You know you live in a strange time when a shrinking economy and a weaker currency causes a 7% surge in a stock market. But this is Japan we’re talking about. It’s where an ancient Eastern culture meets cutting edge Western technology and the result is profound weirdness. Only in Japan can victory be achieved through defeat.
Japan’s economy shrank by 1.4% in 2015, according to GDP figures released yesterday. It’s the incredible shrinking country. Some of this is surely demographic. And a lot of it is the resounding failure of Keynesianism to create wealth. More government spending, greater stimulus, more arrows to Abenomics … none of it has worked to revive the animal spirits of the Japanese.
But it does mean a weaker yen! And that seemed to be good news for equity prices everywhere. The yen was down versus the US dollar overnight. Gold and oil fell too. For a day, for a session, the world made sense again to traders. Breathe.
Don’t forget to think, though. Who creates wealth in the world? Is it governments? Is it the right public policy? Or is it people and the division of labour and enterprise and free trade?
Category: Economics