Abe’s shaman on the ropes

We wrote on Sept 9, 2014 how Japan’s post-war miracle was an aggressive mercantilist policy which depended on protection and exchange rate manipulation [see http://different-traditions.com/?p=1899]. That the US could put an end to that with the Plaza Accords of 1985 was due to Japan’s status as a conquered nation, something which was made very clear by recent events, when the reformist government of Yukio Hatoyama was scuttled by the US in 2010 [See report on Karel Van Wolferen’s spectacular article on the subject by opening link http://different-traditions.com/?p=1944=2076].

Where China has pursued a similar policy, the US administration has constantly tried to force a revaluation of the Renmimbi. However, the US has been unsuccessful in such efforts. China, unlike Japan, was not a conquered nation, and thus follows its own agenda.

Japan has not reformed since 1985, draining the savings of its people to sustain and unsustainable economic structure, deficit funding a system that is addicted to corporate and social welfare, subsidies, and bailouts that no one ever wants to pay for.

All this represents the background to the accession of Haruhiko Kuroda as Governor of the Bank of Japan, and as “Abe’s shaman”, as we have previously called him, pace Izuru Kato, pursuing US Fed inspired ZIRP and market manipulation to keep mushrooming Japanese debt yields in low single-digits. Kuroda’s helter-skelter QE programme was supposed to boost growth, by boosting inflation. On November 2, 2014 we wrote about Izuru Kato’s commentary that this appeal directly to inflationary psychology to boost consumption expenditure, would fail [See http://different-traditions.com/?p=2043].

As indeed it has. Admittedly declining oil prices haven’t helped. But surely this and Kuroda’s QE programmes hammering the Yen should have helped exports?

Not even crushing the Yen has helped to boost exports, however. The Japanese trade balance is firmly in the red. Seeking growth in a moribund world market of competitive devaluation, where your technology has started to lag behind anyway, isn’t easy.