Helicopter Money…Japan..25 charts

Japan has been at the forefront of weakening GDP/wages/growth, deteriorating demographics, elevated sovereign debt and extreme monetary policy.   Of all the major economies, given its existing debt burden and aging population, Japan is arguably the closest to Helicopter money.

Post 2012, policy (Abenomics) aimed at stimulating demand, generating wage growth and inflation has failed with respect to the specific objectives set.  But then again, what is an optimal level of consumption in a declining demographic paradigm?  Perhaps in the modern world it is one which drives growth to the point that current debt levels become manageable, or where risky assets provide returns commensurate with the consumption liabilities expected to be provided by them.   In this context, global Central Banks have been consciously attempting to manufacture growth for at least a decade.  Helicopter Money would however break this intercession, acknowledging that only more money supply and more debt relative to growth can support the expenditure/infrastructure side of the balance sheet: it is difficult to comprehend just how the asset side of the balance sheet would evolve in such circumstances.  I suspect that there would need to be an adjustment, a reset, but even that would be only half the story.  That said, on to Japan:

Japanese real GDP growth has been sliding heavily since the bursting of its own asset  bubble starting in 1990:

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Japan….employment and real GDP per capita dynamics

I had prepared some Japanese charts at the time of the Q3 GDP announcement and for one reason or another failed to complete the analysis. Well here are the charts I was working on:

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In my previous post I posted a graph of key US labour market dynamics…the growth in US employment (based on high water mark analysis).   We know that there has been a slowdown in labour growth dynamics at the same time as we have had an increase in debt, increasing market volatility and a slowdown in economic growth.  But did the financial shock and the long term impact of the unwinding on debt lead to weakening labour market dynamics or did weakening labour market dynamics leverage the impact of the shock and the debt?

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