Failed Pump and Dump

Who believes in words of a political leader that he/she increases our income by $15,000 in next ten years? Market at least did not, yesterday. Prime Miniser, Shinzo Abe, made a speech in Tokyo, in which he promised that he would raise the average income of this nation. Concerning that most national bonds are possessed by the Japanese, increase of national income may be thought to be leading to stabilize long-term bonds rate. But nobody, including Abe, knows exactly how to do that. It is something close to manipulation of market called pump-and-dumps.

Following previous two arrows, monetary policy and positive budget, Abe is making a policy package for growth as the third arrow of Abenomics. The speech was the third attempt to announce new policies for growth strategy that will be delivered later this month. He introduced the concept of gross national income, instead of common gross domestic products, to sell his economic policy. In this standard, he proposed economic policy which, in his idea, can raise Japan’s GNI by 3% in next ten years. That meant that average annual income per capita, ¥3.84 million in 2012, would become ¥534 million in 2012. He was just trying to persuade people that his policy would benefit not only big companies such as Toyota or Honda, but also every household.

So, how? He insisted on deregulation of internet sales of medicines, increasing export of agricultural products, encouraging investment on power generation by reviewing environmental assessment, and introducing private finance initiatives in investment for infrastructure. But, they are all benefiting mainly traditional supporters for Liberal Democratic Party. PFI is a method of increasing jobs of construction companies by introducing private money. Farmers are basic votes in national elections. Power companies are partners of LDP in developing nuclear technology.

But farmers are more worried about increasing imports after the standard of Trans-Pacific Partnership is applied to agriculture in Japan. PFI has not been taking effect, even though many former leaders tried to let it work. Abe also depends on national debt to build more infrastructures in economically stimulating way. In terms of deregulation in agriculture or medicine market, his policy is insufficient.

Basically, GNI is not an indicator of personal income, but of the summary of additional value in economic activities by the individuals and enterprises. Increase of average GNI does not necessarily mean increase of household income. It is fair to say that Abe did not speak about enriching people’s daily life, as long as he insists on GNI.

Acknowledging this policy was something close to magic, Tokyo Stock Exchange marked steep down, ¥518 down marking the third biggest decline this year, at the day Abe made the speech. His attempt of pump and dump failed again.