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    Japan: Abenomics 2.0 in the offering - SocGen

    Kit Juckes, Research Analyst at Societe Generale, notes that recently Japanese Prime Minister Abe has postponed the consumption tax increase and announced significant fiscal easing, which will be included in the second supplementary FY16 budget.Key Quotes“This looks to mark a turning point in Japanese policy away from the original Abenomics, which relied on monetary policy to weaken the yen and push up inflation and asset prices in the process. Abenomics 2.0 hopes to deliver increased demand growth and encourage cash-rich corporates to recycle those savings into the economy. It also edges the country closer to central-bank financing of fiscal policy, since the scope for fiscal easing comes from the large ownership of government debt by the BoJ. Is this good, bad or ugly for the yen?The answer, I think, comes down to one longer-term question and one shorter-term one. The longer-term question is whether this will succeed in boosting GDP growth, and here our economists are optimistic. That being the case, it’s hard to imagine the yen being this soft in a few years’ time. However, the shorter-term question is how asset markets. If we remain in a vicious circle of a stronger yen leading to a falling Nikkei and more disinflation, yen strength will be temporary because confidence in the ability of Abenomics 2.0 to deliver sustainable growth simply won’t last.”


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