Abenomics has, as predicted, conclusively failed:
Japan’s economy unexpectedly fell into recession in the third quarter, a painful slump that called into question efforts by Prime Minister Shinzo Abe to pull the country out of nearly two decades of deflation.
The second consecutive quarterly decline in gross domestic product could upend Japan’s political landscape. Mr. Abe is considering dissolving Parliament and calling fresh elections, people close to him say, and Monday’s economic report is seen as critical to his decision, which is widely expected to come this week.
Rising sales taxes have been blamed for triggering the downturn by deterring consumer spending, and with Japan having now slipped into a technical recession, the chances that Mr. Abe will seek a new mandate from voters to alter the government’s tax program appear to have increased significantly.
The preliminary economic report, issued by the Cabinet Office, showed that gross domestic product fell at an annualized pace of 1.6 percent in the quarter through September. That added to the previous quarter’s much larger decline, which the government now puts at 7.3 percent, a slightly worse figure than in its last estimate of 7.1 percent.
The surprise recession underscores the difficulties faced by Mr. Abe, who won power two years ago on a pledge to reinvigorate the economy and end his country’s long streak of wage and consumer-price declines. His agenda, dubbed Abenomics, has focused largely on stimulus measures, in particular an expanded program of government bond purchases by the central bank.
When the Obama stimulus plan failed, Neo-Keynesians like Paul Krugman claimed it was because the stimulus wasn’t big enough even though it was BIGGER than Neo-Keynesians like Paul Krugman had claimed was necessary to jump-start the economy.
Then Japanese Prime Minister Abe launched the Abenomics program, which consisted of “monetary policy, fiscal policy, and economic growth strategies to encourage private investment. Specific policies include inflation targeting at a 2% annual rate, correction of the excessive yen appreciation, setting negative interest rates, radical quantitative easing, expansion of public investment, buying operations of construction bonds by Bank of Japan (BOJ), and revision of the Bank of Japan Act.”
The total fiscal stimulus was ¥20.2 trillion, and yet even in combination with all the aggressively easy monetary policy pursued by the Bank of Japan, it hasn’t been able to grow the economy at all. The plain and simple economic fact is this: you cannot print or borrow your way out of an economic depression that is a consequence of excessive debt. No matter how many Nobel-prize winners assure you that you can.