Since I returned to Japan after Spring Festival, I have seen various reports and editorials almost every day on television or in newspapers that preached the benefits of Japanese Prime Minister Shinzo Abe's economic policy.

After Abe took office, he began aggressively promoting his economic policy, set to be implemented soon.

Haruhiko Kuroda, the governor of Bank of Japan, Japan's central bank, recently presented the National Diet with the plan to boldly implement a loose financial policy and try every means to achieve the government's goal of price rises. 

Abe has removed the biggest obstacle since his nominee was appointed to Japan's central bank. Public opinion and industrial circles have begun to follow suit.

Soon after some enterprises announced a pay rise, Abe immediately followed up by declaring that the government has begun to achieve the goal of new economic policy, to raise national income and promote consumption.

The fact that the approval rating for Abe's government remains high so far indicates that Japanese now have the highest expectations.

According to the Abe administration, the policy can promote domestic investment and consumption by increasing liquidity, so that the Japanese economy can get out of deflation, and that it can help depreciate the Japanese yen and increase exports and trade income.

But Japan has suffered trade deficit for some time. In addition to the poor performance of the export industry, the Fukushima nuclear incident had a critical influence on the deficit. It forced Japan to shut down most nuclear power plants. As a consequence, Japan has had to import massive extra amounts of oil, natural gas and coal to secure the energy supply.

However, it is precisely the imported energy that is the chief culprit in the trade deficit, for it has pushed up energy price considerably. If the yen depreciates at this crucial time, the pressure to buy energy will be even greater.

Increased exports caused by yen depreciation may not be able to make up for the expenses of imports. Most large and medium-sized enterprises have moved their factories to emerging states like China and Southeast Asian nations, so what affects their sales is not the yen, but the currency exchange rate of those nations.

Even if the yen moderately depreciates, production costs in Japan will not be lower than that in emerging states.

Besides, a strong yen is not solely to blame for Japanese enterprises' poor performance.

Many commentators have pointed out that the biggest problem for Japanese enterprises, especially household appliance firms, is a lack of product competitiveness.

And the proposed escape from deflation may also be wishful thinking. Between 2002 and 2007, there was sustained economic growth in Japan, but the employment rate only increased slightly and wage levels fell instead.

This may have been because of the aging population, which shrunk the consumer market and caused enterprises to concentrate on expanding overseas investments.

Even if the government instructs the central bank to inject funds to the market, it is unlikely to change the situation where domestic market is getting narrower and narrower. Enterprises won't invest at home even with money in hand, since their products will go unsold.        

Extra funds in the market, however, can be a nightmare for ordinary people. The only role of the funds, which cannot generate return on investment, is to cause inflation and push up consumer prices while ordinary people's income remains unchanged.

The few enterprises that have promised higher pay lately are mainly producers or retailers of daily consumer products and they will benefit from inflation, but the majority of enterprises will have a hard time due to rise the import prices. 

For many people, their quality of life, which is built on cheap consumer goods, will be lower, and to depend on imported fuel and face rising food prices is certainly a deathblow. Gasoline prices in Japan have been on the rise for several months, and basics like cooking oil, flour and vegetables are going to have higher prices.

By the time Japanese realize that Abe's economic policy only brings rising prices, it will be too late to save the situation.


The author is a scholar living in Japan. opinion@globaltimes.com.cn