April could be 'cruelest month' for Abe

Updated: 2014-04-16 08:00

By Xu Changwen(China Daily)

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How will Abe's economic policy work if the rate of income growth of blue - and white-collar workers is about 0.5 to 0.8 percent when this year's inflation rate is 4 percent?

These indeed are critical times for Abe, which is perhaps best reflected in what a Japanese scholar recently wrote in a well-known economic journal - that it seems the US has prepared for the resignation of the Abe cabinet. Since February major US media outlets have been blaming the Abe government and its economic policies, called "Abenomics", for the ills facing Japan. The Americans are apparently disappointed with the Abe government and believe it talks endlessly about economic reforms without having a growth strategy.

On Feb 24, Adam Posen, director of US think tank Peterson Institute for International Economics, said in a speech in Tokyo that Abenomics is not aimed at increasing Japan's wealth but at strengthening its national security and defense. Posen hit the nail on the head. Besides, most US media outlets and experts blame Abe's incentive policies for the flailing Japanese economy.

Abe, on his part, has sent many top officials to the US to seek the Barack Obama administration's "understanding" and try to persuade the American president to visit Japan.

The core of Abenomics is to promote the yen's depreciation and boost its stock market. So the Abe cabinet and Japanese banks are desperate to buy in stocks, without hesitating to use even the national pension fund for purpose. But given the economic depression in April, stock prices could decline once more and the yen might begin to rally. Hence, such a policy can result in a big crisis in the near future.

The only chance for the Japanese government to save face is to persuade Obama to visit Japan in late April. Even if the two leaders say nothing meaningful during their meeting, Obama's visit might prevent the immediate collapse of the Abe cabinet.

In conclusion, this month's tax increase will prevent workers' salaries to be raised to the extent expected by the Abe government and Japan's domestic consumption and economy may decline. And given the US administration's dislike of the Abe cabinet, April could well turn out to be Abe's waterloo.

The author is a researcher at the Chinese Academy of International Trade and Economic Cooperation, affiliated to the Ministry of Commerce.

(China Daily 04/16/2014 page9)

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