“When you have eliminated the impossible, whatever remains, however improbable, must be the truth.”
– Sir Arthur Conan Doyle, The Sign of Four
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“We all want to believe in impossible things, I suppose, to persuade ourselves that miracles can happen.”
– Paul Auster, The Book of Illusions
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“He
possessed the logic of all good intentions and a knowledge of all the
tricks of his trade, and yet he never succeeded at anything, because he
believed too much in the impossible. Surprising? Why so? He was forever
in the act of conceiving it!”
– Charles Baudelaire
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“She shook her head and whispered, “No. No! That can’t be true. Impossible!”
“You think things have to be possible? Things have to be true!”
– Philip Pullman, The Subtle Knife
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This
week’s TTMYGH revolves around “Macs.” The first is a man-turned-verb
who was capable of extricating himself from seemingly hopeless
situations, armed with an array of tools seemingly singularly unsuited
to the purpose; and the second is an ingenious, though ultimately
futile, plot device which has been used by everyone from Welles to
Hitchcock to Tarantino.
Though
at first blush it’s hard to see a link between the two, in today’s
world there are Angus MacGyvers everywhere, beetling away with duct tape
and Swiss army knives, trying to extricate themselves from completely
hopeless situations; and if they are to succeed before the credits roll,
they must rely upon one very important thing: the suspension of
disbelief by their audience.
That’s where the other “Mac” comes in.
Man first.
Angus
MacGyver was a troubleshooter. He worked for the fictional Phoenix
Foundation as a secret agent and also for the US government in the (also
fictional) Department of External Services.
Educated
as a scientist and possessing an encyclopedic knowledge of the physical
sciences, MacGyver had been a bomb disposal technician during the
Vietnam War and possessed a distinctly pacifist outlook on life — he
hated guns.
Also, his luck could scarcely be described as merely “good.”
Somehow,
over the course of seven seasons, MacGyver managed to get himself into
some 139 impossible-to-get-out-of situations — each of which he managed
to navigate successfully by using conventional items in a distinctly
unconventional way.
By way of illustration, in the pilot episode alone, MacGyver managed to do the following:
•Rig
a machine gun with a cord, string, stick, and matches so that when the
string burned through, the machine gun fell and was triggered by the
stick and began firing (while still being held by the cord).
•Plug
a sulfuric acid leak with chocolate. MacGyver stated that chocolate
contains sucrose and glucose. The acid reacted with the sugars to form
elemental carbon and a thick gummy residue. (NB this was subsequently
proven to work, as demonstrated on the show Mythbusters.)
•Make
a “rocket thruster” by hitting a flare gun with a rock, launching
MacGyver and a man he rescued off of a mountain, whereupon he opened a
parachute and made a clean getaway.
•Create
a bomb to open a door using a gelatin cold capsule containing sodium
metal, which he placed in a glass jar filled with water. When the
gelatin dissolved, the sodium reacted violently with the water and
caused an explosion which blew a hole in the wall.
Impressive
stuff. It’s no wonder he ended up becoming a verb. But to witness
perhaps his greatest-ever escape, afford yourself two minutes to watch THIS little stunt to see how MacGyver escaped from his own coffin.
I
couldn’t help but think of MacGyver this past week as I sat chatting
with a colleague about the situation Japan now finds itself in.
I
won’t recap the details of the straitjacket into which the Japanese
have been strapped for the past two decades — enough ink has been
spilled on that subject already, including in a recent Things That Make
You Go Hmmm... entitled “Avenomics”
— but my conversation this week stemmed from the following statement,
made by me to myself, as I leaned back in my chair after reading an
article about proposed changes to the GPIF (Government Pension
Investment Fund), Japan’s public pension fund:
“Japan really is totally f*****.”
What led me to that well-thought-out and eruditely expressed conclusion? Read on.
In
case you are not familiar with the GPIF, it is the largest pool of
government-controlled investment capital on the planet — outstripping
even the infamous Arab sovereign wealth funds.
