Slip-Sliding Away …
As a little addendum to our recent ritual lambasting of Abenomics, here are the latest news on Japan's consumer confidence - the reading, mind, is from March - before the introduction of the higher sales tax:
"Japan's consumer confidence fell in March to the lowest level since August 2011, a reading that may tumble further this month after a sales-tax increase on April 1 sapped the public's spending power.
The reading of 37.5, down from 38.5 in February, was released by the Cabinet Office in Tokyo today. About 90 percent of respondents to the survey expect prices to rise over the next 12 months, the highest in comparable data back to 2004.
Prime Minister Shinzo Abe risks the public souring on his campaign to sustain growth in the world's third-biggest economy as prices start to rise while wages stay stagnant. Weaker sentiment could make it harder to drive a rebound from a contraction forecast this quarter, and raise the odds that the Bank of Japan adds to its already unprecedented easing.
"Consumer sentiment has been undermined to a large extent by rising prices," Goldman Sachs Group Inc. economists Naohiko Baba and Yuriko Tanaka wrote in an e-mailed note before the release. "We expect a major retreat in sentiment from April as the tax hike drives inflation."
The confidence reading was 39.9 when Abe took office in December 2012, and rose to 45.7 in May last year - the highest point during his current term as prime minister. The Topix index of stocks is down more than 10 percent this year after soaring 51 percent in 2013.
Confidence dropped in all five components in the survey, with willingness to buy durable goods dropping the most, down by 2 to 30.8."
In light of yet more damning evidence of failure coming to light, we are moved to make a prediction about the near-term future of Abenomics.
It isn't going to be abandoned just because it is failing. Instead, we are hereby confidently predicting a 'flight forward'. Instead of relieving the increasingly sapped and demoralized Japanese consumer from the scourge of rising prices, the pump priming effort will be increased even further. Fresh inflationary measures may well be announced at the next BoJ meeting already.
Anyone want to bet?
Japan's prime minister Shinzo Abe. One day he will come to regret that they named an economic policy after him. Just ask Napoleon - it is far better to merely become a cognac.
(Photo via AFP / Jiji Press)