The government on May 10 revised upward the growth rate of the nation’s gross domestic product for the January-March period. Previously it reported that the economy grow 0.9 percent or an annualized 3.5 percent in real terms from the previous quarter. It now says that the economy grew 1.0 percent or an annualized 4.1 percent.
Thus the government claims that the real economy is improving thanks to the Abe administration’s economic policy, which centers on massive monetary easing by the Bank of Japan.
But people should not be duped by the government’s public relations efforts. The dark side of Abenomics is raising its head. Stock prices have started to show erratic fluctuations. Institutional investors have made profits, but ordinary citizens are in no position to benefit from the stock market.
The fairly cheap yen, compared with the level prevailing during the days of the Democratic Party of Japan government, has helped improve the performance of export-oriented businesses. But the price rises of imported fuel and raw materials are translating into high electricity charges and high prices for food items. The government should give priority to stabilizing people’s lives and should flexibly cope with volatile economic conditions.
On May 23, the Nikkei Stock Average in the Tokyo Stock Exchange dropped more than ¥1,100, as hedge funds sold a large amount of Japanese stocks because of a view that the United States will pull back on its monetary easing.
The “third arrow” of the Abe administration’s growth strategy also has disappointed the market. The Nikkei index dropped more than ¥843 on Thursday to come down to a level prevailing before the BOJ’s massive monetary easing.
Fluctuation in the foreign exchange market is great. The yen which had weakened to more than ¥100 against the dollar strengthened to a level slightly lower than ¥94 at one point Thursday. The fluctuation means that the market players’ trust in the Abe administration’s economic policy is fluctuating.
The Bank of Japan led by Gov. Haruhiko Kuroda had hoped that its massive monetary easing would lead to a fall of long-term interest rates. On the contrary, interest rates have gone up. The resultant effect is an upward trend in interest rates for housing loans and loans for businesses. Mr. Kuroda apparently failed to accurately predict the movement in the national bond market.
The government and the BOJ must pay serious attention to the real economic conditions people are facing. The nation’s 10 major power companies and four major city gas companies will raise their rates in July for the fourth straight month because the prices of imported liquefied natural gas and crude oil have risen. Prices of food items such as ham and sausage are also rising.
There is no prospect that workers’ wages will rise. The Abe administration’s policy to achieve a 2 percent inflation in two years is likely to result in price rises without wage increases, and could even create economic bubbles.
Mr. Abe and other government officials should be aware that their economic policy could wreak financial havoc on many households, which in turn would stall domestic recovery. They should take steps that will create jobs and boost wages.