Once upon a time, a few deluded individuals held hope that quantiative easing may actually do something to improve the plight of the common person instead of simply transferring wealth from the poor to the rich at an ever faster pace. Five years of failed monetary policy later, which has done nothing to stimulate the economy and everything to stimulate unprecedented non-risk taking that makes even the epic asset bubble of 2007 pale by comparison, this naive assumption has been thoroughly destroyed. However, for all those who don’t splurge on yachts, mega mansions, and private jets, the pain is just starting. The latest evidence of this comes from Japan where according to a survey by the Bank of Japan released today, the share of Japanese households with no financial assets rose to a record as falling incomes forced people to dig into their savings.
According to Bloomberg, as a result of Abe’s disastrous “reflation at all costs” policies, the proportion of Japanese households without financial assets reached 31 percent up from 26 percent a year earlier and the highest since the poll began in 1963.
But that’s not all: it’s about to get even worse: Abe needs to, and has been desperately trying to convince companies to drive up workers’ pay, so that he can sustain a “recovery” that has only manifested itself in stock market reflation, a crashing currency and soaring import prices. Already facing declines in wages – the 16th consecutive month of dropping wages in fact as we showed a week ago – households will be hit in April by a consumption-tax increase intended to shore up Japan’s finances. Only now a third of Japanese society will have no reserves which to tap. And that third is only going to increase as more and more are forced to sell that last asset they have: Japanese equities, until Abe’s pathetic experiment meets its inevitable final outcome.
In other words, thank you Abenomics for being precisely the failure which we predicted a year ago it would be. In the meantime, the class disparity in Japan is merely tracking that of the US tick for tick, as the middle class in yet another country is destroyed, and forced to spend all of its accumulated savings on staples like food and energy, even as the “deflation monster” ravages all other goods and services and certainly wages, meaning the government is locked in doing even more of the same failed actions that have brought the country even further to the edge of total collapse, hoping for a different outcome this time.
“It’s critical that Abe succeed in convincing corporates to raise wages,” said Izumi Devalier, a Hong Kong-based economist at HSBC Holdings Plc. “Lower-income households may come to feel they’re getting the short end of the stick from Abenomics.”
Since a year in, verbal urging has failed, the last option is legislation, and a Japanese government which passes laws on a monthly, or weekly, basis decreeing how many percent higher the new minimum wage will be, until finally all the “export-driven” top line growth evaporates. As for capital spending and fixed investment, forget it.
In conclusion, like with every other insolvent, authoritarian government, there is some hope:
“The survey shows a grim wage situation,” said Akiyoshi Takumori, chief economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “Now some companies are hinting at higher salaries so we may see a better result next year.”
Good luck, but please don’t hold your breath. Instead, just keep holding your begging cap to capture some of that QE “wealth effect” trickle down.