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"Abenomics" – In Japan economic blossom hiding risks News

Saturday, September 2nd, 2017 | Economy

The prospects are "very good" that there will be a 57-month economic upturn like the end of the 1960s, said Minister of Economy Toshimitsu Motegi this week. According to government experts, only one month is missing as the economy has been growing since the end of 2012. Tokyo is confident that the upward trend will solidify and public investment will continue to pick up strongly.
But experts warn against a booming economy. Because the state works with a billion-dollar economic stimulus as a catalyst for the upturn, but it also reaches some limits. It is the highest debt burden among all industrialized countries: in 2016 the corresponding quota was more than 222 per cent of the gross domestic product (GDP), which is much more than in the notoriously clogged middle-class Greece with "only" 179 per cent of GDP.
Too low inflation
The economy of the Far East country has grown as fast in the spring as it has been for more than two years. GDP grew by 4.0 per cent from April to June. This is growing more strongly than in the US and the euro zone.
The upturn is shaped by the special Japanese mix of economic aid, floods and reforms. According to its author, Minister President Shinzo Abe, she is called "Abenomics" in the economist's jargon. The government has flanked the Bank of Japan's ultralock monetary policy with numerous economic stimulus packages.
As in the euro zone, monetary conserva- tives want to fuel the unwanted low inflation with the influx of money and thus also create more growth. Unlike Japan, Japan is a burnt-out child when it comes to deflation: prices that have fallen on a wide front have paralyzed the economy for a long time. Consumers are lagging behind in such a deflationary downward spiral in the hope of ever-cheaper offers, wages are declining, and firms are putting back investments.
When is the setback?
Last year, Abes Kabinett adopted an additional expenditure of approximately 118 billion euros for projects at all levels of government, with a corresponding impact on the economy: in the second quarter of 2017, government investment rose by 5.1 per cent. But this could lead to a boomerang effect, warns DekaBank expert Rudolf Besch: "The assumption is that these are the effects of one of the many economic stimulus packages adopted in the past. "
Analyst Stefan Grosse from NordLB also expects that Japan will find it hard to keep up the momentum – also because of the tensions between the US and North Korea on the one hand, and with China on the other: "The strong yen and geopolitical demand sought by investors in uncertain times Risks are likely to affect the consumer's mood as well as the inadequate development of wages. Japan will continue to grow – just slower. "
However, Motegi, as a matter of precaution, gave a cessation of calls from the ruling Liberal Democratic Party for a supplementary budget with higher expenditures: "Under the current economic conditions," such an additional budget could not be expected for the autumn.


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