This is a post by an italian that lives in Japan (Tokyo). Giulio is married to Asami and works for a german contractor. Asami works for a Fortune 500 USA company. Giulio have a child, Riki. With that post, Giulio tries to give us information about how Abenomics changes or not changes his family everyday life. I think Giulio reaches the goal.
My name is Giulio Motta and it’s been 8 years since I moved to Japan. I’ve been asked to expose my point of view on Abenomics as seen from the “inside”. First thing you should know is that I’m no economist and so I don’t think I can give a fully qualified analysis of the matter. Nonetheless, I hope the editors of the blog will tolerate my imprecisions. I will limit myself to illustrate how we live the situation here in Japan, possibly adding some observations about the Land of the Rising Sun. Please note: I think that many things that work (or not) here in Japan could have opposite consequences applied in other places on Earth, as anything that happens here is greatly influenced by Japanese culture, society and geography. With these premises, let’s get back to Abenomics which I understand as the practice to mint more yen so as to devalue the currency and in turn make Japanese exports more competitive.
What follow are some of my personal considerations: 1. We cannot feel the effect on the cost of imports quite yet. So it’s still a bit early to judge the effects on the population. The news on TV warn of impending raises here and there, but we will have to wait a few more months. As of beginning of May 2013, only my favorite 598 yen prosciutto has disappeared from the shelves, while canned whole tomatoes still run at their historical minimum of 78 yen a can. 2. It’s true that in Japan inflation is a bit above or a bit below zero since the ’90s, but it’s also true that Japanese population has been stuck for the same amount of time. On one side there is no significant immigration and on the other side the falling birthrate is compensated by the always longer expected lifespan (despite the important suicide rate). Also, Japan has pretty much no natural resources. Where should the growth come from? 3. Devaluing the yen, Japanese products should become more competitive. The problem, in my opinion, is that competitive Japanese products which are built in Japan, don’t really need to be any more competitive (could the Japanese car industry really get any better than this?) On the other side, competitive Japanese products which are NOT built in Japan (for example, digital cameras) cannot gain from the yen devaluation as prices for these products are already aligned with the global Made-in-China-production. 4. Japanese unemployment is already super-low, between 4% and 5%. They say it’s still getting better, but I would think that a minimum level of unemployment should be endemic to any society. Bringing back manufacturing jobs on Japanese soil is actually really positive, but I don’t believe that to be an urgency at the moment. 5. When inflation is going to hit for real, who will make sure salaries will also grow? In Japan the state has little saying in this. And unions might as well not exist. When everything was all nice and golden up until the Bubble burst in the early ’90s, the economy flourished and salaries with it. But now that inflation is going to be artificially created, who will force businesses to raise salaries to keep the workers purchasing power?
6. From this point of view, I really really don’t understand the increase of the consumption tax which should grow in two years from 5% to 10%. Japan is a country based on consumerism (even though – for various reasons – this result in a almost socialist distribution of wealth). Raising the consumption tax will, in my opinion, hit consumers and consumption really bad.
7. That said, Japanese people are some of the greatest savers in the world. It’s related to culture, I believe. In the centuries, this land has been mangled by earthquakes and tsunamis. Wooden houses have always been – and still are – easy to burn. So the average Japanese citizen not only has more than one insurance, he also saves as much as possible, because sometimes even insurance isn’t enough (house insurance won’t cover damage from earthquake, for example). This means that there are great sums of money saved by people now old and often without heir which are often kept literally inside the mattress (or should I say “futon”). Printing more money could be a way to balance out this money that have been “spirited away”?
8. I have to admit that, before Abenomics, the yen might have been really overvalued and the prices of imports from official channels were completely out there. For example, let’s assume in January 2012 a Prada bag in a Tokyo shop would cost 100,000 yen which were equal to 1,000€. At that time you could have the exactly same bag shipped to you after being bought in a shop in Milan (which means including a 21% VAT) for 750€. And this including a profit for the person doing the transaction.
In the end: will Abenomics work? I don’t think it is a fundamentally flawed attempt to straighten Japanese economy, but I remain skeptical about it. It’s totally possible that the elephant will give birth to a mouse and the lasting effects will be minimal. Whichever the results, raising the consumption tax alone could cost Abe the re-election. Then the next government will hastily restore all the restorable and it will be the end of it, with the yen regaining his status as a safe and stationary currency.
Thanks to Giulio and Asami for post and for translation. Giulio have a blog about his everyday life in Tokyo: take a minute to see it at http://pollonipponico.
Aforisma della settimana
“Lose your opinion, not your money!” (“Perdi le tue opinioni, non i tuoi soldi.”) Anonimo
