Perhaps as a sign of China’s declining economic picture, Japan now stands to bump China off its top spot as the top foreign holder of U.S. debt. Japan is trying to soften the blow it has been taking as the strong yen continues to increase in value against the dollar, according to the WSJ.
This comes as newly elected PM
Shinto Abe vows to wage war against this stubborn deflation using enhanced tactics that have failed to beat back falling prices in the country for the past decade. Outlined in an IBT article, deflation has actually been falling slower than the purchasing power of Japan’s citizens. “Average earnings in Japan have fallen 12.2 percent since the 1997 fiscal year, while a core measure of consumer prices — excluding food and energy — has fallen 6.8 percent.” This is sad news, but perhaps the trend looks to be on the reverse as the BOJ reported the yen reaching a 20-month low of ¥84.48 to a dollar upon the PM’s announcement of heavy easement and stimulus.
Still, it seems unlikely that simply the election of a new political party (rather, the booting out of the old) and an old prime minister that quit on the job will halt over a decade of economic trends that are deeply rooted in problems within the economy, with decreasing consumption, shrinking working population, and an ongoing dispute with Japan’s trading partner China. But perhaps with a proposed $2.4 trillion dollar public works spending plan over 10 years and the restart of the Council on Economic and Fiscal Policy,
Shinto Abe can turn things around.