Japan; from quagmire to Abenomics to collapse! Part III, Part II, Part I
Eugen von Böhm-Bawerk
Part III: Abenomics and the road to collapse.
Abenomics is the label given to Prime Minster Abe`s three pronged plan to revive the Japanese economy. One of his first acts as Prime Minister was to place trusted inflationist at the helm of BoJ. The new Chairman, Mr. Kuroda, did not disappoint with his plan to double the monetary base in two years. In addition, the BoJ is doing qualitative easing through a pledge to create two per cent annual consumer price inflation in order to manipulate real interest rates into negative territory. They will “do whatever it takes” to reach the target set forth. The Treasury will ramp up spending with a “stimulus” package worth 2 per cent of GDC. Hence, the plan has been dubbed 2-2-2- for doubling monetary base to reach two per cent price inflation together with a fiscal package worth 2 per cent of GDC. A third leg of Mr. Abe`s comprehensive plan include structural reforms, but those are hard to get through the political system and has been watered down.
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