Monday, November 17, 2014

"The bad economic news out of Japan: what does it mean?"

From Marginal Revolution:
Here is one version of the latest report, here is another. People, don’t be surprised by this bad news. Unemployment in Japan already had fallen to about three and a half percent. So how much of a miracle could Abenomics accomplish in the first place? Not much, not even for committed Keynesians.

Commentators have grown to expect so much of the Phillips curve these days, but still a mechanism for the output boost is required and the Phillips curve (at best) holds only in some contexts. Japan simply hasn’t had that many laborers to put back to work. Getting more women in the workforce, as Abe has tried to do, is a positive development, but that is not mainly about macro policy nor is it mainly about the short run. Some of you might be thinking “well, won’t inflation cause some kind of output rise, if only by stimulating demand?” People, there is still no mechanism specified in that sentence. And you may recall, the 1970s and early 80s saw the rise of a bunch of “monetary misperceptions” theories, often stemming from the work of Bob Lucas, postulating something to that effect...MORE
ZeroHedge has a slightly less sanguine take on matters:

Abenomics Officially Leads Japan Into A Triple-Dip Recession - Weather Blamed; Nikkei Drops 600 Points, Back Below 17,000