Japan’s economy dysfunctional or just putting off the inevitability of neo-liberal free trade

Interesting article appeared in the Japan Times pointing out how “Abenomics” is now being viewed as a complete failure written by William Pesek of Baron’s Asia. It’s just a huge disappointment though reading what the no-liberal free trade economic guru Paul Krugman commented on regarding “Abenomics” is a failure. What makes this article interesting is that work related stress and death is way up in Japan, and despite the LDP and Shinzo Abe initially announcing that Japanese women would be allowed into management positions inside Japan’s corporations hasn’t happened. Considering Japan’s opposition to the TPP trade agreement, my bet is the LDP and Japan’s corporations are fighting off neo-liberal free trade which Krugman represents.
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Source: Japan Times

Abenomics failure explained

by William Pesek
Barron’s Asia
April 4, 2016

In recent Tokyo visits, two Nobel laureates pleaded with Shinzo Abe: Please don’t be crazy enough to raise taxes on your deflation-plagued nation.

What Paul Krugman and Joseph Stiglitz really did was explain why the prime minister’s economics program has flopped so spectacularly, and how Abe’s team is doubling down on failure by clinging to dogma that has no place in Japan’s present or future.

It’s testament to Abe’s salesmanship that some media still speak of Abenomics as a going concern — just one solid stimulus from restoring Japan’s 1980s greatness. But a con is a con. The first real crack in Abe’s ruse came in April 2014, when his government raised the consumption tax to 8 percent from 5 percent. Sure, getting a handle on the nation’s gargantuan public debt is plenty important, but that such a modest step killed growth prospects should’ve been signal enough that Abe needed to think bigger and recalibrate policies.

Amazingly, Krugman and Stiglitz had to spend their time with Abe trying to teach Economics 101. Didn’t Herbert Hoover, America’s Depression-era leader, teach posterity enough about ill-timed fiscal tightening? Insisting on a further 2 percentage points of sales tax next year is just pushing Japan Inc. toward more austerity and fewer wage increases.

This retrograde tax drama exposes Abenomics’ biggest flaw: a lack of imagination. With its three arrows — monetary stimulus, fiscal pump priming and deregulation — Abe’s team aimed to goad cash-rich companies into fattening paychecks. That would boost consumption, triggering a virtuous cycle of economic revival, inflation, greater entrepreneurship and more swagger when Japanese officials walked into a Group of Seven meeting.

But Tokyo’s plan to regain its innovative mojo lacks, well, innovation. To save Japan from another credit downgrade, why not hike taxes in places that won’t deaden growth? Why not triple tobacco levies and turn Japan into less of a puffer’s paradise? How about a carbon tax, something Stiglitz favors? A hike in inheritance taxes, meanwhile, would reduce inequality. A review of white-elephant public works projects is in order, to say nothing of a tighter lid on runaway budgets for the 2020 Tokyo Olympics. And, what, government bureaucrats can’t fly economy class now and again?

Abenomics has long had an intellectual-honesty problem. It sought to treat the symptoms of what ails Japan (deflationary pressures) and not the underlying illness (a complete lack of confidence in the future). That’s why the Bank of Japan’s unprecedented yen-printing program enriched hedge funds, not households. It’s why pledges to create a Japanese Silicon Valley and unleash a startup boom amounted to swamp gas. It’s why, with the exception of Foxconn Technology buying Sharp, foreign buyers aren’t rushing to Japan. And it’s why the upcoming May G-7 meeting in Mie Prefecture will engender more embarrassment than swagger for Japanese officials.

The Trans-Pacific Partnership on which Abe’s team spent so much time and energy is part of the ruse. As Krugman wrote in a New York Times column last May 22: “Whatever you may say about the benefits of free trade, most of those benefits have already been realized.” Besides, he argued that U.S. President Barack Obama’s trade deal isn’t really about trade. Some already low tariffs would come down, but the main thrust of the proposed deal involves strengthening intellectual property rights — things like drug patents and movie copyrights — and changing the way companies and countries settle disputes.”

Please go to the Japan Times website to read the entire article:

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