Money Printing Is Good for What Again?

Electronic store area akihabaraJapan Prime Minister Shinzo Abe’s economic policies seem to have plundered savings accounts.

The country’s industrial production and household spending have both dropped, while core consumer prices surged to a 23-year high. This drop in household spending was viewed by many as a consequence of the sales tax hike earlier this year.

The dirty laundry list of details shows that things are not moving quite in the direction Mr. Abe and the Bank of Japan (BOJ) wanted, with industrial production dropping 2.5% in April from the previous month, household spending declining 4.6% from a year earlier, and core consumer prices (food prices not included) rising 3.2%.

So the Keynesian theory behind this yen printing goes something like this: Japan Inc. gets rich with more goods sold overseas because of the cheaper yen, wealth trickles down via wage increases to “salarymen” and their wives, and then they all run out gleefully and buy new electronics and perhaps eat out more than once a month. All of which was supposed to kick-start Japan’s ever stagnate economy.

Seems logical, yeah? But if this was the intended goal, why the sales tax hike? Doesn’t this defeat the purpose? I can only assume someone smarter than myself wanted this increase as some sort of inflation control (risk hedge?), but my feeling is that this somebody misjudged “Mrs. Watanabe.”

What do you think? Leave your Keynesian-loving comments below.

H/T: Bloomberg

  • Glasshole

    Two schools of thought here–both believe help starts at the top of the food chain.
    1st school: Decrease taxes and the love trickles down.
    2nd school: Print or flood market with cheap money and easy credit, love drips down.

    What both schools forget is that love is a zero-sum game in the casino. In both cases, the poor and middle class lose while the rich keep making money.

  • Mr. Name

    It’s a casino! The entire global “economy” is one big casino. You’re either a player or one of the floor staff. This party ain’t gonna stop until either the system implodes, the Earth implodes, or we do! So get busy playing, cause waiting for something to happen ain’t a way to go out!