In the wayback days, when I first studied the "theory of electricity"; during my electronics training period, I had to presume the theories of electron flow and related, whether fully understood or not by the most enlightened. At the very least, the theories were indeed able to be applied and manipulated to cause and allow for the functions of all things concerning electricity.
I have followed, as time allows; the theory of the economics policies that have been put in place during the last 5 years by central banks around the globe. The current biggest player in the "game of economic theory" began their game (again) in Japan about 1 year ago.
With what one may read in the linked article and the below text (not mine); is there a short explanation that may be presented to me; to help me understand why all of the currrent and forthcoming policies in Japan is supposed to really fix any problems with their economy?
Questions that arise:
--- devalue the currency and inflate the economy via more expensive imports.....DUH?
--- then, have a new tax in 2014
Isn't all of this just a musical money chairs and moving money among different pockets, with some folks being the winners?
Thank you for your time.
Catch Short overview article, Japan's economyJapan's consumer prices rose in September for the fourth straight month, boosted mainly by higher energy costs, in the latest set of data showing fitful progress toward revitalizing the economy.
The core consumer price index, which excludes food, was up 0.7 percent compared with 0.8 percent in August, the Management and Coordination Agency said. With food prices factored in, the index was up 1.1 percent.
The government is striving to end a long bout of deflation through aggressive monetary easing and hefty spending on public works. Bank of Japan governor Haruhiko Kuroda insists the economy is on track to achieve an official target of 2 percent inflation within the next year or so.
But economists say much of the increase in prices in recent months has been due to higher costs for imported food and energy as the Japanese yen has weakened as a result of mammoth monetary easing.
"Import price inflation has remained stubbornly high, so we could see a further mild increase in goods inflation in coming months. But the pass-through from the weak yen to goods prices has now mostly run its course," Capital Economics said in a commentary Friday.
It said further prices increases would likely be muted.
A planned 3 percentage point increase in the 5 percent national sales tax in April 2014 is expected to weigh on growth in the coming year, despite government stimulus measures to counter the expected impact on consumer demand.
Consumer spending is likely to gain some oomph, however, as shoppers rush to buy big ticket items such as vehicles ahead of the tax hike.
Weaker than expected growth in exports, despite the weaker yen, is also viewed as a sign of wavering momentum.
"Economic recovery takes a break," said a headline in Friday's edition of the financial newspaper Nikkei Shimbun.
Excluding food and energy costs, the inflation index was flat, the first time since 2008 that measure has not fallen.
Japanese consumers are facing price hikes for a wide array of items, including most food products. Fresh food prices rose 11 percent in September from a year earlier, including a 58 percent increase in the price of cucumbers. Gasoline prices rose 9 percent and electricity rates 7.6 percent, for a 5.4 percent increase in overall utility rates.
Price increases for other consumer goods, housing and services have remained weak, however, due to competition and oversupply.
Wage increases, key to stimulating consumer demand, have been slow in coming. Major labor groups say they plan to push for more than 1 percent increases in base wages in spring labor negotiations next year, for the first time in five years. But any increase in average incomes is likely to be more than offset by price and tax hikes.
Comments
I am not an economist and have never attempted to explain Japan’s woeful economy over the last several decades. In some neighborhoods that might qualify me as an expert. I certainly make no such claims.
However, you did ask for an analysis, and a simple, short one at that. I have visited both Japan and China twice over the last decade, so I have formed an anecdotal-based opinion that has both absolute and relative aspects to it. My opinion is merely experience driven so please do not expect a rigorous data driven perspective. I do not own one and do not plan an investment to seriously study the matter. Given that limitation, here is my quick and dirty perspective.
Economic rules and laws are not the same as those that govern electrical energy flow. Electricity laws are universal, irrefutable, and invariant over time. Economic laws are not.
Imagine that individuals and electrons are the working agents for the economy and electricity, respectively. Given a voltage differential and a resistance level, electrical current flow is reliably predictable. Given a money supply increase, folks get to choose to either spend or hoard it. A government or banking decision to increase the voltage, the money supply, does not automatically translate into an increase in demand. Individual players change their resistance levels based on hairy and unpredictable behavioral characteristics.
The Japanese government strongly believes in Keynesian economics. Keynesian policies have a checkered success history; sometimes they work, often they do not. Keynesian tactics failed in the US in the 1970s. Since it does not have a profit incentive element, Government project spending is almost always less efficient than private investment. Japan has been down this road several times recently without much success. The anticipated economic multipliers have not materialized.
Also, the Japanese population is notorious for its frugal saving habits. Money supply might well increase without stimulating an increase in demand. I suspect the general population, and especially government functionaries, still remember their 1980s bubble economy. They are committed to avoiding a repeat and tend to be very conservative on money matters.
Japan’s economic woes must be a highly complex, relative, and interactive on a global scale problem. Otherwise it would have been successfully resolved years ago. To provide an overly simplistic answer to such a very complex problem is surely a reach too far, but, nevertheless I’ll propose one candidate.
It’s the people. They have lost their business aggressiveness. They have abandoned their fighting nature and courage. Adam Smith would say that they have lost their “animal spirits”. Too much government intervention encourages a fatalism philosophy. Too bad if true. A younger replacement generation could recover it.
I mentioned earlier that I anchor my assessment on limited direct interactions with both the Japanese and the Chinese. Allow me to relate two episodes, one with each population, to illustrate my point.
In Japan, I stayed at a plush, first class hotel in Kyoto. The elevator was serviced by three, yes three, young female Japanese college graduates. One pointed you to the elevator, the second escorted you into it, and the third pushed the floor buttons.
That’s a terrific example of an inefficient use of talented, well educated women. This story is representative of other inefficiencies that I experienced in my two extended stays in several Japanese cities. The shameful waste of human resources was repeated many times. The Japanese seemed resigned to this complacent and compliant behavior.
In contrast, the Chinese population seemed devoted to Smith’s economic “animal spirits”. They aggressively pursued their economic wellbeing by aggressively soliciting and servicing any and all visitor wants. Many volunteered to satisfy whatever needs you developed anytime, day or night. And they delivered on their promises.
Given our group experiences, it was clear that this newly developing form of Chinese capitalism would swamp the staid Japanese form in a short timeframe. The enthusiasm disparity was huge.
Well Catch22, you solicited some explanation, and I offered one. It surely is not correct in depth, but it just might provide you with a point of departure for your own thinking on the subject. I hope it helps just a little.
I apologize for the shallow nature of my response, but I do not intend to research the problem. I’ll leave it to real economists to battle the details, and likely never come to a mutually agreed upon resolution.
Best Regards.