Stephen Roach on Japan
The always realistic Stephen Roach, ex-Morgan Stanley and now senior fellow at Yale University, provides his view on the Japanese economy and Abenomics, US consumption, and Chinese growth prospects.
The basic message on Japan is that Abenomics may well turn out to be a red herring, which of course is no surprise to NipponMarketBlog, but what is interesting are the comments about the so-called ‘Third arrow’ of Abenomics, i.e. the structural reform element. Roach goes as far as to call it ‘vacuous’, which may seem harsh but at least so far it is quite accurate. Roach also points out the obvious point that without structural reforms, aggressive monetary policy is likely to achieve very little.
Over this past week there has been some noise made by the Japanese government about possibly putting in place investment incentives for Japanese companies (probably via changes to the tax code) some time this autumn, but we very much feel that it was a disturbingly vague effort. The very fact that this idea is presented in such a non-definitive format via a throw-away comment from a minister just when the markets seem to be crying out for something a lot more concrete, indicates that when it comes to actual reform efforts, the government is still a long way away from attempting to implement anything – possibly because it realises just how difficult it will be.
At any rate, here is the full clip, courtesy of Bloomberg TV: