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The end of Abenomics? Think again

The end of Abenomics? Think again
Published 20 Nov 2015   Follow @SamRoggeveen

With Japan falling back into technical recession, the temptation to question Prime Minister Shinzo Abe's economic reform agenda is strong. But here are three counter-intuitive takes on the latest news (with thanks to Malcolm Cook for the links).

First, Matthew Yglesias in Vox:

The Japanese economy is shrinking because Abe already succeeded in fixing Japan's unemployment problem. Japan is simply in an odd situation where low and falling levels of unemployment aren't good enough to ensure economic growth.

The Japan Times:

If Japan’s economy is in trouble, you wouldn’t know it from the stock market.

In what’s shaping up to be a pretty forgettable year for global equity investors, Prime Minister Shinzo Abe’s Japan is one of the few places providing double-digit returns that are backed by profit growth. The 12 percent gain for the Nikkei 225 stock average through last week came as its companies post record earnings, and valuations rose just 2.3 percent from the end of last year.

A Bloomberg editorial:

...recessions simply don't mean the same thing in Japan as they do most everywhere else. The country has suffered seven of them in the past 20 years -- two since Abe took office in late 2012. Given Japan's declining population, its trend growth rate is at best 0.5 percent, so even downturns as slight as last quarter's 0.8 percent decline can tip the economy into negative territory...

...Even if China's slump hadn't provided an unexpected headwind, efforts to revive Japan were always going to take longer than many observers acknowledged. Difficult structural reforms are under way -- to crack open the energy, pharmaceutical and agriculture sectors, for instance; to slash tariffs under the Trans-Pacific Partnership trade pact; and to unwind the web of cross-shareholdings that's stifled much of Japan Inc. -- but they can't be expected to yield benefits immediately.

Photo by Flickr user Alessandro Grussu.

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