Japan saves its commodity windfall
The fall in commodity prices has gifted Japan’s households around Y10 trillion of extra disposable incomes. However, far from spending this money, Japan’s households seem to be saving almost all of it. Low real yields seem to be forcing Japan’s ageing society to save more of its current incomes in order to hit their ‘financial wealth objectives’, a profoundly deflationary dynamic.
What now remains to be seen is just what will the BoJ do next – will they ease again or will they admit that Abe-nomics has not directly benefitted the real economy, although it has at least managed to stave off a crisis in the JGB markets