The
GPIF controls ¥128.6 trillion, or $1.25 trillion, and to say the
organization is somewhat risk-averse is akin to calling the Kardashian
family somewhat shameless.
The GPIF holds
almost 70% of its assets in bonds — and the vast majority of them are of
the local variety. The reason for this? Well that would be because the
GPIF is (and has always been) run by bureaucrats from the Ministry of
Health, Labour & Welfare, as opposed to, say, investment
professionals.
But that’s probably no bad
thing, because no investment professional worth his salt would have
bought so many JGBs; so if GPIF didn’t buy them, THAT would be a big
problem for the Japanese government AND the BoJ.
Source: GPIF
How did that allocation to domestic bonds do last year? Well, as it turns out, not so great:
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Q1 2013
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Q2 2013
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Q3 2013
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Q4 2013
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Total 2013
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Domestic Bonds
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-1.48
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1.18
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0.18
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-
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-0.14
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Domestic Stocks
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9.70
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6.07
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9.19
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-
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27.05
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Int’l Bonds
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4.01
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1.64
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8.16
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-
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14.34
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Int’l Stocks
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6.14
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7.13
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16.23
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-
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32.17
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Source: GPIF
Fortunately, over the last twelve years the GPIF has managed to meet its targets — by growing at an annualized rate of 1.54%.
Thankfully
for the GPIF, despite their largest allocation throwing off negative
returns, the BoJ’s actions in weakening the yen boosted the Nikkei, and
the central-bank-inspired strength in equities and bonds elsewhere in
the world helped GPIF’s performance to pass the smell test for 2013.
Now,
when it comes to bureaucracy, Japan is in a league all of its own. My
first up-close experience of this came in 1989 when I went to get a
driver’s license after moving to Tokyo. Anybody who has attempted to
complete that fairly straightforward objective in Japan knows that it
requires the best part of a day traipsing upstairs and down between
several counters, getting the same piece of paper stamped by numerous
people in a very specific order. Several visits are required to the same
person — but only in the correct order.
Maybe this process has changed 25 years on, maybe it hasn’t. I’m willing to bet on the latter.
Anyway,
amongst themselves, foreigners in Japan have a saying which strikes at
the very heart of this little bureaucratic problem:
“Everything makes sense once you realize Japan is a communist country.”
Aki Wakabayashi’s book Komuin no Ijona Sekai (The Bizarre World Of The Public Servant)
sprang from her 10 years working at a Labour Ministry research
institute and lifted the lid on some of the peccadilloes of Japan’s
civil service.
Wakabayashi
told of being scolded for saving her department ¥200 million, as her
effort put that amount in jeopardy for the following year’s budget
allocation; of senior managers taking female subordinates on
first-class, round-the-world trips to “study labour conditions in other
countries”; and of the mad dash by all departments to spend unused
budget before year-end — the collective result of which saw monthly
total expenditures by government agencies jump from ¥3 trillion in
February to ¥18 trillion in March.
The facts unearthed by Wakabayashi are remarkable:
(Japan
Times): The national average annual income of a local government
employee was ¥7 million in 2006, compared to the ¥4.35 million national
average for all company employees and the ¥6.16 million averaged by
workers at large companies. Their generosity to even their lowest-level
employees may explain why so many local governments are effectively
insolvent: Drivers for the Kobe municipal bus system are paid an average
of almost ¥9 million (taxi drivers, by comparison, earn about ¥3.9
million).
School
crossing guards in Tokyo’s Nerima Ward earned ¥8 million in 2006. (Such
generosity to comparatively low-skilled workers may explain why in the
summer of 2007 it was discovered that almost 1,000 Osaka city government
employees had lied about having college, i.e., they had, but did not
put it on their resumes because it might have disqualified them from
such jobs!) Furthermore, unlike private sector companies, public
employees get their bonuses whether the economy is good or bad or, in
the case of the Social Insurance Agency, even after they lose the
pension records of 50 million people (2008 year-end bonuses for most
public employees were about the same as 2007, global economic crisis
notwithstanding).
