As "Abenomics" Has So Far Failed to Produce Positive Results for Main Street, Japan's Prime Minister May Be Preparing for Constitutional Change

Abe must know that the hodge-podge economic program he has named "Abenomics" isn't really any program and that it won't work. Japanese consumer sentiment index for July dropped 0.7 to 43.6, following the spike in the consumer price index which turned positive in June but was not accompanied by any rise in wages.

Abe's Plan B is probably "wag the dog", and he seems to be getting ready on two fronts.

First, Yomiuri Shinbun reports that he has made one of the personal advisors of Boy-wonder (aka Toru Hashimoto, mayor of Osaka City) a Special Advisor to the Cabinet, ostensibly to advise the administration on economic growth strategies. Boy-wonder is ecstatic that Mr. Taichi Sakaiya will act as a strong, direct pipe between the Abe administration and his failing party (Japan Restoration Party). Abe needs Japan Restoration Party's vote to change the Constitution.

Second, as Kyodo News reports, he is bringing an active, high-ranking officer of Air Self Defense Force into the Cabinet Secretariat to be in charge of national security and crisis management (i.e. collecting intel on China and North Korea). Major General Jun Nagashima is 52 years old, and the first high-ranking officer of Japan's Self Defense Force to be advising the Cabinet.

As to his so-called "Abenomics", even the International Monetary Fund has some doubts, which was totally ignored by the Japanese media who reported on their latest IMF assessment of Japan. Only Bloomberg Japan reported it, but that news outlet has a rather small audience in Japan. Here's what IMF thinks of Abe's plan to hike sales tax and "Abenomics", according to Bloomberg (English) (8/5/2013; emphasis is mine):

Japan’s plan to double a sales tax by 2015 to improve its finances has triggered some concern within the International Monetary Fund’s board.

While IMF directors “generally” supported the plan, “a few” expressed concern over a possible hit to growth, the fund said today in a statement summarizing the view of its executive board. The term “a few” is used by the IMF to mean between two and four. It urged the country to gradually increase the levy to “at least 15 percent” to bring down its public debt over the medium term, according the IMF’s staff report of its annual review of Japan.

...“An incomplete version of Abenomics would be unlikely to sustain the current strong growth,” Jerry Schiff, IMF mission chief for Japan, said during a conference call today. “In such a case, over-reliance on fiscal and monetary stimulus could also generate important costs for the rest of the world.”

Schiff said the IMF supports the plan to increase the consumption tax.

(Full article at the link)

If IMF actually thinks it is even remotely possible to bring Japan's fiscal health back, with the government debt more than double the GDP, it is delusional.

Japan should remember what IMF recommendations have done to Greece, Spain, Portugal, and most recently Cyprus.

Then again, Japan probably thinks this time is different, because Japan is not Greece (or Spain, or anyone else).

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