- Masamichi Adachi, senior economist at JPMorgan Chase & Co.
Yes, a misery index, you've got it right. Since the announcement of the unprecedented stimulus programme by the Bank of Japan and a three-arrow strategy, called Abenomics, analysts have been very divergent in their assessments. Some, even called Shinzo Abe's measures as a great disaster for the economy. Just like in the United States, enormous cash injections into the economy are beneficial only for some people. With only selected very few benefiting from asset reflation, other citizens will be under the constant pressure.
Consumer prices in the world's third largest economy soared at the fastest pace after April's tax hike. Due to a rapid growth in prices the misery index rocketed to its highest level last time seen in 1981. At the same time, wages adjusted for inflation posted the sharpest drop in most in more than four years. Food accounts for around 25% of CPI in Japan, and central bank's obsession with 2% inflation. Such a chase threatened domestic consumption as Prime Minister weighs a further boost in the sales levy. The government, however, can be forced to ease the monetary stimulus further, a measure that will lead to even a more imbalanced economy. Food prices jumped 5% from a year earlier in April, and keeping in mind Japan is only 39% self-sufficient on a calorie basis and is highly dependent on imported goods, the government can face a serious dilemma in the nearest future.
© Dukascopy Bank SA