Aggressive monetary expansionism, as promoted by Prime Minster Shinzo Abe and Bank of Japan chairman Haruhiko Kuroda, is an absurd fantasy that will fail to spur economic revival and instead undermine Asia's prosperity and thrust the nation into business bankruptcy and sovereign default. The ASEAN bloc has already criticized the weak yen policy, while China characterizes Abenomics as a "currency war."
The actual aims of Abenomics are purely political and not economic:
- Domestically, to reward the Liberal Democratic Party's support base among the major banks, giant construction companies, the government bureaucracy and the nuclear power industry; and
- Internationally, an ultranationalistic move to reverse the interdependence of the Chinese yuan and Japanese yen as a stable tandem currency that ensures financial security for the entire Asia region.
Abe's views are similar to the English Euroskeptics who oppose the euro and insist on the preservation of pound sterling. The motivation is similar: To protect vested institutional interests that dominate a class-ridden social order and to oppose "cultural dilution" within a larger geopolitical framework, in Japan's case, within an Asian Union. Abe's statements of admiration for the late Margaret Thatcher, even to the extreme of supporting gunboat colonialism in the Falklands War against Argentina, reflects the mind-set of a petty nationalism that reeks with disdain toward "lesser" peoples.
Echoing the Euroskeptic wish to disband the EU, Abe pins his hopes on the demise of China and its partition into nine or more smaller countries. Just as the Little Englanders are flustered by the financial and industrial power of Germany, Abe's fanatic followers have no chance whatsoever of toppling the economic strength and political solidarity of the Chinese.
Whatever the temporary problems of regional integration, the major unifying centers will hold, and yesterday's colonial powers shall continue to diminish. This is not stated as an opinion but simply as an unavoidable and melancholic fact, especially for a traditionalist who much prefers splendid isolation. I confess to sharing some of Abe's backward-looking sentiment for a Japan in its long-lost days of cultural glory but none of his wrong-headed assessments about the future.
Why Monetary Easing Can Only Fail
First, quantitative easing, a fancy term for printing money, cannot work in Japan as it has in a half-baked way for the United States, because the yen is not a global reserve currency or tender for international commerce as is the dollar. Washington can keep issuing dollars because the rest of the world requires increasing amounts of them. The yen is just one of two dozen fluctuating currencies on the board of forex traders.
Second, devaluing the yen has serious negative consequences for the real economy.
- Increasing inflation raises the prices of basic necessities like food and gas, meaning consumers will have less disposable income for big ticket items like new cars and televisions.
- A cheaper yen shrinks the value of savings in banks, forcing Japanese savers to either switch to other currencies and surrogates like gold, or simply move out of the country. Japanese are emigrating in droves right now, and the emigration will increase, leaving fewer consumers to buy goods in Japan. The escapees will take their money with them. Capital flight can become a contagion.
- Easy money from the central bank encourages corporations to borrow in Japan for direct investment overseas where costs are lower, labor is abundant and markets are expanding. Before long, Japan's economy will be completely hollowed out.
- A weaker yen raises the import price of energy, raw materials and food staples, driving up the cost of living and production prices, making Japan even more non-competitive in foreign markets.
- Inflation, one of the goals of Abenomics, will eventually raise interest rates on home mortgages. Already, in the shadow of the Fukushima nuclear meltdowns, there is no market for homes because young couples are reluctant to permanently settle down in the Kanto and Tohoku regions due to justifiable fears of radioactive exposure for their children. Nuclear isotopes with a half-life of more than century are continuously raining down on every structure across Japan, where the average lifespan of a building is a mere 20 years. Japan is heading into the biggest property bust in history.
Theft Leads to Destruction
What Abe and Kuroda are really doing is bank robbery. The Bank of Japan is being systematically looted by the Liberal Democratic Party to benefit its institutional patrons. The BoJ is now mandated to purchase 70 percent of new government bonds, a surefire formula for embezzlement and corruption.
Whenever a government tries to lessen its debt burden by printing money, the result is a run on the banks, which then shut their doors, freezing the economic growth and dumping the nation into a depression. During the Great Depression of the 1930s as the yen plummeted, fascist militarists seized power in Tokyo and launched wars to rob Asia of its oil, coal, and gold. Despite the euphoria of initial victory, their ultimate achievement was the annihilation of every city in Japan under fire bombs and atomic blasts.
Much like his war-criminal grandfather, Abe is a gangster in the guise of politician. His mentoring of the Aum Shinrikyo subway cult and association with the Unification Church led to the grotesque acts of terrorism that felled 20,000 Tokyo subway commuters at rush hour in March 1995.
Abenomics owes its origins to his grandfather Nobusuke Kishi, finance minister of Manchukuo, where the economy was based on putting a gun to heads of the local populace, taking their gems and cash, and then pulling the trigger. The Japanese no longer live in a gentle warm space called Japan, for now they are prisoners shivering inside another Manchuria.
Yoichi Shimatsu is a former editor who led investigative journalism probes into the Tokyo subway gassing for The Japan Times Weekly and Takarajima magazine.