Is Abenomics Working? Editor: As Jens O. Parsson explains in his book Dying of Money, ‘Everyone loves an early inflation. The effects at the beginning of an inflation are all good. There is steepened money expansion, rising government spending, increased government budget deficits, booming stock markets, and spectacular general prosperity, all in the midst of temporarily stable prices. Everyone benefits, and no one pays.’ Japan is still very much in the early stages of this latest attempt to solve its problems via the printing press. Sooner or later however, the positive effects will turn to negative effects, and as O. Parsson points out, ‘In the later inflation, the effects are all bad.’ When will we learn that printing money does not create real wealth or lasting prosperity?

There are some signs that Abenomics is beginning to bear fruit.


Although many have cast doubts over Shinzo Abe’s reform plan, there are emerging signs that aggressive monetary reflation is having a positive impact on the Japanese economy. Money and loan growth has reaccelerated, consumer confidence has risen and the Tankan business survey has also spiked.

Most importantly, financial markets seem to believe that the authorities will achieve their inflation target. For the first time in many years, inflation expectations in Japan have risen above 1%. In short, the Bank of Japan (BoJ) so far appears able to manage a revival in consumer and business confidence via a combination of large-scale QE program and a sharp yen devaluation. We see no reason why these positive trends will come to an abrupt end, so long as the BoJ maintains its policy (the BoJ meets later this week – stay tuned).

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