Abe Shoots for the Stars
background on what the world calls “Abenomics” but workers in Tokyo’s red light district have taken to calling “awanomics”—awa means bubble or lather in Japanese. Abenomics has, the Economist reports, “in the short term, worked awfully well, at least for investors…. Yet if the Bank of Japan succeeds in ending deflation, a fresh problem could arise…. [I]nvestors, uncertain as to how far such success may go, [could demand] a higher risk premium for holding government bonds. The bond market has recently become a lot more volatile.”Indeed, the Japanese bond market was walloped today. The WSJ reports: “Japan’s markets witnessed their first serious jolt of 2013 on Thursday, with a 7.3% plunge in stocks and volatility in the bond market reminding investors that the era of “Abenomics” under Prime Minister Shinzo Abe may not be all smooth sailing.”Some experts think Abe is on the right track, but many others disagree. A huge rally in the stock market gave ammunition to the bulls, but last night that optimism tanked. Is this temporary volatility or a sign that the tough times aren’t over? It’s too soon to tell, but the world’s policy makers and investors are going to be watching what may well be the biggest economic story in the world for the next few months.Stay tuned.