UNIVERSAL VISION

There’s an article at Bloomberg today that verifies what I’ve been saying since December of 2012: Abenomics is failing and is having the exact opposite effect of what was intended.

From Bloomberg: Japan Inflation Accelerates to Fastest Since 2008 on Energy

Japan’s inflation accelerated to the fastest pace since 2008 in August on higher energy costs, underscoring pressure on Prime Minister Shinzo Abe to drive wage increases as he seeks to end 15 years of deflation.

Consumer prices excluding fresh food increased 0.8 percent from a year earlier, the statistics bureau said today in Tokyo. The median forecast of 30 economists surveyed by Bloomberg News was for a gain of 0.7 percent. Stripping out energy and perishables, prices fell 0.1 percent.

While, on the surface, and looking at just the core CPI, people are happy about Abenomics, but the cheerleaders are conspicuously silent; a quick peak under the surface shows why as there are massive problems building up.

Japan’s version of, “Change you can believe in!”

Abenomics is supposed to devalue to currency to increase exports all the while wages increase are supposed to help the Japanese public spend more thereby turbo-charging the domestic market.

But it isn’t working out that way at all.

First off all, Japan’s Trade Deficit was massively in the red for the 14th straight month in a row and hit a historical deficit record at the same time.

Please refer to: BNP Paribas Gives Abenomics Only 10% Chance of Success? – I Think They Are Way Too Optimistic

For the eight month period, the trade deficit hit a record of ¥6.8 trillion, up 66% from the same period in 2012, and up 332% from 2011. During that period in 2010, Japan had a surplus of ¥4.2 trillion! Japan’s trade fiasco is on a steep downward slope. August was the worst August ever, July the worst July ever, June the worst June ever…. There’s no discernible turning point on the horizon.

And secondly, wages for workers (the people who were supposed to benefit from all this and start buying stuff) have gone down for the 14th consecutive period in a row (I guess 14 is the magic number for the failure of Abenomics!) Bloomberg again:

Salaries in July extended the longest slide since 2010, with regular wages excluding overtime and bonuses falling 0.4 percent from a year earlier, a 14th straight drop.

Not only are wages declining, while energy (and food) costs are rising, there’s a double whammy of a 40% Sales Tax just around the corner!

Gasoline prices rose this month to the highest since 2008, according to the industry ministry. The nation’s last operating nuclear reactor was halted for maintenance on Sept. 15, leaving Japan without atomic power for the first time since July 2012, and more dependent on imported fuel…

The yen’s 20 percent slide against the dollar in the year through August pushed up fuel costs. While the data point to early success for Abe, a sales-tax increase scheduled for April will add to the burden on households and risk dragging on the nation’s economic rebound. Abe is set to announce a decision on the levy on Oct. 1.

“Without pay increases, households’ purchasing power will weaken gradually,” said Taro Saito, director of economic research at NLI Research Institute in Tokyo. “Abe will have to keep up his campaign on companies for wage growth.”

In this insane Keynesian experiment that Abe is trying, wages are supposed to rise along with inflation. In Japan, the opposite is happening.

This, again, is simple mathematics, folks…. We are witnessing a slow-motion train wreck in Japan.

The good news is consumer confidence is also way down in Japan (for the third month in a row)… Which is usually a precursor to a change in government….

…Rising prices in the absence of higher incomes have dented consumer sentiment, which could undermine consumption…

…Consumer confidence fell in August for a third consecutive month, and sentiment among merchants declined for a fifth month.

The average consumer confidence drops for three months in a row, amongst all the Abenomics recent good news? (polite laughter and applause here, please!) And amongst merchants, it drops for 5 months in a row, and people say I’m negative? Yes, OK. Fair enough. I may be negative on Abenomics, but I work amongst the Japanese and hear what they say and talk about. I’m no more negative than they are.

I just report the facts. Just the facts, ma’am!

Like I said, the best thing here in the news is the drop in confidence part. Why? A drop in confidence amongst the Japanese has always lead to a change in government… But, alas, in Japan’s case, and judging from recent history, a change in government won’t help… It’s too late to fix the debt to GDP problem, energy costs are skyrocketing, the nuclear power plants aren’t coming online anytime soon (and even if they did, that’s not exactly good news, is it?) and the system is broken.

Any new government of Japan will be more of the same: Meet the new boss, same as the old boss… Japan’s problem isn’t this political party or that… Japan’s problem is the government.

There’s a storm coming, folks.