By Todd Crowell
TOKYO
For the past two weeks, the Japanese economy has been hammered, raising concerns that “Abenomics” – the economic recovery plan named after Prime Minister Shinzo Abe – might be on the ropes.
Some trace the start of the stampede to the bottom with the Jan. 29 decision by the Bank of Japan to introduce, on a limited scale, negative interest rates.
But the latest GDP report, issued Monday and covering the three-month period from October through December, indicated that the economy was already shrinking.
The economy shrank by an annualized rate of 1.4 percent.
An added blow was the recent resignation of Minister for Economic Revitalization Akira Amari – “Mr. Abenomics” – due to a late-breaking scandal over alleged payment for business favors.
Amari was the one cabinet officer who understands all the threads and ramifications of the recently concluded Trans-Pacific Partnership agreement, which was meant to be one important element in the Abenomics program.
The overall weakness in the economy has struck at what most consider the only real success of Abenomics – a weakening yen and a robust stock market.
In the past three years since the Abe government’s landslide 2012 election, the yen fell by about 40 percent.
The weakened yen boosted the earnings and profits of many of the major trading houses, which in turn boosted the values of their stocks.
But in the past two weeks, the yen has gone from a fairly steady 120 to the dollar to about 115 (briefly trading at 110).
Shortly after his election, Abe personally appointed a new Bank of Japan chief, Hirohiku Kuroda, who orchestrated the twin market surges by the banks’ lavish purchases of government bonds.
It has been estimated that these actions injected more than a trillion yen of new money into the economy.
The Nikkei stock average has fallen about 21 percent since the beginning of the year, raising worries that it might fall below the benchmark 14,000 line (however it did show a rally of 7 percent Monday, the same day that the sobering GDP figures were released).
Even in the first glow of success, there have been critics who said that while the currency and stock market figures looked good on paper, they were not translating into things that impacted ordinary people such as increased wages.
That’s because the main beneficiaries of this first phase of Abenomics, such as the major exporters, have so far been happy to pocket their profits but not give much more than token raises – usually under pressure from the Abe government.
But other critics have questioned the entire concept and implementation of Abenomics.
The economic recovery program is usually described symbolically as being comprised of three “arrows”, using the metaphor of the Samurai and his bow and quiver.
The first has been implemented with results described above.
The second arrow, fiscal stimulus, is dependent on current budget deliberations in Parliament.
The third arrow, which most say has never really been loosed, concerns such things as reforming the labor market or empowering women.
And it is not just economists and other experts who are raising questions.
Polls show that most of the Japanese public has more or less given up on Abenomics.
So far, the government’s hold on the electorate seems strong despite the crisis.
While the support figure has fluctuated depending on such factors as the passage last summer of controversial security bills, it always seems to bounce back into the high 40s.
For Abe himself, success on the economy was supposed to translate into eventual success in his pet project of revising the U.S.-written post-World War II constitution.
To this end, Abe was looking ahead to the election in July of the upper house of parliament.
The Liberal Democratic Party (LDP) and its ally Komeito already have the necessary two-thirds majority to propose constitutional changes.
It needs a similar super majority in the upper house to complete the deal.
But it seems that every time the premier is on the verge of fulfilling his more heartfelt projects, the economy always drags him back to reality.
