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Abenomics and the Japanese Wealth Gap
- Naomi Fink (CEO and Founder, Europacifica Consulting)
When Shinzo Abe came to power for the second time, his tone was remarkably more reform-oriented. With a new Governor at the helm of the BOJ, many dared hope that reform was in the making. Alongside this reform came inevitable comparisons with Reagan and Thatcher, as well as the widening wealth gaps that ensued from these policies.
Radically reducing capital tax, while a typically robust method to increase aggregate welfare, might also contribute to aggravating disparities in welfare. Still, despite plans to increase spending on infrastructure as well as pressure for greater monetary easing and possibly cutting corporate tax, there is nothing as yet to suggest Abe’s reforms will be radical especially in longer-term structural regard. Those fearing the less desirable legacies of Reagan and Thatcher – widening wealth gaps – might have put the cart before the horse. Japan’s widening wealth gap (to date) contrasts starkly in nature to that of the increasing income disparities of the US or UK in the 1980s, thanks to the absence of economic growth in Japan, as well as the greater transgenerational transfer of wealth.
We discuss the similarities both in ideological and practical aspects of Abenomics versus its 1980s Anglo-Saxon counterparts, including the likely error of failing to address the one of the true founts of Japan’s structural impediments – weak Total Factor Productivity (TFP). We point out why we should avoid looking for solutions to Japan’s productivity problem in the manufacturing or IT sectors, instead paying greater attention to the services and non-IT sectors. Finally, we point out some policy clues and recommendations that actually might work in regard to structural reform
CEO and Founder, Europacifica Consulting
Naomi Fink is the CEO and founder of Europacifica Consulting, an economics and strategy-consulting firm. Prior to founding Europacifica in August 2013, Naomi established herself as a high-profile financial market strategist for some of the world’s leading financial institution. With over 14 years of experience in financial markets, Naomi’s experience as a strategist extends from G10 and Asian foreign exchange markets to Japan macroeconomic and equity strategy. Embarking on her research career while at UBS in 2002, she established herself as an Asian foreign exchange strategist, thereafter starting up BNP Paribas’ foreign exchange derivatives research product from New York, in 2005. From there, Ms. Fink was recruited by the Bank of Tokyo Mitsubishi UFJ (Japan’s largest bank) to start up their first English-language Japan Strategy product. While at Bank of Tokyo Mitsubishi UFJ, her daily publication “The Talk of Tokyo” became one of the most widely read daily publications on Japan in international financial markets. Subsequently, Fink started up Jefferies’ Japan equity strategy product in their nascent Japanese equities operation in 2011, providing clients with vital analysis not only on Japanese equity markets but also on various aspects of Japanese public policy ? from monetary to energy policy – in the wake of the Tohoku disaster.
Naomi has been a frequent public speaker at major events around the world. She appears on international television and radio providing expert commentary and is regularly quoted in numerous financial publications. Naomi holds an M.A. Honours in International Relations from the University of St. Andrews and an MSc in Specialised Economic Analysis from Barcelona GSE, as well as a Financial Risk Manager certificate (administered by GARP). Among her pet projects is the analysis of heterogeneity in Japanese total factor productivity.