by super sized cheap cola.

Coming Soon Designer "Meat' made from worms and other bugs ground into mush and extruded.   Of course since we are lied to on a daily basis this will be reported by the MSM as a fantastic new healthy product - without identifying the components.

You want to feed 7.2 billion people on the cheap?   Get ready to eat bugs

 

 

 

Fri, 06/06/2014 - 11:44 | 4830196 DaveA
DaveA's picture

In tropical climates, people do eat bugs, they're cheap and nutritious. But in temperate climates, we need warm-blooded livestock. You'd either have to invest in a heating system for your bug farm, or flash-freeze bugs in a tropical country and ship them to market, like we do with Thai shrimp. Lots of expensive fossil fuel either way.

Mon, 06/09/2014 - 03:10 | 4836294 dreadnaught
dreadnaught's picture

they love deep-fried Tarantulas in SE Asian countries...add salt and they taste like potato chips--or was it checken?

Fri, 06/06/2014 - 11:45 | 4830198 zerocash
zerocash's picture

And when the bugs get too expensive it 's time for Soylent Green.

Fri, 06/06/2014 - 05:07 | 4829268 Peter Pan
Peter Pan's picture

Japan is truly a lucky country. It has an aging population, massive national debt, no resources, a hostile neighbour, and a bonus in Fukushima. 

 

It's a miracle it's  still on its feet with so many challenges.

Fri, 06/06/2014 - 05:02 | 4829279 newbie vampire
newbie vampire's picture

Japan's problem is that it lacks American visionary central banking experience. What they need to pull their economy out of recession/low growth is a Greenspan, Bernank or a Yellen.

And it wouldn't hurt to give everyone an Abenofone, a SNAP card and a new series of Japanese Idol. Oh and sushi flavored popcorn.

Fri, 06/06/2014 - 14:12 | 4830689 Duude
Duude's picture

The government has been in cahoots with producers to hide US inflation. Who in their right mind would allow for substitutions when trying to MEASURE inflation?  Who in their right mind would liberally adjust for improvements both real and imaginary, when trying to MEASURE inflation. Its supposed to be about creating an accurate report, not a better presentation. 

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