In
addition to their generous salary and bonuses, public servants get a
wealth of extra allowances and benefits. Mothers working for the
government can take up to three years’ maternity leave (compared to up
to one year in the private sector, if you are lucky). Some government
workers may also get bonuses when their children reach the age of
majority, extra pay for staying single or not getting promoted, or
“travel” allowances just for going across town. Perhaps the most
shocking example Wakabayashi offers is the extra pay given to the
workers at Hello Work (Japan’s unemployment agency) to compensate them
for the stress of dealing with the unemployed.
Japan’s
bureaucracy is extreme but hardly unique, so I won’t dwell on its
absurdities; but these examples at least give us some background for
understanding the GPIF.
The decision-making
chart of the organization is a masterclass in Japanese process. Where
else would you have specific departments responsible for “demands for
improvements” and “deliberations”?
Source: GPIF
Back
in November 2013, a seven-member panel led by a Tokyo University
professor Takatoshi Ito and convened by PM Shinzo Abe published its
final recommendations for the future of the GPIF, and those findings set
the behemoth on a course into far more turbulent waters:
(Pensions
& Investments): The panel’s Nov. 20 final report said the GPIF’s
60% allocation to ultra-low-yielding Japanese government bonds —
defensible in the deflationary environment of the past decade — should
not be maintained in the inflationary one Mr. Abe has promised as a
centerpiece of his quest to revive Japan’s economy.
The
seven-member panel ... urged the GPIF and other big public funds in
Japan to diversify into real estate investment trusts, real estate,
infrastructure, venture capital, private equity and commodities, while
shifting more assets to active strategies from passive and adopting a
more dynamic approach to asset allocation.
Governance
of those public funds, with combined assets of roughly $2 trillion,
should be strengthened by making them more independent of the ministries
that oversee them.
Now, it’s
extremely hard to fault the logic underpinning the recommendations made
by Ito’s panel — though naturally, with this being Japan...
Some observers — noting that previous calls for reform had come to naught — urged caution.
The
recommendations make sense, but the challenges of revamping investments
at a fund controlling such a large chunk of Japanese retirement savings
will be considerable, warned Alex Sato, president and CEO of
Tokyo-based Invesco (IVZ) Asset Management (Japan) Ltd.
To
put the size of the GPIF into perspective, should the decision be made
to allocate a mere 5% of its assets to a particular asset class, that
would require the deployment of $60 billion.
The redeployment of those holdings of JGBs is likely to cause future problems, but that
didn’t concern one of the GPIF panel members, Masaaki Kanno, an
economist at JP Morgan in Tokyo, who, after the findings were published,
made a couple of predictions:
(P&I):
In a Nov. 20 research note, Mr. Kanno predicted the GPIF would be
permitted enough flexibility to allow allocations to yen bonds to drop
to 50% by the summer of 2014.
The
Bank of Japan’s recent policy initiative to flood the market with
liquidity, meanwhile, could set the stage for a seamless transfer of
that huge amount of Japanese government bonds, Mr. Kanno said.
Eventually,
Japanese government bonds should drop to between 30% and 40% of the
GPIF’s portfolio — higher than the 20% to 30% range typical of leading
public pension funds abroad to account for Japan’s rapidly aging
demographic profile, Mr. Kanno said. Meanwhile, another ¥30 trillion
($300 billion), or a quarter of the fund’s assets, should eventually
shift into “risk assets,” according to the J.P. Morgan report.
The
BoJ certainly does have a policy initiative to “flood the market with
liquidity,” but that policy initiative is the continuation and expansion
of a policy that has been in operation for 20+ years — namely, the
purchasing of the government’s own debt with freshly printed yen.
In 2001 the Japanese termed it ryōteki kin’yū kanwa, but today everybody knows it as quantitative easing.
