Is this the end for Abenomics?

Japan appears to be stagnating, despite Prime Minister Shinzo Abe's best efforts to revive the economy.

Are Japanese prime minister Shinzo Abe's attempts to revive the Japanese economy failing? Recent data have been "mixed at best", says the Financial Times. Japan's GDP shrank by 1.7% between April and June as a new consumption tax hit spending. the economy appears to be stagnating casting doubt on hopes for a third-quarter rebound. Industrial production edged up by 0.2% in July, not enough to reverse a 3.4% plunge the month before. Retail sales fell by 0.5% in July, the first fall since April.

Meanwhile, the job-to-applicant ratio, a gauge of labour-market tightness, remained unchanged in July, the first time since the launch of Abenomics' that it has failed to improve. And core inflation, which strips out fresh food prices, fell slightly to 1.3%.

Even so, it would be wrong to write off Abenomics, as the FT points out. The goal is to improve Japan's growth potential, and reach 2% inflation.

Structural changes (such as measures to make labour markets more flexible) will take time to have an impact, and the Bank of Japan has signalled it will print more money if need be.That's likely to be necessary, reckons Capital Economics the consultancy predicts further QE early next year.

As we've often noted, money-printing in the form of QE has proved good news for equities in the past, and it is also likely to weaken the yen, further boosting Japan's export earnings. It also bodes well that more than 40% of listed companies in Japan look cheap, on a price-to-book ratioof between 0.5 and 1, says PFP Wealth Management's Tim Price.

Recommended

How long can the good times roll?
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
The charts that matter: the dollar flexes its muscles
Global Economy

The charts that matter: the dollar flexes its muscles

As the US dollar made significant gains this week, everything else sold off. John Stepek looks at how it's affected the charts that matter most to the…
26 Sep 2020
The world's central banks will follow the Federal Reserve's example
Global Economy

The world's central banks will follow the Federal Reserve's example

The US Federal Reserve – America's central bank – has said that it would become more tolerant of inflation and hold interest rates down. Others will f…
25 Sep 2020
Oil producers are back at their Covid-19 lows – is it time to buy?
Oil

Oil producers are back at their Covid-19 lows – is it time to buy?

With demand for oil hammered by Covid-19 and talk of “peak oil demand”, there are lots of good reasons to be bearish on oil producers. So, asks John S…
22 Sep 2020

Most Popular

The electric-car bubble could get an awful lot bigger from here
Renewables

The electric-car bubble could get an awful lot bigger from here

The switch to electric cars is driving a huge investment bubble. But that’s not necessarily a bad thing, says John Stepek. Fortunes will be made and l…
24 Sep 2020
Can Rishi Sunak’s winter plan save the UK economy?
UK Economy

Can Rishi Sunak’s winter plan save the UK economy?

With his Winter Economic Plan, chancellor Rishi Sunak is hoping to support the economy through the dark months ahead as restrictions tighten again. Jo…
25 Sep 2020
The rising dollar is proving bad news for most other assets – will it last?
Investment strategy

The rising dollar is proving bad news for most other assets – will it last?

Precious metals, stocks and pretty much every other asset has taken a tumble as the US dollar strengthens. Dominic Frisby looks at how long this trend…
23 Sep 2020