Monday, January 07, 2013

So Far, So Good; If Only That Were All There Was to It

Prime Minister Abe has talked down the yen and talked up the stock market with his proposal for a 2% inflation target and a government –BOJ policy accord and his expression of intent for a plus-size supplemental budget and reflationary FY2013 budget. In other words, he has managed to create expectations for a combination of inflation and low interest rates and for rising corporate profits. Mission accomplished? Not quite. In fact, unless the Abe administration undertakes the kind of broad-stroke, structural reforms on labor, land, and the social safety net to name three, that cut away at inefficiencies, demographic constraints are sure to consign the Japanese economy to another decade of you-know-what. Heizo Takenaka has signed onto the economic team, an encouraging sign, but a powerful reformist voice of skepticism from a METI defector can heard here, in Japanese (and no, it’s not Shigeaki Koga, for once). And all-around Abe-skeptic Noah Smith, proprietor of an extremely lively economics blog who happens to have an unlikely personal interest in the Japanese economy, thinks that Abe won’t even reach that starting line.

Me? I’m not an economist but I do have to live here; I wish Abe the best of luck, but I’m not going to let my guard down. First data point: his January Washington visit, and what he does (or not) with TPP there.s to It

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