Abenomics could not save Japan from structural deterioration

Much has been touted about Abenomics, the aggressive monetary stimulus and flexible fiscal support and structural reform introduced by Japan's Prime Minister Shinzo Abe.  However, I do not think highly of Abenomics, and Abenomics could not save Japan from structural deterioration, for 2 main reasons:

1) Aggressive monetary stimulus will not save Japan:
How much a country can print money without significant monetary depreciation and significant capital outflow to safer heaven is premise on how confident people are in the country. 
If US print money, there is unlikely to be significant capital outflow because US is still the world's strongest super power, and the US$ is the world's internationally traded currency.
However, the same cannot be said for Japan.

2) Structural reforms is difficult for Japan:
Japan is facing very serious aging problem, with a higher and higher percentage of its population being too old and unable to work as time goes by.  This will result in significant taxing and burden on the younger working population, and it will come a time when thing just snapped.  I don't think Sales tax will save Japan because while it raises additional revenue for Japanese government, it will lead to more hoarding of money and repercussions. 

The long-term future for Japan is grim indeed. I will not want to be holding Japanese assets, be it Japanese Yen or Japanese stocks.....................


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PUBLISHED OCTOBER 06, 2014
Abenomics: Roadmap to corporate reform

Abenomics reforms could bring significant corporate improvements that rekindle interest in Japanese equities. By Hiroki Sampei

LAST year was a great year for Japanese equities. Investors returned to the world's third-largest economy on a wave of euphoria surrounding Prime Minister Shinzo Abe's bold ambition to drag Japan out of a deflationary stagnation that dates back to 1990.

The first two arrows of Abenomics - aggressive monetary stimulus and flexible fiscal support - were highly successful in building initial enthusiasm around Japan's economic outlook, triggering a sharp rally in the Japanese stock market.

However, enthusiasm has given way to scepticism in 2014, and investor unease was exacerbated by a worse-than-expected fall in quarterly gross domestic product (GDP) after the increase in consumption tax in April 2014.

Japan's stock market has been a relative laggard year-to-date amid mounting concerns over whether Abe can deliver on his all-important third arrow of structural reform.
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