In
a paper which analyzed Japan’s initial experimentation with QE,
published in February 2001, Hiroshi Fujiki, Kunio Okina, and Shigenori
Shiratsuka (all three senior BoJ economists) suggested that once a zero
interest rate had been reached, if the situation still appeared dire,
MacGyvering an alternate solution might not be the greatest idea in the
world:
(Monetary Policy under Zero Interest Rate: Viewpoints of Central Bank Economists):
[F]urther monetary easing beyond the zero interest rate policy, most
typified by the outright purchase of long-term government bonds, should
be viewed as a bet which we would only be forced to explore in the event
the Japanese economy stands on the brink of serious deflation.
Considering the uncertainty and risks surrounding these unconventional
measures, it is quite inappropriate to introduce them merely on an
experimental basis. Of course, this does not mean that further monetary
easing may not be warranted in any circumstances, nor that other easing
measures not covered in this paper are infeasible...
What the hell did those guys know, anyway?
Indeed. As if looking into some sort of crystal ball, Messrs. Fujiki, Okina, and Shiratsuka continued:
With
regard to monetary policy in Japan, there seems to be some
oversimplified idea that the adoption of inflation targeting would be a
panacea for current economic difficulties. This should remind central
bankers, who must make policy decisions on a real-time basis amid
drastic structural transformation, of the unfruitful traditional “rule
versus discretion” debate in terms of monetary policy implementation.
Perhaps Abe and Kuroda prefer watching reruns of Friends to perusing BoJ policy recommendations?
The
subsequent expansion of the BoJ’s QE policy can be seen clearly in the
chart on the previous page. It highlights beautifully the problem with
heading down the treacherous QE trail: ever-increasing amounts of money
must be printed to keep the wheels turning.
Once you start, to stop is not a decision that is made by you, but rather it eventually gets made for
you. In the meantime, your balance sheet just swells and swells. The
BoJ’s has increased almost five-fold since 1997 and is up 80% since the
beginning of 2012:
... and, if you’re Japan, your monetary base goes vertical:
That’s three very similar charts, but the next one looks nothing like the preceding ones:
And therein, as The Bard (who celebrated his 450th birthday this week) almost once said, lies the rub.
Japan’s
population is actually declining — fast. And under the crush of that
breaking statistical wave, everything gets harder for Japan.
Japan’s
population “pyramid” looks more like a top-heavy baking dish. There are
already more over-65s than under-24s; but it is estimated that by 2060
Japan’s population will have fallen from 128 million to 87 million, and
roughly half of those remaining will be over 65.
The
ONLY answer for Japan is immigration — lots of it — but that, I am
afraid, is a total non-starter for the insular Japanese. The
depopulation problem already loomed on the horizon like a distant oil
tanker in 1989 when I lived in Tokyo. What has changed since then is
that the tanker has now docked.
In 2003, it
was estimated by the UN that Japan would need 17 million new immigrants
by 2050 to avert a collapse of the very pension system we’re examining
this week. Those immigrants would amount to 18% of the population in a
country where immigrants currently amount to...wait for it... 1%.
It gets worse.
Of
that 1%, most are second- or third-generation Koreans and Chinese,
descendants of people brought to Japan from former colonies.
As
of October 1, 2013, there were all of 1.59 million foreigners in Japan,
and that is after net immigration ROSE for the first time in 5 years,
with 37,000 new immigrants taking a bit of the sting out of the 253,000
decrease in Japanese citizens in 2013.
So...
Japan’s fate is set. In coming years the ageing population will be
drawing down its pension funds at an ever-increasing pace, even as the
largest pension fund in the world is being forced by the government into
allocating more of those funds to riskier assets in order to try to
stimulate growth in the moribund economy.
Meanwhile,
the Bank of Japan is embarking on an experiment in monetary
prestidigitation the likes of which has never before been seen; and in
order for it to be successful they will need the GPIF to not only not SELL JGBs but to BUY MORE of them.
In
addition, Shinzo Abe is promising the Japanese (and every holder of
JGBs, which are yielding a paltry handful of basis points) that he will
generate 2% inflation, thus rendering their JGB holdings completely
useless.
The whole thing is madness — madness built on the promise of the delivery of a dream.
Already
the BoJ is buying up to 85% of some JGB issuances, and an estimated 91%
of Japanese bonds are held domestically. What do you think happens when
the GPIF turns from buyer to seller?
