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The Abenomics Devastation: Japanese Real Wages Decline For Record 16 Consecutive Months
Those seeking proof that Abenomics is working are advised to look elsewhere.
Overnight Japan released its latest, October, wage data, which showed that total cash wages rose 0.5% yoy, slightly slowing from the 0.7% growth recorded in September. As the chart below shows, Nominal wages have been slowing down from the peak in July when the figure was boosted to +2.4% on summer bonus payments. Overtime pay grew +0.4% yoy (September: +1.9%), slowing from the peak recorded in April (+6.0%) on a slowdown in economic activities. The figure contributed to overall wages by only +0.03 pp.
Some more details from Goldman: "Basic wages rose 0.4% yoy in October, unchanged from September. The effect of the shunto spring wage hike seems to be fully reflected into base wage growth and settling at a stable growth around 0.5%. However, with overtime pay near zero, the 0.4% increase in basic wages virtually determines the overall wage growth during non-bonus months. We also note that preliminary basic wages tend to be revised down at the final stage."
Looking at nominal wages by type of employment, regular employees saw a 0.6% yoy increase, significantly slowing down from +1.1% in September. Wage for part-timers turned negative at -0.3% (September: +0.5%). Part-timers saw a sharp fall in basic working hours (-1.6% yoy) and overtime hours (-6.9% yoy).
In other words, when Japan turns to wage controls some time in 2015, a move that is now essentially assured as Japan has gone all in on central planning, it will demand that corporations boost pay to part-timers first, and then force all corporations to hike wages across the board.
But as everyone knows, for the past 2 years nominal wages are just half the story. The reason is that courtesy of the crashing Yen, everything has to be converted into real terms to adjust for soaring inflation and exploding import prices. It is here that we find that for the 16th consecutive month, real wages continued to decline heavily.
Real wages (nominal wages less the CPI inflation) continued to register a large decline of 2.8% yoy, after falling 3.0% in September. Despite high one-time bonus payments, the much lower pace of increase in basic wages (around +0.5%, conceptually close to permanent income) relative to inflation rate, and the resulting large decline in real wages at normal times, is restricting consumer behavior.
And with Japan's snap election in less than two weeks, Abe's reign may be yet again prematurely interrupted if the local population decides it has had enough of being on the receiving end of the most cruel Keynesian experiment in recent history. As Bloomberg notes, "With the effect of the sales tax hike, I don’t see real wages rising in the financial year through April,” said Toru Suehiro, an economist at Mizuho Securities Co. “People will be asking themselves whether they feel better off, and there probably aren’t that many who think the economy has got better.”
Which is to be expected. After all we now know that the brain trust behind the latest Japanese push into outright lunacy, is none other than Paul Krugman. Is there any doubt that Japan is now an economic basket case, with an unsustainable demographic implosion to boot?
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The skat man!
http://hedgeaccordingly.com/2014/12/leak-at-federal-reserve-revealed-con...
Good thing prices aren't rising there.
At first I thought the destruction of purchasing power and the erosion of living standards wouldn't work, but that conclusion was predicated on the assumption people would eventually be angry enough to revolt and demand real change. I must admit, I'm beginning to reconsider...
The people have been trained that the government knows what its doing and desensitized to the real world by the big media Xanax. The difference between us and them is language,
It's not that they think the government is omnipotent. They're just powerless against it. It's the same thing here in New Babylon. You can't just remove every superfluous gevernment agency and employee. And you can't just make debt disappear. In order for it to change, it must collapse and be reborn. After the citizens have suffered they may be more interested in vetting the officials they put in place.
It seems most will gladly see the destruction of their ancestors wealth (built with years of sweat and toil) by following sociopaths who promise "good paying" jurbs... most of which build useless junk while the rest build prison planet. We are doomed.
Nevermind though! Gaius Frakkin' Baltar wishes you a Merry Frackin' Christmas while you play with your useless junk in front of your new watchful telescreen!
It's not a bug, it's a feature.
Ding ding ding ... you win the prize !!
