There are the perfunctory warnings that speculators shouldn’t test Tokyo and that Kishida’s team won’t tolerate “excessive” yen moves. Yet it’s not sizeable moves that Tokyo abhors, just those that boost the yen in ways deemed to hurt competitiveness.
Mostly, Abe just did what the previous 11 governments dating back to the mid-1990s did: prod the BOJ into easing, to boost GDP via a weaker yen. Doing so eliminates the urgency for painful structural reforms.
Yet a dearth of reforms left decision-makers unwilling to take risks. This “trickle-down economics” with Japanese characteristics was the same ploy Tokyo used a decade earlier, and in the years before that. Delay tactic after delay tactic cost Japan decades it can never get back.
Demographics are reducing China’s odds of getting growth back above 5 per cent. The faster a population ages, the quicker deflation becomes ingrained. Retirees don’t spend like consumers in their 20s, 30s and 40s.
Tokyo’s lessons for Beijing are clear: move boldly and transparently to fix the property sector, create broader social safety nets to encourage consumption over saving, and tackle inefficiencies to weed out “zombie” companies and sectors. Not that Japanese officials are acting accordingly, but Xi’s inner circle is convincing virtually no one it is on top of China’s fast-mounting troubles or that a Japan-like slump can be avoided.