Abenomics - Japan's Dangerous Experiment

"For Abenomics to succeed, Japanese households will need to reverse the recent deflationary trend of excess saving and encourage consumers to spend more. In the infographic, Mads Koefed, Head of Macro Strategy at Saxo Bank, suggests that ‘the new experiment in Japan has boosted consumer sentiment and that has now resulted in consumers spending more of their money’. Will a more optimistic outlook translate into a revival for the world’s third largest economy? It is premature to gauge the success of Abenomics at this stage, and there are question marks over the proposed structural reforms. Fears remain over Japan’s alarming national debt, and an eventual rise in interest rates would add a greater burden on the government, undercutting reform measures. Will an offshoot of Abe’s remedies to Japan’s macroeconomic problems inflict a greater debt load?"

http://uk.saxomarkets.com/tradingdebates/abenomics-infographic-japan-2013

Will debt derail Abenomics?

"It seems to me that one of the automatic, if not always intended, consequences of Abenomics is to force up Japan’s current account surplus, and in fact to force it up substantially. This will have to do at least in part with deciding how to manage the country’s enormous government debt burden, which easily exceeds 200% of the country’s GDP."

"Second, it is not obvious that the world will be able to absorb a significant increase in the Japanese exports, and if Abenomics implicitly forces up the Japanese savings rate relative to investment (which is all that we mean when we say that economic policies force up current account surpluses), these policies can resolve themselves either in the form of high growth and soaring exports, or much lower growth and slowing imports. The former implies that Abenomics will be successful, while the latter that it will fail. It is not obvious, in other words, that Abenomics can succeed in a world of weak demand, and its failure is likely to make Japan’s domestic imbalances worse, not better."

http://blog.mpettis.com/2013/11/will-debt-derail-abenomics/

Japan; from quagmire to Abenomics to collapse! Part I, II, III

"The second thing the reader needs to know about economics is that debt can have a positive or a negative effect on wealth creation, depending on what kind of deb. If the debt is made with the intent of making a subsequent sale, id est. a business loan, it will help increase capital accumulation. However, if the debt is taken on to fund current consumption it will decumulate the capital stock and make society poorer. (...)

Japan misallocated large amounts of capital in the 1980s. Instead of dealing with it head-on, they tried to paper over the problems with fiscal expansion, lowering interest rates to laughable levels and expanding the central bank balance sheet. This story should be familiar to all Americans and Europeans by now as the western economies did the exact same thing in the 2000s.

All it did for Japan was to lift public debt to levels that eat away all tax revenue."

Part I http://www.bawerk.net/#post16
Part II http://www.bawerk.net/#post17
Part III http://www.bawerk.net/#post18

Abe Spurs Day Traders as Japan Stock Swings Hit 2-Year High

"Day trading helps explain why Japanese individuals now account for more than 40 percent of the nation’s equity volume, or about as much as the overseas institutions that once were the biggest traders. They’ve also helped make Japan the most volatile developed market, which is good for some and bad for others. (...) Dramatic price movements aren’t the only thing that’s made Japan a day trader’s paradise. Deregulation of margin tradingopened the flood gates, Murakami said. After rules were relaxed in January, investors can borrow three times as much as their brokerage account balances and turn loans over the instant they exit a trading position."

http://www.bloomberg.com/news/2013-06-23/abe-spurs-day-traders-as-japan-stock-volatility-hits-2-year-high.html

Goldman Slams Abenomics: "Positive Impact Is Gone, Only High Yields And Volatility Remain; BOJ Credibility At Stake"

"While many impartial observers have been lamenting the death of Abenomics now that the Nikkei - essentially the only favorable indicator resulting from the coordinated and unprecedented action by the Japanese government and its less than independent central bank - has peaked and dropped 20% from the highs, Wall Street was largely mum on its Abenomics scorecard. This changed overnight following a scathing report by Goldman which slams Abenomics, it sorry current condition, and where it is headed, warning that unless the BOJ promptly implements a set of changes to how it manipulates markets as per Goldman's recommendations, the situation will get out of control fast."

http://www.zerohedge.com/news/2013-06-18/goldman-slams-abenomics-positive-impact-gone-only-high-yields-and-volatility-remain-