Japan just reported yet another awful retail sales result. Though it far exceeeded predictions of a 7.3 percent fall, the 9.7 percent March 2015 plunge compared to March 2014 doesn't reveal much, as March 2014 saw a splurge at the stores ahead of a steep sales tax increase which took effect on April 1. The really telling figure is the 1.9 percent seasonally adjusted dive compared to February.
Proving once again that they haven't learned, and probably never will, the press and financial commentators are really hoping that the government will respond, after two decades of Keynesian deficit spending and quantitative easing which have given the country slow growth, several recessions and a dispirited populace, with (good heavens) more stimulus.
Japan received ill-advised high praise from the press and financial commentators two years ago for vastly expanding its stimulus efforts — to the point where it has "the world's most expansive" monetary policy. The results generated show that economists like Paul Krugman at the New York Times, who has insisted that the Obama administration's U.S. stimulus plan six years ago was far too modest, could not have been more wrong.
The financial press and their sources, though, haven't gotten the message. Here's Leslie Schaffer at CNBC (bolds are mine throughout this post):
Japan's retail sales for March plunged 9.7 percent on-year, well below expectations, after last year's sales were front-loaded as shoppers splurged ahead of a sales-tax increase.
Retail sales were expected to fall 7.3 percent, according to a Reuters poll of 17 analysts. The decline follows February's 1.8 percent drop.
"If you look at the larger data points of the past three to six months, they've been pretty bad all around," Joe Zidle, a portfolio strategist at Richard Bernstein Advisors, told CNBC. "If you think about the consumer's importance ... it's 60 percent of the Japanese economy, I think this ratchets up the pressure on the Bank of Japan (BOJ) in order to introduce more stimulus."
Here's Reuters, found at (Singapore) Today Online:
Japanese retail sales declined last month at their fastest annual pace in 17 years as consumer spending struggled to pick up a year after a sales tax increase, keeping alive speculation the Bank of Japan will expand stimulus again later this year.
Retail sales in Japan declined at the fastest pace on record in March, underscoring the inability of BoJ policy makers to underpin demand and fueling speculation of further monetary policy easing.
Commentary on the mess found at Seeking Alpha ("Japan Hits The Easy Money Wall") indicates that there may be no point at all, even in the short-term, in applying more stimulus:
... while it's too soon to say anything with certainty, the early results are discouraging for Keynesians who believe that the problem is too little debt and insufficiently negative interest rates.
Japan has been creating new currency on a scale that, relative to the size of its economy, dwarfs the Fed's recent QE program. A bunch of its bonds trade with negative interest rates and its government continues to run huge deficits. And despite all this, its people will buy less stuff this year than last while inflation drifts towards zero. Limits, in short, are starting to appear.
The Bank of Japan is meeting next week under growing pressure to up the ante with even more money creation and lower interest rates.
Although the debt-creating, deficit-generating spigots have only been wide open since early 2013, the country has been a Keynesian mess for two decades, and things are only getting worse. I don't think that "it's too soon to say anything with certainty" that Keynesian policies have failed. They have. But the financial press's belief that they simply must work is so deeply ingrained that they won't entertain an alternative, even as they stare a massive failure in the world's third-largest economy in the face.
Cross-posted at BizzyBlog.com.
