Politics in Japan: Master plan

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Anarchy in the UK

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Politics in Japan

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TOKYO

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Shinzo Abe eyes an expanded majority

LAST year Japan lowered the voting age from 20 to 18. But Minami, a high-schooler from Tokyo, does not plan to vote in an election for the upper house of the Diet, or parliament, on July 10th. Like many Japanese, she finds politics dull. The upcoming election will probably not change their views.
The government, led by Shinzo Abe, is likely to trounce the floundering opposition. Mr Abe’s poll ratings have been boosted by the government’s competent handling of earthquakes that struck Kumamoto prefecture in April, and by Barack Obama’s emotional visit to Hiroshima the following month. Low turnout benefits his Liberal Democratic Party (LDP), which runs an effective get-out-the-vote machine.

Mr Abe also stands to benefit from the post-Brexit-vote …

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Wrecks it?: Why Brexit is grim news for the world economy

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Wrecks it?

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Uncertainty abounds. Expect a global chilling effect on investment

NIGEL FARAGE, the leader of the UK Independence Party, told elated supporters that June 23rd should go down as Britain’s Independence Day. The reaction in financial markets to Britain’s vote to leave the European Union was rather less euphoric. During the Asian trading day, the pound plunged against the dollar by over 10% to $1.32, a 30-year low. It fell far harder against the yen, a frequent bolthole for the anxious. Investors have started to flock to the safety of US Treasuries. As Europe’s markets opened, the main stock indices followed the lead set overnight in Asia and fell by around 10%.
Investors hate uncertainty and the result of the referendum gives rise to a surfeit of it. But the falls in Asia’s equity markets are also in large part an early judgment about the impact on the world economy. Of course, markets often overreact. Britain accounts for just 3.9% of the world’s output; it is not big …

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The vote to Leave and monetary policy: The implications of Brexit for the Bank of England

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The vote to Leave and monetary policy

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Britain faces months of economic uncertainty

WHAT does Britain’s vote to leave the European Union mean for interest rates? Two things seem likely: the Bank of England will plump for looser monetary policy to cope with the coming economic slowdown and Mark Carney, its governor, may soon depart.
At first glance it might seem inevitable that rates will be increased from their current historical low of 0.5%. After all, following the sharp depreciation of the pound, imports will become more expensive, pushing up inflation—perhaps above the bank’s 2% target. Higher interest rates may also help sterling to recover. The central bank has typically “looked through” this sort of inflation in the past, however, seeing it as a temporary phenomenon (think of how it treated the fall in oil prices from 2014 onwards). Moreover, the economy will be in desperate need of some sort of stimulus.

With the base rate already so low, cutting it much further is …

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Buttonwood: The next leap

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March of the machines

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Buttonwood

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Helicopter money sounds radical. It may not be that much of a departure

WOULD “helicopter money” (the use of newly created money to finance government spending or tax cuts) be a revolutionary break from existing monetary policy? Its advocates argue that the tactic would give the global economy a much-needed boost; its detractors see it as a further step on the path towards fiscal irresponsibility and hyperinflation.
A paper from Toby Nangle of Columbia Threadneedle, a fund-management group, argues that helicopter money is not as radical a leap as you might think. Money is created in two ways. By far the largest proportion is generated by the banking sector when it lends to consumers or businesses. The bank creates a deposit in the name of the borrower which can then be spent. Mr Nangle refers to this as “inside money”. The other type, which he calls “outside money”, is that created by the government and central bank, including the notes and coins that everyone carries …

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These Graduates Beat The Odds, Now They Need A Job

What’s the key to helping a child born in poverty make it to the middle class? Some say it’s good preschool, others say a college diploma. For one advocate, the time to help is at the end of college.

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Nigeria floats its currency: Free at last

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Divided we fall

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Nigeria floats its currency

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LAGOS

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A slumping economy and high inflation prompt a much-needed reform

 
 
 
 

BARE shelves in supermarkets and soaring inflation would worry any central-bank governor. For Godwin Emefiele in Nigeria, the added twist is that both problems are partly his fault. The central bank’s policy of trying to maintain the value of the naira, Nigeria’s currency, in the face of a slump in the price of oil, which used to account for about 90% of the country’s export earnings, has failed miserably. Now it is being scrapped.
Mr Emefiele tried heroically to conserve the country’s dwindling reserves of foreign exchange. In effect, he banned the import of a huge range of goods, from tinned fish to toothpicks; arbitrarily rationed the supply of dollars from the central bank to …

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America’s economy: When barometers go wrong

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How to make a good teacher

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America’s economy

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WASHINGTON, DC

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A weak jobs report belies the resilience of America’s economy

AMERICA’s labour market has become a reliable source of comfort when other economic indicators dismay. When growth slowed to just 0.8% in the first quarter of the year, economists were mostly unperturbed, because payrolls were growing by over 150,000 workers a month. Wage growth was picking up. Even labour-force participation was rising, after a long period of decline.
So the news on June 3rd that the economy created a mere 38,000 new jobs in May—the lowest total since 2010—was a nasty shock. Three days later Janet Yellen, the Fed’s chairman, hinted that she no longer favours raising interest rates this summer. This abrupt change of direction followed weeks of warnings from Fed officials that a rate rise was coming, perhaps as soon as the conclusion of the Fed’s next meeting on June 15th. That now looks all …

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Japanese politics: Postpone and be damned

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Under attack

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Japanese politics

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TOKYO

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Doubts about the prime minister’s economic record are growing

ALL things considered, the month of May ended well for Shinzo Abe, Japan’s prime minister. He hosted his fellow leaders from the rich world’s club, the G7, at a summit at Ise in Mie prefecture last week. It went well. He welcomed them at a Shinto shrine founded 1,300 years ago. Just after the summit Barack Obama became the first sitting American president to visit Hiroshima, which an American atom bomb levelled on August 6th 1945. Japanese of all ages and backgrounds were moved by his speech, and by his embrace of a survivor. Mr Abe basked in the reflected political glow.
That gave the prime minister ample cover to announce, on June 1st, that he would put off raising Japan’s consumption tax from 8% to 10% from April of next …

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Buttonwood: Working hard for the money

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Under attack

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Buttonwood

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There are more explanations than solutions for the productivity slowdown

ECONOMIC growth stems from two main sources: putting more people to work or enabling workers to operate more efficiently (ie, better productivity). With the workforce in many developed economies likely to stagnate or decline in the next two decades as the baby-boomer generation retires, a lot is riding on improvements in productivity.
So the recent progress of productivity in developed economies is cause for severe disappointment. As the chart shows, growth is well below its level in the late 20th century; the brief surge that was seen in places like America and Canada at the time of the dotcom boom has also dissipated. A combination of productivity growth of 1% or so and a stagnant workforce implies very sluggish GDP growth.

A new paper* from the OECD tries to understand this puzzling slowdown in productivity. It cites a number of possible explanations. There is the “progress is over” thesis, for example: …

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