Japanese Prime Minister Shinzo Abe was voted in promising the electorate he would “print” money to infinity. The promise, premised on destroying his currency, was supposed to boost Japanese exports and throttle imports.
So five months after the election, you might be wondering how Abenomics is doing? Well, he got his wish about the Yen. It is being destroyed…
But how about the promises he made when this happened—that it would produce prosperity and boost exports?
Japan's insane policy has so far pumped the stock market up by 35% and crushed the yen down by 22%. The results? Imports +9.4%, exports +3.8%. Their trade deficit fell to the worst level in decades.
Says Reuters, “The result underscores the limitations of a weak yen in bolstering the trade sector, especially as external headwinds crimp demand for exports.”
In other words, destroying your currency does nothing to boost exports. And when exports themselves are relying on factor inputs that come from overseas—steel, oil, gas, etc.—and all these are now rocketing in price, turns out the costs of these imports go up, and the costs to export do too.
Turns out, in other words, you can’t print yourself rich after all. But you can pretend to by inflating the stock market.
I hope rabid inflationists Russel Norman and Bernard Hickey are watching.
And I hope when things turn really sour Shinzo Abe’s other promise, to militarise Japan, doesn’t turn out as some of us fear it might.
[Hat tip Mish & Keith Weiner]