Japan’s Releases Weak Economic Data
It was always clear that consumer spending would drop in the wake of the recent sales tax hike in Japan, as some of the spending was dragged forward by consumers trying to beat the deadline. However, the latest Japanese data releases show weakness in factory output as well. In an odd similarity to the US economy, Japan has exhibited a tendency to release both strong and weak data in close succession. In other words, it is difficult to discern a clear trend. Japan’s labor market has become extraordinarily tight, an effect that is due to the combination of BoJ pumping (and the bubble activities it engenders) and the country’s demographic trend.
‘Inflation’, i.e., consumer prices, appear to be the only thing that is in a fairly strong uptrend (by Japanese standards anyway). We can therefore remain fairly certain that real incomes continue to decline. Considering the aging population with ever more people relying on some sort of fixed income, the BoJ’s inflationary policy makes even less sense in Japan than elsewhere. For unknown reasons rising prices are hailed as a ‘success’. We know of approximately 127 million Japanese consumers who would disagree.
In fact, it feels totally bizarre to read about this every time. Consider the formulation in the excerpt from Reuters below: “Nationwide consumer prices showed that inflation picked up in April, excluding the April 1 sales tax hike – a welcome sign in the Bank of Japan’s battle to bring inflation to 2 percent.â€
A central bank ‘battling’ to increase inflation? It is a ‘welcome sign’ when consumer prices are rising? All we can say to this is that it proves that world has gone mad and that there is nothing more absurd than the economic theories on which modern central banking is based.
