Japan’s Keynesian Money Printing Experiment Continues To Fail: Jobs, Real Incomes And Spending Plunge Again

From Zero Hedge

Just when you thought it couldn’t get any worse… In a veritable deluge of data from Japan tonight, there is – simply put – no silver lining. First, Japan’s jobless rate unexpectedly jumped to 3.8% – its highest since Nov 2013 (despite the highest job-to-applicant ratio in 22 years). Then, household spending re-collapsed 5.9% for the 4th month in a row (showingh no sign of post-tax-hike-recovery).

Industrial Production was up next and dramatically missed expectations with a mere 0.2% rebound after last month’s plunge (-0.9% YoY – worst in 13 months), quickly followed by a 0.5% drop in Japanes retail trade MoM (missing hope for a 0.3% gain). That’s good news, right? Means moar QQE, right? Wrong! Japanese CPI came hot at 3.4% YoY with energy costs and electronic goods ‘hyperinflating’ at 8.8% and 9.1% respectively. As Goldman’s chief Japan economist warns, “the BOJ doesn’t have another bazooka,” adding that “The window for reform may already have been half closed.” We’re gonna need another arrow, Abe!

Japanese unemployment jumps to highest since Nov 2013…


But the job-to-applicant ratio is at its highest since 1992 (no incentive to work?)

Blowing the idea that “slack” is creating deflation out of the water.

Household spending then collapsed 5.9% YoY… 4th month in a row…

As Bloomberg notes, Inflation-adjusted household income fell 6.2% in July y/y, extending its slide to a 10th month in a row, according to data released today by Japan’s statistics bureau.  That is the longest period of declines since at least 2004

Retail Sales dropped and missed again…


  • Credit creation slowed as Loans rose only 1.95% YoY – slowest since March

But don’t expect Moar QQE… as inflation is on fire…

  • MNI: JAPAN JULY CPI TVS +11.8% Y/Y VS JUNE +8.0%

But apart from that… what a total disaster… only – we are sure – to be met with some glib comment from the Japanese politicians that the recovery is on track and there are signs of recovery…

Wondering how this ends… here’s Bloomberg Briefs Tom Orlik ( @TomOrlik ) discussing the future for Japan with Goldman Sachs’ chief Japan economist Naohiko Baba

Why Japan May Catapult From Deflation to Stagflation

A heroic attempt to lift Japan’s economy out of deflation may succeed only in pushing it into stagflation. Goldman Sachs’ chief Japan economist Naohiko Baba tells Bloomberg Economist Tom Orlik why he thinks reviving growth will be tough.

Q: What’s your assessment of Abenomics’ progress so far?

A: Monetary and fiscal stimulus has provided a boost to the markets but the real economic impact is short lived. Structural reform is most important and progress has been limited. Discussion of the Trans-Pacific Partnership has been delayed. There’s been very little progress on labor market reform. We’re seeing higher labor force participation, but that reflects a recovery trend in place from before the start of Abenomics. The impact of reforms has been very limited.

Q: Do you think the Bank of Japan can hit its 2 percent inflation target?

A: I am skeptical. The CPI has already declined from its April peak. The BOJ says it will come down to around 1 percent over the summer then rise again from the second half of the fiscal year. They expect higher wages to make the difference. My view is the CPI will fall to around 0.8 percent to 1 percent and then stay there. I don’t expect the wage channel to work. If you look at the spring wage negotiations this year, despite a big government push, the results were disappointing. In 2015, weaker profits will mean reduced funds for firms to pay higher wages. My guess is that July 2014 wage growth could be the peak.

Q: If inflation goes off track, what will the BOJ do?

A: They will keep their program in place through 2016, make it open ended. They might adjust the composition of purchases, buy more ETFs. It’s difficult for them to increase the size of their JGB purchases. Banks have already sold a large part of their government bond portfolio. Liquidity in the market is low. If they can’t increase the size of their program significantly, the BOJ doesn’t have another bazooka.

Q: How do you assess the impact from April’s tax increase?

A: There was front-loading of purchases ahead of the tax increase and then payback afterward. That’s a temporary impact. The bigger worry is the fall in real income from the tax increase and higher inflation. That’s a longer-lasting impact. Second quarter GDP growth was very weak. If you take out the positive contribution from inventory buildup, real growth was minus 11 percent on a quarter-on-quarter annualized basis. That’s much worse than after the 1997 tax increase.

Q: It seems like Abenomics so far has not been good for households.

A: Real wages are falling 3 percent a year. Real disposable income was down minus 8 percent year on year in the June household survey. It is as if Japan’s economy is heading into stagflation. That’s good for managing debt, bad for quality of life. As households see quality of life fall, it may negatively affect the approval rating f r the Cabinet. That will make it harder to push painful structural reforms. The window for reform may already have been half closed.