Why is Anyone Surprised that Abenomics Failed?

Posted on November 19, 2014 by Yves Smith

In case you managed to miss it, there’s been a fair bit of hand-wringing over the fact that Japan has fallen back into a recession despite the supposedly heroic intervention called Abenomics, whose central feature was QE on steroids.

But Japan of all places should know that relying on the wealth effect to spur growth has always bombed in the long term. They were the first to try that approach of a large scale. That idea was the basis for the Bank of Japan keeping monetary policy super loose in the later 1980s. They explicitly wanted to increase stock market and real estate prices to stimulate more consumer spending. We know how that movie ended.