Like Aesop’s boy who cried wolf, the Japanese authorities have lost credibility, at least when it comes to the threat of intervention in currency markets. As a result, speculators remain convinced that they are making a one-way bet – win big or break even – and continue to push the yen higher.
TOKYO – With Japan’s economy struggling to escape its deflationary torpor, the economic-revitalization plan that Prime Minister Shinzo Abe launched in 2012 has come under growing scrutiny. But Japan’s current travails, which have brought a concomitant decline in Japan’s stock market, stem from the yen’s appreciation – 24% over the last year – against major currencies. “Abenomics” – which included substantial monetary and fiscal expansion – has nothing to do with it.
Since Abenomics was introduced, Japan’s labor market has improved considerably: 1.5 million new jobs have been created, and the unemployment rate has fallen to just over 3%. Moreover, corporate profits have soared, and tax revenues have increased by more than ¥20 trillion ($188 billion).
To build on these gains, Japan has promised a large fiscal expansion next month, which some describe as a piecemeal, temporary version of so-called “helicopter drops” (permanent monetization of government debt). But there is concern that it will not be enough, if the yen continues to appreciate.
TOKYO – With Japan’s economy struggling to escape its deflationary torpor, the economic-revitalization plan that Prime Minister Shinzo Abe launched in 2012 has come under growing scrutiny. But Japan’s current travails, which have brought a concomitant decline in Japan’s stock market, stem from the yen’s appreciation – 24% over the last year – against major currencies. “Abenomics” – which included substantial monetary and fiscal expansion – has nothing to do with it.
Since Abenomics was introduced, Japan’s labor market has improved considerably: 1.5 million new jobs have been created, and the unemployment rate has fallen to just over 3%. Moreover, corporate profits have soared, and tax revenues have increased by more than ¥20 trillion ($188 billion).
To build on these gains, Japan has promised a large fiscal expansion next month, which some describe as a piecemeal, temporary version of so-called “helicopter drops” (permanent monetization of government debt). But there is concern that it will not be enough, if the yen continues to appreciate.