Twenty years of economic growth averaging less than 1 percent have failed to convince Japan's leaders — and apparently its citizens — that Keynesian-style government spending and handouts are not the answer to turning that long-suffering nation's economy around.
So the Shinzo Abe government, fresh from learning that the country is in yet another recession — its fifth since 2008 — is doing more of the same, while counting on press shills around the world like the Associated Press's Elaine Kurtenbach to be gentle in their coverage. Kurtenbach cooperated as expected early Friday morning (bolds and numbered tags are mine):
JAPAN PLANS EXTRA BUDGET, HANDOUTS, TO PUMP UP RECOVERY
Prime Minister Shinzo Abe has ordered Cabinet ministers to prepare an extra spending package, including cash handouts for the poorest pensioners, seeking to breathe fresh life into Japan's stalling recovery. [1]
The amount of the supplementary budget has not been decided, the chief government spokesman, Yoshihide Suga, said Friday after the Cabinet met.
Local media said the package will likely exceed 3 trillion yen ($24.5 billion) and will be prepared in December, for approval early in the new year. [2]
It will likely include one-time subsidies of 30,000 yen ($245) for cash-strapped pensioners. Suga said it also will include provisions to help farmers improve their competitiveness as the Japan opens its markets further as part of a Pacific Rim trade agreement, the Trans-Pacific Partnership.
Suga said the measures are part of broader plan announced by Abe to increase Japan's gross domestic product to 600 trillion yen ($4.9 trillion) by 2020. [3]
The extra spending aimed at farmers and seniors, bastions of support for Abe's Liberal Democratic Party, also will likely find favor among voters ahead of an election next summer. [4]
Japan slipped into a mild recession in the spring. Although the jobless rate fell to a 20-year low of 3.1 percent in October, according to data released Friday, consumer spending and incomes also edged down as the tight labor market failed to spur significant increases in wages. [5]
... Ultimately, the fate of his "Abenomics" approach, which has relied heavily on pumping cash into the economy, hinges on getting consumers and companies to spend more and thus boost demand. [6]
So far, short-handed employers have resorted to use of overtime and hiring more temporary workers, [7] seeking to avoid increases in base wages that would be difficult to reverse if the economy takes a turn for the worse. [8]
Notes:
[1] — Japan is in a recession, the economy having contracted at annual rates of 0.2 percent in both the second and third quarters (annualized rates of 0.7 percent and 0.8 percent, respectively). The "recovery" isn't "stalling." It has stalled, and has started rolling backwards.
[2] — The $24.5 billion in new Keynesian stimulus (note how the press and government officials now avoid those two words like a plague these days) would be about $60 billion if done in the U.S. based on population, or about $90 billion if pegged as a percentage of U.S. GDP. Safely assuming that it's accomplished through additional borrowing, it will increase even further Japan's debt-to-GDP ratio, already a frightening 230 percent. That ratio has been rising steadily under Abe.
[3] — Reuters drily explained in September that the $600 trillion yen goal is a pipe dream:
The GDP target could draw criticism for being unrealistic because it implies levels of growth not seen in the last two decades, while economists doubt the government will enact policies bold enough to even come close to the target.
Sadly, the "economists" involved probably want even more "stimulus." (Sigh) It just never ends, does it?
Reuters was apparently reluctant, as is the rest of the business press, including the AP in the this writeup, to tell readers what actual growth in Japan has been during the two decades. I can't say I blame them, given the truth (source data is in graph labels found here):
Twenty years of Keynesianism have yielded growth averaging far below 1 percent per year. Much of the world has been passing Japan by. That may not last, though, because it seems that nearly every country on the planet is drinking the Keynesian koolaid and beginning to suffer the serious consequences of doing so.
[4] — Ah, yes. Buying votes — what this is really all about.
[5] — The unemployment rate may be very low, but as we have seen in the U.S., that doesn't mean that the labor market is "tight." It may mean that many adults are discouraged and not looking for work, or that many of them are in part-time and temporary positions. Actually, at least the latter is the case in Japan. See Item [7].
[6] — Japan has been singing from the "our people and businesses need to spend their way out of this malaise" hymnal for two decades, with little in the way of positive results. They need to find another church which will teach them that they need to restructure and reform key areas of their economy so that entrepreneurs, investors and businesspeople see and capitalize on more opportunities for growth. But that would involve loosening the regulatory reins, and apparently no one is interested in causing that change to happen.
[7] — The resort to overtime for existing employees and using temps and part-timers to smooth out cyclical ups and downs is also occurring here in the U.S., and will probably continue to accelerate here. Japan, once the home of "lifetime employment," has been expanding its use of temporary workers for many years. The costs in standards of living and lifetime expectations have been substantial, and collectively a national tragedy.
Five years ago, I noted in a NewsBusters post that a befuddled New York Times reporter was wondering how Japan could have fallen "into a slow but relentless decline that neither enormous budget deficits nor a flood of easy money has reversed" — and that said reporter failed to recognize that he had just solved the "riddle" in that very statement. Imagine how much more desperate things are now.
[8] — The economy has already taken a turn for the worse, Elaine. It's in a recession. The proper wording should have been "if the nation's recession deepens even further."
Contrary to the AP's headline, there is no "recovery" to "pump up." There is only yet another recession to try to somehow escape in a meaningful fashion — something that hasn't genuinely happened in 20 years.
Cross-posted at BizzyBlog.com.
