On the public choice of Abenomics

Sober Look reports:

Price increases have been driven by weaker yen rather than pricing power improvements of domestic producers. Japan is generating the “wrong” kind of inflation…The combination of declining or stagnant nominal wages and rising prices is creating serious hardships for the nation’s citizens.

Electricity and fuel prices are way up, for instance, as you will see in his graphs.  Contra Sober Look, I suspect this is the way Abenomics is “supposed” to work, and it hearkens back to a long tradition of Japanese policy toward “forced savings,” dating at least as far back as the 1930s.  Still, this decline in real consumption opportunities is exactly why I think there will be practical limits to Abenomics as a sustained strategy for economic growth.  It is rewriting real wage contracts for most workers, and most of them will never get that consumption back or bargain back to the old real wage.  Many exporters will be better off.

And by the way, if you exclude the cost of energy, there is still deflation in Japan.


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