Add Japan to the ever lengthening list of countries whose economies are deteriorating into recession. From Wolf Richter at wolfstreet.com:
Japanese consumers have borne the brunt of Abenomics even as the government has coddled Japan Inc., and as the Bank of Japan’s no-holds-barred money-printing campaign has pumped up the stock market.
They’ve had to digest a jump in the consumption tax, declining real incomes, and a devalued yen that makes import purchases, such as gasoline and a million other things, more expensive and that moves trips to foreign countries, long a cherished activity for the inhabitants of the island nation, out of reach.
It has shown up in the Consumer Confidence Index, released today by the Cabinet Office. The survey, covering households of two or more persons, paints a dreary picture. In July, the index fell 1.4 points to 40.3, the lowest level in six months. All sub-indices were down: “overall livelihood” fell to 38.1; “income growth” – a sad joke in Japan – fell to 39.6; “employment” fell to 44.7; and “willingness to buy durable goods,” such as cars, fell to 38.8.
Japanese households haven’t been exactly an enthusiastic lot. In the years between 2004 and 2007, the Consumer Confidence Index ranged from 45 to 50. But in early 2007, it began diving. By the time their general malaise had pushed the index down into the mid-30 range, the Financial Crisis blew up, pushing the index down even further. It bottomed out at 27. Consumer confidence then regained some feeble momentum to vacillate between 40 and 43, only to be felled by the horrific earthquake and tsunami of March 2011.
In late 2012, Shinzo Abe rode along on hope, promise, and a huge free lunch: unlimited printed money that would solve all of Japan’s problems. The honeymoon lasted over a year, until May 2013. That’s about when Japanese consumers came in contact with the conflux of rising prices and stagnating or falling incomes mixed with the anticipation of a broad consumption tax increase, effective April 1, 2014. It did its magic and hammered down consumer confidence. Things have been crummy ever since.
And it has mauled auto sales.
The Big Three Japanese automakers, which are global companies, are able to cover the malaise at home through an Abenomics miracle, the debauched yen. It allows them to translate the results from overseas operations and the value of exports into much weaker yen. If they had to report in dollars, they’d look pretty sad. But the market loves it that the debauchery of the yen sprays some superficial gloss on their income statements.
The debauched yen is of no help in their home market, however. And total vehicle sales – cars, trucks, and buses – have been cascading down relentlessly.
To continue reading: Worst Year for Car Sales in Japan since Earthquake
