Shinzo Abe’s remarkable attempt to rip up the monetary policy textbook has been paying dividends. Abe got his pick of governor; The strong yen, which was blamed for stifling Japan’s exports, has been sliding against the dollar (up is weaker):
And the Nikkei 225, Japan’s leading stock index, is on trend to hit 13,000 before 31 March—meaning that Japan’s economic minister’s attempt to goose the stock market has been successful.
But economist Norm Smith throws cold water on the popularity of Abenomics, reminding us that Shinzo Abe does have other policies as well.
We’ve always known that Abe is, in the words of Paul Krugman, “a pretty bad guy”. But the hope of economists was that he was stumbling into a string of monetary successes; that by doing the exact opposite of the conventional wisdom for no other reason than being a crotchety old anti-intellectual, he could prove that conventional wisdom was wrong.
For those purposes, it didn’t really matter that Abe is ” a nationalist, a denier of World War II atrocities, a man with little obvious interest in economic policy”. We would get our experiment either way.
But Smith now picks apart the likely plan of action for Abe, and it doesn’t include seeing the experiment through to success:
Abe is generating a brief fillip of optimism and a sense of economic movement in order to secure an LDP majority in the all-important upcoming upper house election. Securing that majority would allow him to get on with his true all-consuming priority – revising Japan’s constitution. After that, his conservative instincts, and the conservative instincts of the Finance Ministry (which is arguably a lot more powerful than the Prime Minister), will take over, as will the worries of the LDP’s elderly voters that inflation would destroy their hard-earned life’s savings. At that point, talk of radical monetary reform will evaporate, and the recent movements in the yen and the Japanese stock market will begin to slowly unwind.
What cynical actions of right-wing nationalists give, cynical actions of right-wing nationalists take. If Smith is right, Abenomics isn’t long for this world.