I am always astonished how the usually smart editors of ZH just can't seem to get Japan. But you did. Lowering real wages is the purpose of Abenomics. If real wages are going down, that means it's working. Japanese voters are not revolting because they are more sensible and realistic than voters in most societies, and know that it needs to be done.
Keep in mind that Japan is the brokest country in the history of the universe, and was already before Abe took over. Japan was locked in famously puzzling, widow-making circumstances -- its currency remained stubbornly high despite it being the brokest country in the history of the universe and adding still more government debt at a shocking pace. The thing was going to explode eventually, so the Japanese welcomed Abe's attempt to reverse course, avenge the widows, and restore some semblance of balance to the Japanese economy. Abenomics is actually a radical departure from Krugmanism. Strange no one gets that.
Krugmanism: maintain real wages by government deficit spending.
Old school IMFism: cut real wages by devaluing. Abenomics is a version of the old-fashioned you-got-no-choice advice the IMF used to dispense to broke banana republics: devalue to reduce real wages into line with what you actually produce. The Japanese version is adapted to a situation where the broke country (despite all logic) has a quasi-reserve currency. But the intent is the same: reduce Japanese living standards back in line with what they can actually produce, to revive exports and create more productive (as opposed to makework) jobs. Reviving exports takes years, so the results can't be seen instantly (disappointing cable news talking heads and ZH editors alike). But a broke country has no other options.
Japan definitely hase huge problems, not caused by Abenomics:
-- difficult demographics
-- maintenance overhang from too much Krugmanism prior to Abe -- too many expensive roads, bridges, and tunnels to maintain relative to the declining population
But Japan has a secret too: it's the best place to live in the world, if you can source a living from outside. (OK, except for small problems like Fukushima radiation and war with China.)
"devalue to reduce real wages into line with what you actually produce." ---
Interesting. Remind me, what does the U.S. trade defecit look like again?
What do all those SNAP babies actually produce again?
a good news story for you
This will only hasten Japan's drive to automate and roboticize every aspect of life.
And then they export "I, Robot" to the world.
And the Chinese will reverse engineer all that and sell it for a tenth of the price.
Enjoy your slave wage now, United Burger Flippers of America, your robot replacement is being built and beta tested right this moment.
"If only they had listened to me and printed more."
-Krugs
"If I could only eat more babies I would save the universe." Freddy Krugman
Doctors in the Middle Ages believed that bloodletting would cure practically anything, and when the patient was nearly dead from loss of blood, the prescription was always the same: more leaches!
This child has the sniffles...we must bleed it immediately!!!
Doctors in the Middle Ages believed that bloodletting would cure practically anything, and when the patient was nearly dead from loss of blood, the prescription was always the same: more leaches!
Yep, that will be Krugman's take on this whole mess: "If only they had called me in earlier, I'd 've been able to save the day."
Is there a procedure for reclaiming Nobel Prizes? If not, such a procedure is now urgently required. In two quite distinctive cases.
Paul Krugman has not received a Nobel Prize, so there is nothing to reclaim. He did receive the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, which is kind of a fraudulent Nobel Prize awarded to frauds, and there is probably no greater fraud than Paul Krugman deserving of this fraudulent prize, so why reclaim it.
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel is a fraudulent award, awarded by frauds to frauds.
Why don't we simply view this latest Abenomics episode as just a unilateral currency devaluation?
The main goal of all this Abenomics has been to boost exports and stifle imports. It's pretty obvious that had Abe announced publicly that his goal was to devalue the Yen to 125/$, the Chinese and Koreans would have bitched, moaned and then retaliated.
Now he gets to achieve his true goal through a "policy" perceived to be a "failure" by the rest of the world and his key trading partners. He isn't that stupid.
Obviously, Japan must have massive, generational structural reform. In a democracy, even a Japan-style "democracy", this is incredibly difficult. Abe knows this. And it's clear that the predicate for any long-run structural reform is a lower Yen. So why not have that first and the pain of restructuring later?
Quite simply, because Japan doesn't need to do this. When your country's primary demographic is young people, your economic policy is jobs, but when your country's primary demographic is old people, your economic policy is purchasing power of savings.