Uh-huh. The BoJ will have its work cut out to maintain order.
How tenuous is the BoJ’s grip on their bond market?
Well,
last month the BoJ announced that it would be buying “just” ¥170 bn of
long-term bonds instead of the ¥180 bn the market expected. The result?
(FT):
Traders’ explanations for a sudden surge in yields at about 10:15 am in
Tokyo ranged from a “fat finger” trade in JGB futures — which saw
prices for June delivery drop one whole point from 144.80 to 143.80 — to
a simple sell-off exacerbated by algorithmic trading.
But
there was no doubt about the trigger: a 10:10 am announcement from the
central bank that it was looking to buy Y170bn of long-term bonds,
rather than the Y180bn the market had expected.
“I
think the BoJ has induced some form of unwarranted volatility, which is
not being taken kindly by the market,” said Shogo Fujita, chief Japan
bond strategist at Bank of America Merrill Lynch in Tokyo. “With rates
near zero the only thing the BoJ can do is to contain volatility, and
today they’re doing a very poor job.”
Mark my words, this is going to end VERY badly. Very badly indeed.
PAGING MR. KYLE BASS! MR. BASS TO THE FRONT DESK, PLEASE:
(Beacon Reports): KYLE BASS:
That plan, one of the three arrows in Abe’s growth strategy (called
‘Abenomics’), has the BOJ buying just over ¥60 trillion of new bonds
each year for the next two years. It effectively doubles Japan’s
monetary base. Considering the likely fiscal deficit for this year and
next is running about ¥50 trillion each year, or close to 11% of GDP, I
think the BOJ can only buy another 10 or ¥12 trillion of JGBs. I don’t
think that cushion is going to be enough to monetize the entire fiscal
deficit if they are going to be the buyer of last resort.
The
key question is, will the BOJ be able to hang on to rates? I think they
can in the near-term and I think they can’t in the medium to long-term.
If investors holding JGBs actually believe that ‘Abenomics’ will work,
then it creates a problem — the ‘Rational Investor Paradox’ — where
investors rationally sell some of their JGBs because they are being told
to expect negative real rates of return if the administration achieves
its 2% CPI target.
Whether
that means they sell some or all of them is up to the individual
sellers. One bank sold more than 20% of its JGB ownership in the first
quarter. If 5% of owners sell, that’s another ¥50 trillion. The reason
you’re seeing so much bond market volatility, even though the BOJ is
actively trying to keep a lid on rates, is that the BOJ is being
overwhelmed by selling despite its large purchase program.
Bravo, Kyle.
Kyle
brings up the topic of Abenomics and Abe’s fabled “three arrows,” which
supposedly, once fired, would magically fix all Japan’s woes.
The
first arrow, massive monetary easing, has been launched; and, depending
on how you measure these things, it has either been a magnificent
success or has put the final nail in Japan’s coffin. Optically, it has
done what was intended (weaken the yen, pump up the Nikkei, and pull JGB
yields even lower), so the Japanese government is counting that one in
the win column. Me? I think, once hindsight can take a look at Japan
properly, Abe’s QE will be seen as an arrow shot right through the
faintly beating heart of the country, finally killing it. But we’ll have
to wait and see.
The second arrow is the
targeted ¥10.3 trillion ($116 billion) of fiscal support that includes
investment in ageing infrastructure and tax breaks to encourage R&D,
the hiring of new employees, the raising of wages, and the buying of
capital equipment. That arrow too has been fired, and the jury is once
again decidedly out on whether any long-term success will result.
That leaves Abe’s third arrow.
Before we get to that one, a little story of how the policy got its name.
In 16th-century Japan, according to legend, a daimyo
(feudal lord) named Motonari Mōri told each of his three sons to break
an arrow in half. Each of them duly did as their father bade them. Mōri
then told his sons to tie three arrows together in a bundle and try to
break all three at once.
None of them were successful.
Do
you see what Abe and his advisors were doing here? Isn’t it brilliant?
