Why Japan needs Abenomics and Bitcoin faces a lost century

What do Japan's "lost decade" and the intractable problem facing bitcoin have in common? Deflation.

The Japanese economy is in a mess. It has been for a while now. GDP broke $5trn in 1996, but then fell, and stayed low for a decade and a half. It only reached that high again in 2011, after well over a decade with growth fluctuating between mildly positive and mildly negative : the "lost decade" of economists' nightmares.

That's the background against which the new prime minister Shinzo Abe is struggling. Abe, a right-wing popular nationalist, was elected on a platform of giving the Bank of Japan a kick up the arse and using unconventional methods to restore the country to growth. His motivations have been questioned repeatedly: some fear that he's just trying to provide a short term boost to the economy before the upcoming election to in country's upper house; others, that he's only enacting bold new policy due to a stubborn belief that whatever conventional economists say must be wrong. Sure, a stopped-clock is right twice a day, but that doesn't mean you want to base your economy on what it says.

But the unconventional policies have been enacted, and now we are just waiting to see their effect. Abe has launched a ¥10.3trn stimulus package; his economic minister has explicitly targeted the stock market, in an attempt to push it up by 17 per cent in just two months; and he's got his choice of central bank governor, with the appointment of the maverick Haruhiko Kuroda.

But if we want to find out whether these plans are working, we don't look at GDP. That's too slow to change, it's too subject to external shocks, and, most importantly, it's a symptom, not a cause.

The real culprit is inflation. Or rather, deflation.

The Japanese economy has had inflation hovering around 0 per cent – and more frequently below it than above it – for almost as long as it has had stagnation. And while the country has seen a return, of sorts, to GDP growth, inflation remains as stubbornly negative as ever. Even after Abe's reforms, the headline rate fell – down to -0.9 per cent, the fastest rate of deflation in three years. That's against a background, not only of all those impressively major reforms, but also a far more direct one: raising the inflation target of the bank of Japan from 1 to 2 per cent.

But why is deflation a problem? In the west we're used to fearing inflation, after the scarring experiences of the 1970s, when prices grew by 20 per cent in a year. And we all learned in school about hyperinflation in Weimar Germany, where the price of bread would be higher in the afternoon than it had been in the morning, and how that led to the rise of Hitler. (Incidentally, that connection is largely mythical; although it was responsible for prompting the creation of many extremist groups, hyperinflation was largely beaten by 1924, long before the Nazi party became a force in German politics.)

But deflation – prices getting lower year-on-year – sounds like a good thing. Who doesn't like getting richer without having to do anything?

The easiest way to explain the issues is to look at another economy which could almost have been invented to illustrate the problems with deflation: the trade in bitcoins.

Bitcoin, you may recall, is an anonymous, cryptographic, peer-to-peer digital currency. It's been in the news because of its astonishing boom-and-bust dynamics, with the value of one bitcoin increasing by 2000% in two months, then losing almost all of that in a week, and now slowly returning to a second high. But what's interesting here is that it's a currency with deflation built in from the very start.

There will only ever be 21 million bitcoins. Half of them have been made – "mined", in the parlance – already, and the rest will be released in decreasing quantity at ten minute intervals until 2140. Add in the fact that, although they can't be created in any other way, they can be destroyed just by deleting the file that holds them, and you've got a currency which is designed to deflate.

That deflation was made far worse in the last couple of months by the hyperbolic increase in the value of a bitcoin measured in any normal currency. If you can buy a bitcoin for $10, and then a month later it costs you $200, then that is largely inseparable from inflation, particularly since you still need to use real currency to eat, pay your rent, and buy your travelcard to get to work. It got so bad that some started talking about "hyperdeflation".

What all that deflation does is ensure that, if you hold bitcoins, it makes sense to wait until you're absolutely sure you need to make a purchase before you part with them. After all, if you're the guy who bought a pizza for 10,000 bitcoins in 2010, you may have got a tasty meal; but if you had held off, you would be $1.3m richer now.

And it gets worse when you look at things like investment. If you used bitcoins to buy equity in a startup, your expected return would have to be through the roof to even stand still compared to where you would expect to be if you hoarded the money.

These are hypothetical questions for bitcoin – no stock market in the world lets you buy equity with the currency yet – but they're very real problems in Japan. The dearth of investment is so bad that the government has "nationalised" industrial stock, spending up to ¥1trn to buy plants in its biggest manufacturing industries.

There is optimism that Japan can pull itself out of this hole. Even as inflation continues to fall, predictions for future inflation are high; and there's a certain sense that with enough wild plans thrown at the wall, something is going to stick. Even if its just out of the frying pan and into the fire, a change of scenario would be nice.

The future's not so rosy for bitcoin. Even if its price stabilises, the long-term policy of deflation is not going to go away. The fact that Japan's "lost decade" lasted fifteen years may seem like a stretch, but bitcoin's could last a lifetime.

Shinzo Abe. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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MP Michelle Thomson's full speech on rape at 14: "I am a survivor"

The MP was attacked as a teenager. 

On Thursday, the independent MP for Edinburgh West Michelle Thomson used a debate marking the UN’s International Day for the Elimination of Violence against Women to describe her own experience of rape. Thomson, 51, said she wanted to break the taboo among her generation about speaking about the subject.

