Japan’s Prime Minister Shinzo Abe declared last week that Japan is no longer suffering from deflation the day after his own government statistics showed that Japanese prices declined for the first time since QQE began. That is actually great news for the Japanese people, though Abe and Kuroda at the Bank of Japan continually pledge to end the relief. Abe’s direct synthesis, however, is jarring in that it is exposing the internal framework of global monetarism. Rational expectations itself may have once been nothing more than a forced equality in order to gain the ‘E’ in DSGE statistics, but in 2015 it is showing its true, modern manifestation of being ‘all talk.’
Central banks, for all the posturing, don’t actually do all that much aside from heap generous transaction premiums upon the broker class. In economic reality, bank reserves are divorced from function leaving room only for those who wish to believe in the magic. That is what all the fuss is about inflation expectations, since most people don’t care enough to figure out what a central bank actually does (this is especially true of economists). They are supposed to be taken at the word, which is fine when those words at least vaguely resemble what is transpiring or what has transpired.
Instead:
Prime Minister Shinzo Abe’s updated plan for reviving Japan’s economy and achieving a GDP target of 600 trillion yen ($5 trillion) suggests a recognition that earlier policies are not doing the trick…
Japan’s inflation rate remained flat at 0.2 percent in August, according to data reported Friday, with core inflation excluding volatile food prices slipping 0.1 percent. A preliminary survey of manufacturers released Thursday showed a sharp drop in export orders. Recent corporate investment figures were likewise worse than expected.
To which Abe replied:
This post was published at David Stockmans Contra Corner by Jeffrey P. Snider – September 28, 2015.
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