abenomics - dajf.org.uk · pdf file• growth has been slow due to demography. •...
Post on 24-Mar-2018
217 Views
Preview:
TRANSCRIPT
Abenomics by Andrew Smithers
Daiwa Anglo-Japanese Foundation
London, 18th April, 2013.
Slide 1. The Conventional Wisdom.
• Japan has suffered from two “lost decades”.
• This is due to a failure to boost the economy sufficiently
with fiscal and monetary stimuli.
• Deflation has depressed demand and thereby the economy.
Slide 2. Reality.
• Growth has been slow due to demography.
• Deflation has been more of a help than a hindrance.
• Japan’s productivity has improved more than France or
Germany.
• As in all developed economies, poor policies have held back
growth.
0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8
France
Germany
Japan
UK
US
% p.a. change in GDP at constant prices per person employed.
Slide 3. G5: Productivity 1992 - 2012.
Data Sources: National Accounts via Ecowin.
Slide 4. Policy Failure.
• Neither fiscal policy nor monetary stimuli have been
insufficient.
• The problem has been the wrong policies.
• Ignoring Japan’s key problem is the cause of bad policies.
Slide 5. Japan’s Key Problem.
• Japan has a structural corporate cash flow surplus.
• This comes from excessive past investment and
• Current excessive depreciation allowances.
-15
-10
-5
0
5
10
15
1980 1984 1988 1992 1996 2000 2004 2008
Secto
r le
nd
ing
(+
) or b
orro
win
g (
-) a
s %
of
GD
P.
Data Sources: Cabinet Office Website National Accounts 2003 and 2011.
Slide 6. Fiscal Deficits = Other Sectors' Surplus.
Government Households
Companies Export of Capital
Slide 7. It’s Not A Cyclical Problem.
• Advocates of fiscal and monetary stimuli assume that
companies’ cash surplus is a cyclical problem.
• Hence the nonsense about deflation.
• Inflation advocates assume that negative real interest rates
would boost investment.
• If they did, it would make things worse!
Slide 8. Japan Overinvests.
• Japan invests more than other G5 countries both business
(Slide 9) and total.
• Through demography, not poor productivity, it grows
slowly (Slide 10).
• It wastes investment (Slide 11).
6 7 8 9 10 11 12 13 14 15
France
Germany
Japan
UK
US
Business investment as % of GDP.
Slide 9. G5: Business Investment as % of GDP.
2012 1991 - 2012
Data Sources: National Accounts via Ecowin.
0 5 10 15 20 25 30
France
Germany
Japan
UK
US
Fixed capital investment as % of GDP.
Slide 10. G5: Total Investment as % of GDP.
2012 1991 - 2012
Data Sources: National Acounts via Ecowin.
0 0.5 1 1.5 2 2.5 3
France
Germany
Japan
UK
US
% p.a. change in GDP at constant prices 1992 - 2012.
Slide 11. G5: Growth Rates 1992 - 2012.
Data Sources: National Accounts via Ecowin.
0 5 10 15 20 25 30 35
France
Germany
Japan
UK
US
Investment as defined as % of GDP divided by % p.a. change in GDP over period.
Slide 12. G5: ICORs (Incremental Capital/Output Ratios).
Business Total
Data Sources: National Accounts via Ecowin.
Slide 13. The Case for Inflation.
• Deflation keeps real interest rates positive.
• This depresses investment.
Slide 14. The Case Against Inflation.
• It might boost investment, which is too high.
• High past investment increases depreciation (Slide 14).
• This causes the structural savings’ surplus.
0
10
20
30
40
50
60
70
0
10
20
30
40
50
60
70
1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Dep
recia
tion
an
d i
nv
est
men
t o
ver
pre
vio
us
12
mo
nth
s.
Data Sources: MoF Quarterly Survey of Incorporated Enterprises.
Slide 15. Japan: Non-financial Companies' Investment in
Equipment.
Depreciation
Investment in Plant and Equipment
Slide 16. Why Corporate Cash Flow is Too High.
• Depreciation allowances are too high.
• Depreciation is a function of growth or real wages and this
has fallen from 4% p.a. in the 1980s to c. 1% today (Slide
16).
• Companies don’t distribute, as dividends, more than 100%
of their profits.
-2
-1
0
1
2
3
4
5
6
-2
-1
0
1
2
3
4
5
6
1983 1986 1989 1992 1995 1998 2001 2004 2007 2010
% p
.a. ch
an
ge o
ver
pre
vio
us
3 y
ea
rs
in G
DP
at
co
nst
an
t
pric
es
per
perso
n e
mp
loy
ed
an
d e
mp
loy
ee c
om
pen
sati
on
ad
just
ed
fo
r ch
an
ge i
n C
PI.
Data Sources: MIC and Cabinet Office.
Slide 17. Japan: % p.a. Change over 3 Years in
Productivity and Real Wages.
Productivity Real Wages
Slide 18. Other Changes Needed.
• Companies cannot take full burden.
• Current account surplus must also rise.
• The fall in the yen is essential and must be maintained.
• Household savings are already low (Slide 19).
0.0
2.5
5.0
7.5
10.0
12.5
15.0
17.5
20.0
22.5
25.0
0.0
2.5
5.0
7.5
10.0
12.5
15.0
17.5
20.0
22.5
25.0
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010
Ho
use
ho
ld s
av
ing
s a
s %
of
dis
po
sab
le i
nco
me.
Data Sources: Cabinet Office National Accounts 2011 and 2009.
Slide 19. Japan: Household Savings.
Net Gross
Slide 20. Abenomics Conclusion.
• Weak yen – good.
• Inflation aim – bad.
• Fiscal stimulus – bad.
top related