Japan's two-decade romance with Keynesian economics has led to another betrayal — and yet the press and all the supposedly smart economists and analysts seem to believe that just one more fling might bring about a different result.
The Land of the Rising Sun, aka the Land of the Two-Decade Zombie Economy, has just reported an annualized contraction of 0.8 percent in the third quarter. The decline, following a revised 0.7 percent second-quarter downturn, means that the country is once again in a recession — its second in three years (Update: And fifth since 2008). Oh, but don't worry. It's no big deal. The Associated Press insists that it's only a "technical" recession, and more Keynesian "stimulus" could set things right — even though such measures, in place to varying degrees since the 1990s, have consistently failed to bring about sustained, meaningful recoveries:
JAPAN SLIPS INTO TECHNICAL RECESSION WITH LATEST CONTRACTION
Japan's economy shrank in the July-September quarter as domestic demand declined, sending the nation into a technical recession.
The numbers from the Cabinet Office Monday showed that gross domestic product, the value of a nation's goods and services, declined at an annualized pace of 0.8 percent in the third quarter, and contracted a seasonally adjusted 0.2 percent from the previous quarter.
That meant the world's third-biggest economy slipped into a technical recession because it had contracted in the second quarter as well.
... Japan has been slipping in and out of such periods of contractions, while eking out growth in between. Weak GDP numbers could prompt fresh government stimulus measures.
Investorwords.com defines a recession as "A period of general economic decline; typically defined as a decline in GDP for two or more consecutive quarters."
There's nothing "technical" about that definition. It is what it is, it's objective, and it's the only definition almost every country in the world uses.
The largest exception is the U.S. where a bunch of supposedly agenda-free economists at the National Bureau of Economic Research decides when recessions begin and end. These "agenda-free" folks "somehow" decided that the most recent recession in this country began in December 2007, even though fourth-quarter 2007 and second-quarter 2008 growth were both positive. Their recession call is really the one that was "technical."
The NBER's December 2007 recession call was not genuinely supported by the facts, as expressed in their own words relating to their own supposed criteria. The correctly defined U.S. recession using the commonly accepted, objective two-quarters-of-contraction benchmark really began in the third quarter of 2008 and lasted four quarters, officially ending after the second quarter of 2009.
Thus, Japan is really not in a "technical" recession. It's an objectively defined recession. The AP, perpetual defender of government-enhancing stimulus, is trying to water down the significance of that nation's latest Keynesian economics-driven descent.
CNBC's coverage via Reuters is somewhat better. At least that wire service's story waited five paragraphs before describing Japan's recession as "technical," but it still speculated about the need for more stimulus:
Japan's economy slid back into recession in July-September as uncertainty over the overseas outlook hurt business investment, putting policymakers under growing pressure to deploy new stimulus measures to support a fragile recovery.
... Japan thus slipped back into technical recession, which is definied as two consecutive quarters of contraction, after suffering one last year due to the hit on consumer spending from a sales tax hike in April 2014.
... The dismal reading may affect debate among politicians and policymakers on how much fiscal spending (i.e., stimulus — Ed.) should be earmarked in a supplementary budget that is expected to be compiled this fiscal year.
Bloomberg News also invoked possible "pressure" for more stimulus:
... While growth is expected to pick up in the current quarter, the GDP report could put pressure on (Prime Minister Shinzo) Abe and Bank of Japan Governor Haruhiko Kuroda to boost fiscal and monetary stimulus. The BOJ holds a policy meeting later this week.
It's as if there's no other conceivable solution beyond more "stimulus." Japan's policymakers, and the journalists who cover them, will apparently never learn that when people get to keep more of their money, they almost invariably make wiser choices than their governments. As a result, the economy performs far better. Barring a miracle no one has any right to expect, Japan will never truly prosper until its leaders change their uber-Keynesian mindset.
Cross-posted at BizzyBlog.com.