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Japanese Firms Admit Abenomics Failed, Government Now "Left Trying To Redistribute Wealth"

Do not believe in official statistics, Japanese retailers seem to be saying, as they cut earnings forecasts and warn of lackluster consumer spending, a key growth engine for Japan at a time when exports and factory output are stalling. Despite government statistics claining a 2.9% rise in household spending, Reuters reports Japanese retailers exclaimed "Consumer spending has ground to a halt," as Japan heads for a quintuple dip recession. Amid falling wages and higher costs, on apparel maker warned "shoppers are tightening their purse strings."

Abenomics is not working...

 

"Consumer spending has ground to a halt," said Noritoshi Murata, president of Seven & i Holdings (3382.T). "There are a lot of concerns about the global economy and not many positives for consumption. Weak spending could continue into the second half of the fiscal year."

 

Seven & i, which operates Japan's ubiquitous 7-Eleven convenience stores, on Oct. 8 trimmed its full-year profit forecast by 1.6 percent to 367 billion yen ($3.05 billion) and cut its revenue forecast by 3.9 percent to 6.15 trillion yen, triggering a fall in its shares in Tokyo.

As Reuters reports, shortly after Abe took office late in 2012, the wealthy cashed in on a stock rally and went shopping. Unions got the pay increases they asked for, and companies started raising retail prices.

Since then, the monetary and fiscal measures taken by Abe to rekindle Japan's economy have delivered uneven results.

 

A sales tax hike last year to 8 percent from 5 percent helped tip the economy into a brief recession.

 

Now, the world's third-largest economy is at risk of falling into its fourth recession in the past five years as exports, factory output and consumer spending stumble.

 

Abe had a bold agenda of ending deflation and knocking down the barriers to growth, but many economists say the requisite policies never really materialized.

 

Some economists worry consumer spending is now stuck in a prolonged period of very low growth.

The main problem is wages are not rising fast enough to keep pace with rising food prices, and consumers are starting to cut back on other goods...

Real wages, adjusted for inflation, rose 0.5 percent in July from a year earlier. That was the first gain in 27 months. But wage growth subsequently slowed to 0.2 percent in August, and summer bonuses fell from last year, government data shows.

 

Another problem is more and more workers are getting stuck in jobs with low pay. Part-time and irregular workers comprised a record 37.4 percent of the workforce last year, according to the National Tax Bureau. Irregular workers earn on average less than half of what regular full-time workers earn, tax data show.

The third problem is the government plans to raise the nationwide sales tax again, to 10 percent in 2017 from 8 percent, and households are already changing their behavior.

And now the retail sector is adapting to a return to more subdued household spending.

"Some companies are starting to realize they've actually driven away some customers by raising retail prices," said Norio Miyagawa, senior economist at Mizuho Securities.

 

"The government's initial growth strategy did not really expand the pie. Now the government is simply left trying to redistribute wealth."

As we noted previously, the cultish fervor remains though among the mainstream media...

From all that you might ask yourself why would the BoJ need more QQE when its own argument put forth suggests exactly the opposite. Such contradictions are scarcely the exceptions, as the entire idea is itself at odds with itself. Apparently the only true economic danger in Japan, as elsewhere, is not the actual economy (which is always terrific or just about to be) but the evil, dreaded “deflationary mindsight.” So the BoJ upped its ante in case Japanese people start thinking unhappily about what QQE might not be able to do with, apparently, no real basis for them to actually think that way. Thus is the treasure of monetarism as it applies “forward guidance” and the Krugman version of “credibly promise to be irresponsible” as if nobody should notice anything but the intended happy ending. It really is the monetary equivalent of “the beatings will continue until morale improves.”