Lowering the value of the Yen is the definition of insanity for Japan. They should be selling their dollars to drive the Yen higher. Rising Yen means purchasing power for the elderly rises (cost of living declines), lowering fiscal pressure on the government to provide pensions and services for the old, and reversing a consumer stinginess born of the worry that savings won't last through retirement.
Less young people means less need for jobs, and many young people could be employed in caring for/providing services to the elderly. Eventually, the mortality rate will create a massive supply glut in housing, leading to a second collapse in house prices, which will eventually become a baby boom, as house prices and the birth rate have a negative correlation of about 90%.
It's time to flip the East Asian Economic model on it's head, and Japan really needs to lead the way here.
Workign perfectly. Don't touch any of the buttons or levers.
Doesn't matter: U.S. stocks are up, again! and it's the only thing that matters.
cant solve a demographic problem by printing money. unfortunately, that is not in the economics books when these stupid fucks get their PhD's from Harvard and Yale.
Demographics represent reality and modern economists (Krugman et al) avoid reality at all cost.
"when these stupid fucks get their PhD's from Harvard and Yale."
These educated idiots can't figure it out. Their stuck in the Keynesian economics paradigm.
Declining wages would not be so bad except the Yen has lost about 15% in value in the last 3 months. So falling wages and sharply rising prices makes for a very big squeeze for Japanese wage earners. Besides, even with the fall in the Yen, Japan cannot compete with the low wages in China. So what has been gained by Abenomics? Pain for the Japanese wage earners and an impending collapse of the Japanese bond market.
I see no "collapse" of the JGB market. They've just taken it "in house" so it goes straight from the government to the banks and back to the BOJ. A closed loop, no "market" necessary to support it.
Yeah that is for new bond issuance. If you are holding Japanese bonds and they pay 1.5% for the 20 year variety, how do you feel about 15% currency losses in just 3 months? If yen goes to 125 to the dollar, all your 20 year gains are lost. Who in his right mind will hold Japanese bonds? Will the Japanese Central Bank buy all Japanese bonds?
It's worse than that. The percentage loss is 60% since Abenomics began.
So why is anyone holding Japanese bonds except the Japanese Central Bank?
Partly the conservative nature of Japanese retirees, partly the way the Japan Post Bank deposits and pension funds are used, partly a cultural sense of duty to Japan along with generations of brainwashing about obeying authority.
Oh, and don't forget about those JGB ads with the fat dude surrounded by kawaii girls. Also, taxpayers are paying the popular girl group AKB48 to sell the bonds, good for the young boys and girls (none of whom have any extra money) and the lolita-loving salarymen who haven't had a raise in 5 years.
"A closed loop, no "market" necessary to support it." And isn't that the definition of a market (the neokeynesian definition)?
See my post above. Abe has to make domestic capital investment a positive ROI proposition. The only way to do this is through a lower Yen. Capital spending obviously lags behind the immediate impact of lower real wages.
I'm not saying I'm an advocate of Abenomics. But I think everyone here would agree that the Yen at 80 instead of 120 was unsustainable and not helpful to Japan in the long run.
Gas is cheaper now, so according to Dudley do Right of the NY FED they will have more "real income" to spend.
Dudley and Full Bulltard are running FEDERAL BANKS! These frigging morons are in CONTROL OF MONEY PRODUCTION!
abandon ship, all hope is lost. our nation is run by buffoons.
Sorry, this ship is unsinkable, so we only have lifeboats for the luxury class, I'm sure you'll float just fine though.
I hate to see the Japanese people being made to suffer so, but if it repudiates Krugman, maybe it will have been worth it.
Krugman's flexible stick at work.
Make less money..less taxes to pay..that is good for the economy..right?????
are those suicide swords half price yet????
That's what former House Speaker Pelosi said: More people on welfare is the best thing for the economy (paraphrasing).
this report for october
Kuroda's currency massacre move came on halloween
real wages (year over year) for november should be rather ... interesting
Sadly, the failure of industry to raise wages will be cited as the reason - and only reason - Abenomics didn't work.
japanese workers need to only hold on till china (and rest of asian tigers) devalue ... then they 'might' see boost to real wages ... assuming they still have a job
Abenomics...working only for banks and stawks since 2012.