Such a wonderful allegory. Who wouldn’t buy into that idea? Well, the
Japanese certainly did (up to a point); and foreign investors,
guaranteed a sinking yen and a rising Nikkei, also came to the party —
though one can’t help but think they have a taxi waiting outside and
won’t be sticking around for the slow dancing.
But there’s still that damned third arrow.
That
is the one that involves real, structural change; and I’m sorry to have
to be the one to mention it, but the Japanese don’t do real structural change.
This brings me to our other “Mac” for today.
Abe’s
third arrow is little more than an ingenious device designed to keep
the watching world focused on something that will ultimately prove
irrelevant to the plot.
In movie
parlance, it’s a “MacGuffin”:
parlance, it’s a “MacGuffin”:
(Wikipedia):
[A] MacGuffin is a plot device in the form of some goal, desired
object, or other motivator that the protagonist pursues, often with
little or no narrative explanation. The specific nature of a MacGuffin
is typically unimportant to the overall plot. The most common type of
MacGuffin is an object, place or person; other types include money,
victory, glory, survival, power, love, or other things unexplained.
The
MacGuffin technique is common in films, especially thrillers. Usually
the MacGuffin is the central focus of the film in the first act, and
thereafter declines in importance. It may re-appear at the climax of the
story, but sometimes is actually forgotten by the end of the story.
Sound familiar?
Think of Abe’s third arrow as Citizen Kane’s sled or Pulp Fiction’s briefcase — a plot point that initially assumes tremendous importance but fades into irrelevance by the end of the movie.
Abe
has done a masterful job at getting the world to buy into his reform
program, but the world was only too ready to do so after two decades of
false dawns in Japan.
The Japanese public
were ready for their country to cast off the shackles of deflation
(although, to a population ageing as fast as the Japanese are, a little
deflation is a wonderful thing), and investors around the world were
happy to believe that this was finally going to be the time when buying
the Nikkei would lead to outperformance (providing your currency was
hedged, of course). FX traders just wanted a central bank-backed trade
to put on.
But as with all central
bank-inspired moves, the reality here is not all about reform and
structural change, but rather about a group of investors simply
front-running the BoJ’s largesse.
The
investment community will play ball until the moment juuuuuuust before
the crashing realization dawns that Abe can’t fire his third arrow — and
then they’ll say thank you for the free ride and exit stage left.
Preliminary
committee findings which suggested that radical overhaul of Japanese
employment law, healthcare, and agricultural policy be part of the third
arrow were watered down, and a vague compromise was wafted in front of
the world — with the promise of so much more to follow.
In an interview with CNN’s Fareed Zakaria earlier this year, Abe explained the true significance of the third arrow:
“What
is important about the third arrow, structural reform, is to convince
those who resist the steps I am taking and to make them realize that
what I have been doing is correct, and by so doing, to engage in
structural reform.”
Read that again.
Yes
folks, the important part of structural reform in Japan is to convince
people that Abe is correct. If he can convince them he is right, they
will have engaged in structural reform.
Confused?
You should be.
This is how Japan works — or doesn’t.
Immigration reform has been widely recognized as the only answer to Japan’s crippling demographic problem for well over three decades. Nothing has been done about it.
How
about the “Wage Surprise” — increasing wages on a national basis —
hailed by Abe as the key to lifting Japan out of the doldrums, and a key
feature of Abenomics?
(Bloomberg,
March 4, 2014): Japan’s salaries increased for the first time in almost
two years in January as companies boosted pay for part-timers, aiding
Prime Minister Shinzo Abe’s effort to end 15 years of deflation.
Base
pay excluding bonuses and overtime rose 0.1 percent from a year
earlier, the first gain in 22 months, the labor ministry said in Tokyo
today.
Yep, a 0.1% increase in base pay. However...
Overall pay fell 0.2 percent, the first drop in three months.
Doh!
Subsequently,
Japan’s wages have seen modest increases, with base pay increases
hitting 16-year highs. “Good,” I hear you cry. Well yes, only, that
16-year high equates to a 2.39% rise — not QUITE enough to make up for
the 3% consumption tax increase which kicked in on April 1.
