Japanese Households With Zero Savings Hits 31%, Most Since 1963; Sexless Youth; Currency Crisis Awaits

Japanese citizens are starting to complain Abenomics is not helping them. Here are a few reasons:

1. Prices in Japan are rising, but wages aren't.
2. Taxes have risen massively and Prime Minister Shinzo Abe wants even more tax hikes.
3. Interest on savings accounts does not keep up with price increases

As a direct result of Abenomics, Japanese Households Without Savings Climb to Most Since ’63

The share of Japanese households with no financial assets rose to a record as falling incomes forced people to dig into their savings, highlighting the potential for widening disparities under Abenomics.

The proportion reached 31 percent, according to a Bank of Japan survey released in Tokyo yesterday, up from 26 percent a year earlier and the highest since the poll began in 1963.

Already facing declines in wages, households will be hit in April by a consumption-tax increase intended to shore up Japan’s finances.

“It’s critical that Abe succeed in convincing corporates to raise wages,” said Izumi Devalier, a Hong Kong-based economist at HSBC Holdings Plc. “Lower-income households may come to feel they’re getting the short end of the stick from Abenomics.”

Japan’s salaries extended the longest slide since 2010 in September, with regular wages excluding overtime and bonuses falling 0.3 percent from a year earlier, a 16th straight drop.

Tax Hike Deal

On August 31, I wrote Japan Seeks to Hike Taxes then Waste Money on Stimulus to Make Up for Decline in Spending; Currency Crisis Awaits

When Japan last hiked the sales tax from 3 percent to 5 percent in 1997, consumer spending tumbled by 13 percent in the quarter after the higher tax went into effect. That was followed by a recession.

In October, Abe got his tax hike. It's the first tax increase since 1997. Sales taxes will rise from 5% to 8%, a tax rate increase of 60%.

To ease the blow of the tax hikes, Abe will announce a fiscal stimulus package in December.

The deal is not a good one for the average Japanese citizen: Tax rates will go up 3 percentage points, but Abe will announce a spending package in December to waste some of the increased collection on useless projects.

Consumers would have been far better off with no tax hike, falling prices, and stable (-0.3%) wages.

Japan's Sexless Youth

In case you missed it, please consider my October 22, 2013 report on Japan's Sexless Youth

Here are some stats according to the Japan Family Planning Association (JFPA)

• 45% of women aged 16-24 "were not interested in or despised sexual contact". More than a quarter of men felt the same way.
• Population of 126 million has been shrinking for the past decade
• Population projected to plunge additional one-third by 2060
• Survey in 2011 found that 61% of unmarried men and 49% of women aged 18-34 were not in any kind of romantic relationship
• Fewer babies were born in 2012 than any year on record.
• Of the estimated 13 million unmarried people in Japan who currently live with their parents, around three million are over the age of 35.
• Married working women are sometimes demonised as oniyome, or "devil wives".
• Japan's Institute of Population and Social Security reports an astonishing 90% of young women believe that staying single is "preferable to what they imagine marriage to be like".

This is what I wrote in response ...

Fighting Demographics

Those wondering why prime minister Abe is having such a hard time stimulating inflation can now stop wondering.

Until Japanese attitudes towards child-bearing, jobs, and relationships change, Abe will continue to struggle.

Abe seeks to stimulate inflation, but that is likely to encourage more saving, not more spending.
With the bulk of Japanese pensions tied up in bonds yielding next to nothing, higher taxes and higher cost of goods and services will decrease demand from aging retirees.

Record Service in Interest on National Debt

On August 27, I pondered Japan Finance Minister Seeks Record Debt Servicing on Interest on National Debt; What's Next?

Abe Tells Companies to Ignore Customers

Inquiring minds may also wish to consider my July 19 article Japan Tells Firms "Stop Sitting on Cash", Ignore the Lack of Customers

That headline is correct. Abe wants companies to spend money whether or not they have customers. I asked a very simple question in response "What happens to prices when more products are produced in the face of falling or static demand?"

The Abenomics story goes on and on.

"Virtuous Circle" of Inflation

In November, Abe was promoting the "virtuous circle" of inflation while simultaneously whining that wages did not keep up.

Japan's prime minister Shinzo Abe managed to get prices to rise. He did that with his policy to destroy the Yen even though Japan is heavily dependent on foreign oil and food imports.

Interestingly, Abe is not quite pleased with the results. Abe now complains that wages are not keeping up with prices. He wants a wage-price spiral on top of it all.

For more details, please see Prime Minister Abe Calls for Wage-Price Spiral to Create "Virtuous Circle"; Shame Shame

Things Can Only Get Worse

Wages declining .3% annually is hardly a problem if prices are falling as much. Instead, enter Abenomics. Abe wants 2% inflation, more fiscal stimulus, higher taxes, rising wages.

He also wants the impossible: Inflation to bail out the government and savers alike, while interest rates remain near 0%.

Crisis Awaits

Expect the percentage of households with no savings to soar.

Hiking taxes is about the silliest thing a country hoping to escape deflation can possibly do. Telling businesses to produce goods that no one wants to buy is perhaps even sillier.

Economic illiterates sing the praises of Abenomics because the stock market and prices are rising.

But attitudes, "sexless youth", increasing households with zero percent savings, rising debt levels, and falling real wages tell a far different story.

Without a doubt, a currency crisis awaits Japan.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com