Japan's Abenomics Gets Caught Swimming Naked
William Pesek (FAG)
Contributor
I write about economics, markets and policymaking throughout the Asia.
As the Nikkei Stock Average plunges, Japan is producing a bull market in something rather ominous for 2019: déjà vu.
The feeling of familiarity concerns a return to recession and deflationary forces. Didn’t Prime Minister Shinzo Abe arrive on the scene six years ago to avoid this very scenario? Those asking this question tend to grasp at the wrong answer -– that Japan’s sudden return to the red is all Donald Trump’s fault.
Sure, the U.S. president’s dumb trade war wrecked Japan’s 2018. It was, after all, supposed to be the one in which Abenomics finally produced solid wage gains, boosted consumer prices and validated the 98% stock surge on Abe’s watch. Fallout from Trump’s tariffs has since sent investors fleeing Japan’s export-driven recovery, the longest since the 1980s.
That revival hit a wall in the third quarter, when growth contracted an annualized 2.5%. Tokyo’s spin machine would have us believe that drop reflected earthquakes, storms and bad luck. Yet Trump’s assault on Asian supply chains did the real damage. And yet, most of the blame leads to Abe’s office in Tokyo, not Trump’s in Washington.
Fact is, Japan’s $4.9 trillion economy wouldn’t have halted so abruptly of Abe had used the growth years to reinvent a model with more in common with South Korea than Germany. For all the huge talk of structural Big Bangs and reanimating animal spirits, Abenomics turned out to be a tale of old-school weak-curre.
https://www.forbes.com/sites/williampesek/2018/12/31/japans-abenomics-gets-caught-swimming-naked/#482dca7f22db