If Keynesian loon former BoE policymaker Adam Posen is to have his way, those wages had better start spiraling up fast:
(WSJ):
The goal of Abenomics, Mr. Posen said, is not to make Japan richer or
improve its fiscal position. Rather, it’s to establish a strong base
from which Japan can help remake the Asian order in coming years — “a
nice way of saying” that the ultimate purpose is to enable “Japan and
its neighbors not to be dominated by China.”
There’s
a window of about a decade to remake Japan’s economy toward that goal,
Mr. Posen said, but over that time it needs to average economic growth
of about 1.75% a year and raise its consumption tax to 20%.
Markets
will eventually tire of Abe’s continual promises that more is coming,
so he desperately needs to somehow break the entrenched deflationary
attitude in Japan.
(WSJ):
In a survey of 1,000 consumers on March 29-30 by broadcaster Fuji News
Network, 69% said they had not made any special purchases ahead of the
sales tax rise, and 77.4% said they didn’t feel an economic recovery was
under way.
Good luck with that attitude problem, Shinzo.
This week we got a look at how Abe is faring with one of his promises, that of guaranteed 2% inflation.
Core CPI (excluding food and energy) rose 1.3% in March — unchanged from the previous month and lower than analyst forecasts.
Of course, that was taken as a sign that further easing by the BoJ would be forthcoming...
And round and round it goes... until it stops.
The briefcase in Pulp Fiction ONLY works because we DON’T find out what is in it.
Abe’s
third arrow can be loaded into the bow, but it can’t be fired once and
for all, because if it IS fired, the game is up. There will still be
continual promises of more to come, and markets may buy into that for a
while; but, like all central bank-induced “boom times,” Abenomics has a
shelf life, and that is nearing an end.
The
changes at the GPIF are potentially disastrous, and Kuroda’s BoJ and
Abe’s government are desperately trying to MacGyver their way out of an
impossible situation, armed only with hollow promises and faith, when
what they really need is duct tape and a Swiss army knife.
When
asked by François Truffaut in a 1966 interview how he would describe a
MacGuffin, Alfred Hitchcock illustrated it perfectly with this story:
It
might be a Scottish name, taken from a story about two men on a train.
One man says, “What’s that package up there in the baggage rack?” And
the other answers, “Oh, that’s a MacGuffin”. The first one asks, “What’s
a MacGuffin?” “Well,” the other man says, “it’s an apparatus for
trapping lions in the Scottish Highlands.” The first man says, “But
there are no lions in the Scottish Highlands,” and the other one
answers, “Well then, that’s no MacGuffin!” So you see that a MacGuffin
is actually nothing at all.
Abenomics
is a plan by which to change Japanese behaviour; but as anyone who has
spent any time in that wonderful, perplexing country will tell you, the
Japanese do NOT change their behaviour — even when facing a demographic
disaster.
Sorry, but Abenomics is actually nothing at all.
*******
Right then, after that little lot, it’s time to get to the rest of this week’s Things That Make You Go Hmmm...,
and we kick things off with suspicions surrounding a Chinese export of a
slightly different kind than those we are used to. From there we head
to Rome to find a mighty city in decay; to the US, where an astonishing
one in ten bridges is in need of repair; and to France to read about the
man of the moment, Thomas Piketty.
The
BRICS are on the verge of making a big move of their own; and heading
back to China, we ask the question “What if China has a Fukushima?” and
find a property market swiftly falling to earth.
The article that kicked off this week’s TTMYGH can be found on page 26, and I’ve thrown in an irresistible story from The Onion for good measure. See if you can guess which one it is.
Charts?
Well, food inflation, crop and water stress, and Chinese gold
consumption take care of those, which leaves only the interviews; and
this week we have a couple of crackers, beginning with my friend Bill
Kaye from Hong Kong.
After Bill we get to
hear from the brilliant Pippa Malmgren, and there’s even room for yours
truly to squeeze his ugly mug in at the bottom of the page.
Until Next Time... Grant Williams
