Japan: Growth in freefall – Le Figaro

Japan: Growth in freefall – Le Figaro

Growth in Japan fell 6.8% annualized in the second quarter. The VAT increase has reduced consumption by 5%. Wages are still falling. A setback for the “Abenomics.”

Tokyo

Will this already singing the swan for Abenomics? The Japanese government has released its assessment of growth in the second quarter (April-June). The figures are disastrous, as expected. Japan’s GDP, the third-largest economy, fell 1.7% (-6.8% annualized). Consumption dropped drastically, 5%, and wages have fallen 1.8%.

The figures were eagerly awaited. They show the impact of the VAT increase, from 5 to 8% on April 1 on the Japanese economy. The effect is much worse than in the second quarter of 1997, the last VAT hike, but the Tokyo Stock Exchange, which had anticipated a drop in GDP of 8%, closed slightly up 0.35%.

This performance was against a disavowal Shinzo Abe. Crowned with glory when he came to power and the tenacity of its reform policy called “Abenomics” it produces only skeptics. As promised, the very expansionary monetary policy has pushed the yen; but instead of raising the export sector, traditional engine of Japanese growth, it enjoys only a temporary accounting and artifice (repatriated profits are up), while the volume of imports, he recoils. And while the import bill (mainly its energy component), it exploded.

As promised, too, Abe caused an inflationary shock in the economy. Prices rose about 1.5% in Japan since its introduction in December 2012; Today, 86% of Japanese feel, according to a government survey, that prices will rise further. But far from causing wage increases promised accordingly, the price rise has only contracting demand. The purchasing power of wages fell sharply in the second half (-6.1% compared to 2013, according to the government)

result. Never the Japanese have been so cautious in their purchases . Most disturbing is that the basis of betting Shinzo Abe, who was to change the mindset of the people to make it more optimistic and push to consume, proves totally wrong. “For now, the Abenomics have only had the effect of making the outrageous rich richer,” thought Patrick Artus, Natixis, during a visit to Japan in February when the Tokyo Stock Exchange, boosted by the popularity Shinzo Abe in the financial world, shining its last rays

Today, even the punters are frown. Japanese basket this year is one of the least efficient in the world. Foreign speculators who make rain or shine in Tokyo because of their activism brimming over the placidity of local investors, quickly packed up and were carried to more promising markets, leaving the Nikkei on the sand.

The only hope for the Prime Minister: this against-performance is an epiphenomenon, and that the economy recovers in the next quarter. Shinzo Abe pledged to increase VAT in October 2015 two additional points. It could reconsider if the economy continues on this slope.