Principal Consultant, SiliconEdge
The fact is, Japan's Abenomics is really just another name for Kruganomics.
And it's an abject failure, carried on the backs of the citizenry.
We've talked about this in excruciating detail before -- that of Abe's so-called "Three Arrows", the only arrow that was needed was the structural reform arrow -- The other arrows such as the devaluation of the yen would have come naturally as Japan's current account was depleted due to the abject failure of TEPCO to the run their nuclear power plants safely and prudently, results in the massive importation of oil and natural gas.
With the loss of these nuclear power plants, it should have been obvious that surging oil imports would sap Japan's trade balance, taking the Yen lower yet again... and all of this would have happened naturally.
As this slow motion train wreck was unfolding, the Bank of Japan stepped in to further goose the process and in a very short while, we went from approximately 79 Yen to 1 USD all the way down to 123 Yen to 1 USD - an effective Yen devaluation of 55.7%!
At the same time, Abe ushered in (or to be far, simply allowed that which had already been scheduled) a massive consumption tax increase from 5% to 8%.
Now, the average man in the street and other mathematically challenged individuals actually believed and still believe that this was only a "3%" consumption tax increase rather than the full 60 percent increase that it was (8% current tax- 5% former tax = 3% delta; then 3%/5% = 60% increase).
Oh, and it should be fun watch the next installment of the consumption tax increase because to the man in the street, it's just a minor 2% increase -- from the now current 8% consumption tax to the scheduled 10% -- although, those with basic math skills can tell you it's actually a 25% consumption tax increase on top of the 60% increase before that, oh, and that's also on top of the 55.7% devaluation of the Yen.
In effect, all that Kruganomics, err, Abenomics has done is to shift the failure of an ossified, rent-seeking, export-culture onto the backs of domestic consumers and small business owners.
The smart move for Japan, then and now, would be to drive the yen lower against the dollar (that is, to strengthen the yen) and force the ossified firms to compete (such as enticing them to acquire overseas assets and IP with the strong yen) and evolve....or do nothing or do something but fail to execute effectively and die.
Yes, that's right die -- to have these ossified corporations die an inglorious death but be composted for the good of the markets and Japan all while reforming the labor markets (labor mobility, employment at will, etc.) the capitals markets and tax rates so that small business and solo entrepreneurs could easily accumulate sufficient capital and simply form their ventures without the need for large amounts of capital or expensive tax advisers.
And that is the arrow Abe never fired.
In fact, that's the arrow which he never will.