FX Macroeconomics Abenomics Q4. appears to be off
to a fairly successful start. Japan’s Q1 GDP expanded at an annualized 4.1% from 3.5% in
Private consumption
steadily increased and g o v er nmen t ex p e nd it u r e s u pp or t e d growth on add it io n a l fiscal stimulus as the a rrow
second of
A b e nom i cs . Co n s u me r s e nt i m e nt continues to improve as Japan’s May c o n s u m e r c o n fide nc e rose to 45.7, the highest since 2005. The A b e no m ics euphoria has continued to enjoy support from Japanese hou seho lds despite the volatility in JGB’s and Japanese stock markets. Abe and his government are running strong in the opinion polls with economic success, putting his party in a solid position to win the majority of the upper house in this summer’s election. Abe
wants to amend the Constitution, but this may prove to be more difficult. The LDP and pro- constitution amendment party, Japan Restoration Party headed by Osaka Mayor Hashimoto, are
The critics of Abenomics have generally focused on the risks involved. On the fiscal front, the high debt burden limits the government’s ability to maneuver. This leaves the onus on
monetary
policy. Here the BOJ has been exc e pt io na l ly a g g r es siv e. Consider US
the
is nearly three times than
economy bigger
Japan
and the BOJ is
while buying
roughly $75 bln a month in
securities, the
Federal Reserve is buying $85 bln a month.
Abenomics euphoria has continued to enjoy support of Japanese households despite volatility in the JGB’s and the Japanese stock markets
unlikely to gain 2/3’s majority in the election, which is needed to amend the Constitution. The DPJ is expected to lose more than 20 seats, but this will likely secure its position of being the biggest opposition party.
18 FX TRADER MAGAZINE July - September 2013
However, what could be even worse for Japan than the failure of Abenomics is its success. Abe released the growth strateg y
as the third arrow in Abenomics ahead of the upper house election in July. The strateg y aims at expanding annual non- residential investment back to
before
JPY70 trillion - the
2008 the level financial
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