Tylers why blame Abenomics and not businesses who have near record profits and literally trillions of dollars worth of retained earnings? While I often sure your mistrust for governmetns, I mistrust all concentrations of power. Since Japan's government does not set wages (and if they did you all would not like that either) why blame the Prime Minister for Sony or Nissan wage policies? Misdirecting your angst, which gets you no closer to understanding what is really happening.
Maybe it's because those businesses understand Abenomics is doomed to fail and will never solve anything and would rather save for the rainy days coming rather than waste money on this pig-in-a-poke. Because when Abenomics fails, the luxurious corporate welfare these folks have been living on for a generation goes away.
Marc, how much money do you have in the bank (rhetorical question don't answer), well why not invest it all into the market the next time it hits an all time high. Because it's fake, that's why you won't.
Deflation isn't great but it's good when you have artificial inflation like what the fed has done. Everyone on TV, the "experts", say they fear deflation, but you have to have deflation when you spent all your inflation in 2 years of artificially juicing the economy with $85 billion a month QE. Bernanke messed with a natural balance and he tried to cheat nature, now we all pay.
Yes, blame families for saving some of their "record profits" (income) and not spending it on having the house painted when it doesn't need to be painted or the lawn mowed when it doesn't need to be mowed. Those evil, greedy, people not spending their money... (same with businesses, correct?)
Maybe you should lobby for laws forcing people to spend their money how someone else sees fit. Oh, never mind... that's what the government already does.
Marc, just an FYI, you can't cut a check out of retained earnings.
Companies are in the business of making money. If the growth prospects were out there they would probably be allocating money to it. Since they see little growth they invest little and use their money and borrowed money to buy back shares since the fed has created cheap money with nothing to use it on. If I had a skill that sony or nissan wanted or needed, they would pay me a competitive wage. Supply and demand is "what is really happening".
I'm not in Japan but it's my understanding that Abe is giving the population two options:
1. Give Abenomics the right to keep printing money and keep doing what it has been doing AND we will not raise taxes.
or
2. We raise taxes and we stop printing money like crazy idiots.
two things about this concern me. First, taxes and printing money are not the same. It's like me saying let me take your money or I shoot you in the face. You would be like, here take my money. But if I said can I take your money with no threat of shooting you, you would say fuk off i'm keeping my money.
Secondly, if they do decide not to get a tax hike and give Abe what he wants (a no responsibility blank check), then Abe will have more power than he ever has had because now he can say, well my good citizens, this is what you voted we do. The citizens made this choice now, not Abe. He's basically trying to wash his hands of responsiblility.
How about a third option:
3. We stop printing money like idiots. (i bet they would vote on this one)
The problem is that local elections decide if Abe stays. As long as the LDP retains its majority in the lower house, Abe will remain PM. It is not the mandate a direct election would provide.
this election is being sold as a tax referrendum which abe will use as an affirmation of his policies. he is basically saying, "what choice do we(you) have? we have to do this?"
mind you, the japanese are willing to put up with a bit of misery if there is good reason but i think they realize this is the end game. this has to work and they have no choice but to go forward.
this is an economic "banzai" attack (i don't like the stereotype but it works here) and the japanese are willing to be slaughtered to achieve their goal.
Why don't they just print money to pay taxes? Oh, wait...they need somebody to do REAL work. Imagine.
basic chart but i will agree with th efailure of abenomics meme as soon as that wage chart confirms the continuation of the trend and starts another leg down without cracking the last spike.
Irish figures ( nominal) much worse.
Google Irish CSO stat body Nov 25 publication.
Irish wages continue to decline in the Irish " boom period" of 2014.
Less foreign labour helps in Japan.
"this town needs an enema" or should that be "this country needs a different asshole"! :)
This is SO Dear Leader Obama's dream scenario for the U.S. Hope-n-Change, peoples. Hope-n-Frickin-Change until you starve to death.
buddy of mine got laid off six months ago. his old boss asked him if he wanted his old job back, but he said he would have to pay him less.
now that's real wage decline!
The Japanese people simply need to understand that they are better off with less money. After all, aren't they copying the US?