The Extraordinary Stimulus in Japan seems to be paying off, although the dismal figures for the economy contracting over the last two quarters may make some people believe otherwise.
From a fall of 7.6 percent in the 2nd quarter, the fall in the 3rd quarter has been trimmed down to 1.7 percent. That to me is an early indicator that the tide has turned, and the Japanese Stimulus is proving effective. It may prove to be the case that this current quarter may show growth (or a fall that is trimmed down further).
With the gigantic size of the Stimulus, which at $85 billion a month is equal to the Quantitative Easing they had in the U.S., there are of course concerns for the future, of an unsustainable monetary expansion that may be creating a bubble. That is a moot point, as although the size of the population and physical size of the country may not suggest it, but Japan is a powerhouse of wealth, her citizens having saved ample in the past few decades to enable Japanese banks and corporations invest overseas, resulting in very healthy GNP figures. Only under that significance can the Stimulus be seen to be relevant, with sound underlying strength of the Japanese economy.
The cash flow created is helping to repair the damages after the disaster at Fukushima, and hopefully putting a few more Yen into the citizens pockets, enabling them to have rising standards of living, as well as creating the capacity to invest abroad.
I was pleased to note that India under Mr Modi has secured about $35 billion over next three years, and this friendship and co-operation will serve India well. In the past, Japan has invested in South Korea, and that success story is anybody's envy. With a talent pool in high quality engineering and infrastructure development, especially earthquake proof buildings and sound bridges, as well as power plants and electronics products such as televisions, computers and transformers, Japan is likely to serve the export markets very well, in return earning growth of capital in host nations.
This strategy of cheapening the Yen and hence making their products and services cheaper is a bold strategy under Prime Minister Mr Abe, complemented by BoJ Chairman Mr Kuroda which has helped pull Japan out of the period of entrenched stagnation to a period of Recovery. Perhaps the Stimulus now needs to be trimmed down, just like the Tapering in the U.S. If they cut it down perhaps $15 billion every three months, it would form a safety net to keep the economy growing but with a little bit more stability. I believe that is perhaps the only thing they need to do to keep going.
If this current quarter's figures actually indicate a Rebound, then I believe it will confirm to one and all that Mr Abe's policies have been very successful. If he remains as Prime Minister after the snap election, so much the better. He has the unique blueprint in his mind that has helped Japan in Recovery so far. Should he remain in the same office after the election, it would be so much the better. He should have the kudos at least of being the Prime Minister, as he has masterminded the Recovery after Fukushima. That I believe.
Durudarshan H. Dadlani