MPs listening were visibly moved by the speech, and afterwards Thomson tweeted she was "overwhelmed" by the response. 

Here is her speech in full:

I am going to relay an event that happened to me many years ago. I want to give a very personal perspective to help people, both in this place and outside, understand one element of sexual violence against women.

When I was 14, I was raped. As is common, it was by somebody who was known to me. He had offered to walk me home from a youth event. In those days, everybody walked everywhere - it was quite common. It was early evening. It was not dark. I was wearing— I am imagining and guessing—jeans and a sweatshirt. I knew my way around where I lived - I was very comfortable - and we went a slightly differently way, but I did not think anything of it. He told me that he wanted to show me something in a wooded area. At that point, I must admit that I was alarmed. I did have a warning bell, but I overrode that warning bell because I knew him and, therefore, there was a level of trust in place. To be honest, looking back at that point, I do not think I knew what rape was. It was not something that was talked about. My mother never talked to me about it, and I did not hear other girls or women talking about it.

It was mercifully quick and I remember first of all feeling surprise, then fear, then horror as I realised that I quite simply could not escape, because obviously he was stronger than me. There was no sense, even initially, of any sexual desire from him, which, looking back again, I suppose I find odd. My senses were absolutely numbed, and thinking about it now, 37 years later, I cannot remember hearing anything when I replay it in my mind. As a former professional musician who is very auditory, I find that quite telling. I now understand that your subconscious brain—not your conscious brain—decides on your behalf how you should respond: whether you take flight, whether you fight or whether you freeze. And I froze, I must be honest.

Afterwards I walked home alone. I was crying, I was cold and I was shivering. I now realise, of course, that that was the shock response. I did not tell my mother. I did not tell my father. I did not tell my friends. And I did not tell the police. I bottled it all up inside me. I hoped briefly—and appallingly—that I might be pregnant so that that would force a situation to help me control it. Of course, without support, the capacity and resources that I had within me to process it were very limited.

I was very ashamed. I was ashamed that I had “allowed this to happen to me”. I had a whole range of internal conversations: “I should have known. Why did I go that way? Why did I walk home with him? Why didn’t I understand the danger? I deserved it because I was too this, too that.” I felt that I was spoiled and impure, and I really felt revulsion towards myself.

Of course, I detached from the child that I had been up until then. Although in reality, at the age of 14, that was probably the start of my sexual awakening, at that time, remembering back, sex was “something that men did to women”, and perhaps this incident reinforced that early belief.​
I briefly sought favour elsewhere and I now understand that even a brief period of hypersexuality is about trying to make sense of an incident and reframing the most intimate of acts. My oldest friends, with whom I am still friends, must have sensed a change in me, but because I never told them they did not know of the cause. I allowed myself to drift away from them for quite a few years. Indeed, I found myself taking time off school and staying at home on my own, listening to music and reading and so on.

I did have a boyfriend in the later years of school and he was very supportive when I told him about it, but I could not make sense of my response - and it is my response that gives weight to the event. I carried that guilt, anger, fear, sadness and bitterness for years.

When I got married 12 years later, I felt that I had a duty tell my husband. I wanted him to understand why there was this swaddled kernel of extreme emotion at the very heart of me, which I knew he could sense. But for many years I simply could not say the words without crying—I could not say the words. It was only in my mid-40s that I took some steps to go and get help.

It had a huge effect on me and it fundamentally - and fatally - undermined my self-esteem, my confidence and my sense of self-worth. Despite this, I am blessed in my life: I have been happily married for 25 years. But if this was the effect of one small, albeit significant, event in my life stage, how must it be for those women who are carrying it on a day-by-day basis?

I thought carefully about whether I should speak about this today, and it was people’s intake of breath and the comment, “What? You’re going to talk about this?”, that motivated me to do it, because there is still a taboo about sharing this kind of information. Certainly for people of my generation, it is truly shocking to talk in public about this sort of thing.

As has been said, rape does not just affect the woman; it affects the family as well. Before my mother died early of cancer, I really wanted to tell her, but I could not bring myself to do it. I have a daughter and if something happened to her and she could not share it with me, I would be appalled. It was possibly cowardly, but it was an act of love that meant that I protected my mother.

As an adult, of course I now know that rape is not about sex at all - it is all about power and control, and it is a crime of violence. I still pick up on when the myths of rape are perpetuated form a male perspective: “Surely you could have fought him off. Did you scream loudly enough?” And the suggestion by some men that a woman is giving subtle hints or is making it up is outrageous. Those assumptions put the woman at the heart of cause, when she should be at the heart of effect. A rape happens when a man makes a decision to hurt someone he feels he can control. Rapes happen because of the rapist, not because of the victim.

We women in our society have to stand up for each other. We have to be courageous. We have to call things out and say where things are wrong. We have to support and nurture our sisters as we do with our sons. Like many women of my age, I have on occasion encountered other aggressive actions towards me, both in business and in politics. But one thing that I realise now is that I am not scared and he was. I am not scared. I am not a victim. I am a survivor.

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.