Japan Press Weekly

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2013 June 26 - July 2 [ECONOMY]

Is it true ‘Abenomics’ turns economy around?

Prime Minister Abe Shinzo is boasting of an upturn in the country’s economy as a result of “Abenomics”. Is that true?

Abe says economic indicators are positive, but people don’t feel any recovery

Abe says that all economic indicators are showing signs of economic growth. It is true that production and consumption have increased, but it was mostly wealthy people buying high-end products following the recent rebound in the stock market that accounted for the increase in consumption. In fact, 78% of ordinary people answered in an Asahi Shimbun opinion poll (June 11) that they do not feel the economy has recovered.

Abe never says anything about the fact that capital investment by Japanese companies has been in decline for the fifth consecutive quarter.

Companies have no incentive to increase capital spending because they know that there will be little demand as consumer spending continues to shrink. As a matter of fact, household spending by the general public has cooled down. The average monthly income of workers decreased to 272,406 yen in April 2013 from 281,700 yen in April 2008 before the Lehman Shock.

The same Asahi survey shows that 45% of respondents think that Abenomics will not contribute to an increase in wages and jobs while 36% answered positively.

The biggest factor in the stagnant economy is weak domestic demand caused by falling wages and ongoing cost-cutting practices by large corporations. Only when ordinary people’s incomes show an upward trend, will a full-fledge growth in consumption become possible.

Abe admits that some people still do not feel the economy has recovered, so he says he will stick with his economic policy to the end until everyone feels an economic upturn.

Abenomics has “three arrows” which are to whip up speculative investments and a bubble economy by means of “an entirely new dimension of monetary easing”; to increase government spending for unnecessary public works projects; and to promote a “growth strategy” to encourage the growth of large corporations by exporting Japan’s infrastructure and nuclear power plants to other countries, lifting employment regulations, and giving tax breaks on capital investment.

Abe aims all these arrows only for the benefit of large corporations. Regarding the enormous financial burden the country will bear in association with his economic policies, he seeks to make up for this expected burden with an increase in the consumption tax rate and cutbacks in social welfare spending.

Abe calls for relaxation of dismissal rules and more flexible labor mobility in order to facilitate smooth layoffs and restrain wage increases. In addition, with a higher consumption tax rate and cuts in social welfare services, Japan’s domestic demand will further cool down and the livelihoods of the general public will be damaged further.

It is absolutely necessary to discourage Abe from sticking with his economic policy to the end. What he should do instead is to cancel the plan to increase the consumption tax rate, help boost people’s income by returning part of large corporate internal reserves to the society, and improve social welfare programs.