Abe, who would be Japan's seventh prime minister in 6 1/2 years, will likely push for increased public works spending and lobby for stronger moves by the central bank to break Japan out of its deflationary trap.
Stock prices soared Monday morning to their highest level in more than eight months, reflecting hopes in the business world that the LDP will be more effective in its economic policies than the Democrats were.
Obviously, the Japnese are expecting Abe to perform miracles to raise Japnese economy out of its collapse. But it is easier said than done to inflate a dead economy. If Abe tried to inject money to increase Japnese economy then the only he will do is increase inflation. In the end, it is like I keep saying, economic growth depends on increased productivity which in turn depends on technological advancement. Since Japan's technologies are not advancing rapidly there can be no rapid increase in productivity. Therefore, the Japnese is a zero sum equation which means any increase in money supply will inevitably leads to inflation which will cause serious harm to most of the Japnese people.
What is even more catastrophic to the Japnese economy is that it is overly dependent on exports. But as the technologies of other rising economies such as China increases its high tech exports it will decrease Japan's global market share. This will then make it even harder for Japan to export enough to pay for all the imported raw materials and energy. Therefore, in order to compete globally Japan must reduce the prices of its exported products which in turn will make it necessary for the Japnese wages to be lowered while Japnese corporations will make less profits. The cycle will spiral downward to make Japan overall much poorer. Already, Japnese per capita GDP in real purchasing power terms is less than that of Taiwan:
GDP (PPP) 2011 estimate
- Per capita $34,748
GDP (PPP) 2012 estimate
- Per capita $38,486
Therefore, even though Japan has a higher nominal per capita GDP its purchasing power per capita GDP is actually significantly less than that of Taiwan. This means Taiwan people have a higher standard of living than the Japnese. And as Japan's exports declined the Japnese people's standard of living will continue to slide lower until their real purchasing power is among the poorest in the world. The decreasing purchasing power also means Japan cannot deploy a very powerful military. As the purchasing power of the yen decreases they must pay more for anything made in Japan. That is, the wages of the Japnese soldiers will increase. The cost of building submarines and destroyers made in Japan will rise much higher. And as taxes rise the Japnese people will have even less money to pay for what they need. And so the downward spiral will be exacerbated by the increased militarization.
Japan's public debt is already the highest in the world at:
http://en.wikipedia.org/wiki/List_of_co ... ublic_debt
% of GDP (CIS/Eurostat : IMF)
Japan (208.2 : 229.77)
China (43.5 : 25.84)
US (105.5 : 102.94)
Italy (120.9 : 120.11)
Greece (165.3 2011 : 160.81)
Therefore, given such a hugh public debt, it is just simply impossible for Japnese government to stimulate its economy. Given such a sick economy, the obvious thing for the government to do is to instill stability so that the status quo is maintained or that taxes is raised on the wealthy and reduced on the poorest so that all can have a minimally dignified life. Increasing public spending will only raise the debt, causes inflation and lead to further miseries for the people and decline and contraction of the economy.
Therefore, there is nothing that Abe can do either to increase exports or to stimulate the domestic economy. And if he expanded the Japnese military in such an economic environment he will only hasten the collapse of the Japnese economy and ultimately weaken the Japnese military even more.
So what should China do in this larger picture? China must first reduce exports and concentrate on developing the domestic economy through the indigenous advancement of technologies, the urbanization of the rural residents or farmers and the energy self-sufficiency. As China's exports is systematically reduced, China must expand its domestic productivity. In this environment it is stimulative to expand the military to provide jobs which will inturn stimulate the domestic economy by creating demand. And since China has all the essential mineral resources it does not need to import much of anything. China can also become energy self-sufficient through its abundant coal, hydro, wind, solar, nculear, etc. resources. And the expansion of these domestic energy resources will further expand jobs and create demand leading to more jobs and demands. And so Chinese economy will spiral upward even as the Japnese economy spiral downward.
And not the least as China's exports shifts from low tech low labor cost products to high tech high labor cost products, it will on the one hand expand Chinese economy and enrich the Chinese laborers and on the other hand eat into Japan's global market share and reduce Japan's overall economy.
Therefore, given this larger picture, China should not be compromising in territorial problems. China must demand assertively that Japan respect China's sovereignty and return all Chinese sovereignty forthwith. If Japan did not comply with China's righteous demands then China must implement a forceful policy of confronting Japan on all fronts from the economic sector to diplomatic sector to military sector. In the end, Japan will only wither and die while China rises to its historical position as the richest and the most powerful nation in the world to bring peace, justice and prosperity to all except its enemies.