Earlier today we reported [6]that the Japanese cries of "more QE" have not only started but are getting progressively louder, when after a massive initial surge in the first half of the year following an epic currency dilution, the Nikkei's performance since May has largely been one big dud, which is putting not only the psychological "wealth effect" at risk, but also is tearing Abenomics apart, since perhaps the only key variable for the Prime Minister's plan of "growth" is the constant increase in the stock market, much the same as in the US. But while the market has gone nowhere fast, it is the economy that is truly starting to crack at the seams, as was confirmed hours ago when Japan reported that in the third quarter its economy grew an annualized 1.9%, following a quarter when the GDP grew at more than double that pace or 4.3%, which in turn succeeded a quarter with 3.8% growth. What's worse, in nominal terms, the actual third quarter growth was a paltry 0.4%: the lowest in all of 2013 while actual nominal consumption plunged to the lowest level since just after the start of Abenomics.
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Paradoxically, and certainly tied to the lack of gains in the market, and lack of losses for the Yen which has stabilized in the upper 90s range, the GDP losses were driven by the two core focal points of Abenomics: exports and consumption. The WSJ reports [9]: "the two growth pillars lost much of their momentum in the reporting period, as exports fell 0.6% from the previous quarter while growth in personal consumption slowed to 0.1%. Exports gained 2.9% and consumption rose 0.6%, in the April-June window. Both figures were also revised Thursday."
Naturally, like every other Keynesian basket case, Japan was quick to place the blame elsewhere, in this case accusing "slowing growth overseas" as the main culrpit. "Japan's growth rate halved during the July to September period compared with the first half of this year, as falling demand from emerging markets as well as weaker consumption put the brakes on the economy's expansion."
It gets better:
"Weaker exports could become a major threat Mr. Abe's mission to haul the economy out of its 15-year-long deflationary malaise. Exports have been hit by decreased demand for cars from the U.S. while sales in emerging Asian economies have been hurt by financial market speculation over the Federal Reserve's plans to downsize its asset-buying program. "
In other words, it was all the US' fault that Abenomics is now failing. Where it wasn't the US fault, is in showing the way that when all else fails, only government funded "growth" is the only answer: "Government-funded public works helped prop up the third-quarter growth. Public works spending rose 6.5% from the previous three-month period, mostly as a part of the government's ¥10.3 trillion stimulus package earlier this year. Ahead of the tax increase, Mr. Abe is compiling another package worth ¥5 trillion."
Some however saw through the triple: Goldman cautioned that “exports have failed to grow in volume despite expectations they would rise with a time lag following a weakening yen, suggesting there may be a structural problem hurting exporters’ competitiveness and exporting capability." Well, since the primary beneficiary of a plunging yen is, at least on paper, the export industry, can one just call it a ballgame for Abenomics?
As for that key sticking point, and so far most undisputed failure of Abenomics by far, declining wages, well: they declined. Goldman says that employee compensations, a key focus of overseas investors, came in with a negative growth in both real and nominal terms for the first time in three quarters.
Amusingly, the weakness in consumption is thought to be short-lived: "Concerns over personal spending during the remainder of the fiscal year to the end of March are not so strong, as analysts expect last-minute demand ahead of Japan's sales tax increase to 8% from 5% in April to prop up consumer spending."
Remind us to look back at this post in 3 months when instead of the widely predicted economic spending Golden Age supposedly driven by even more taxation in the future, consumption instead craters as the population retrenches in anticipation of more upcoming hardship.
But then again economists, like all hacks, were never good at actually figuring out how common sense works.