Japan’s lucky cats may be cute but they won’t save the economy

Kevin Rafferty says Prime Minister Shinzo Abe’s focus on constitutional issues has led to the neglect of the nation’s economic problems, and a popular focus on photogenic felines won’t help

PUBLISHED : Wednesday, 09 March, 2016, 1:32pm
UPDATED : Wednesday, 09 March, 2016, 1:32pm

Can cute cats rescue Japan’s economy? It is a measure of the desperate times that a leading Japanese popular magazine is floating a new economic theory that, it says, may rescue Japan from gloom and doom. It is called nekonomics, derived from neko, the word for cat.

It’s crazy but Japan’s conventional economic indicators are poor and leading news media are writing obituaries for Abenomics, named after Prime Minister Shinzo Abe, that promised to make Japan a great economic power again. Abe is nowhere to be seen near economic policies. He is still in power, but too busy peddling ideas of Japan as a “normal” nation with a new constitution allowing it to have a proper military, ideas that will be economically costly and may have dangerous political and military consequences.

READ MORE: Japan’s Abenomics programme lies in tatters

No wonder Japanese are searching for their salvation and, as is often, said, “Cometh the hour, cometh the man” – or cat in this case. The heroine of the claim of Spa! weekly magazine is Tama, now sadly dead – worn out, some people claimed, by her labours to boost the tourism industry of the tiny town of Kinokawa.

The obscure station did a roaring business from tourists who flooded in to see the cat

Tama, a calico stray, used to hang around the local railway station, which was earmarked for closure until someone had the bright idea of making Tama the stationmaster, replete with cap and badge of authority. The obscure station did a roaring business from tourists who flooded in to see the cat. The town prospered by more than a billion yen (HK$68.9 million) until Tama died last year. More than 3,000 mourners attended her funeral.

Now another cat is making headlines. She is white but with bold black eyebrows, and all she has to do is arch her eyebrows, which form the Chinese characters for the number eight, considered lucky in Japan (as in China). She is called Hachi or “Eight” and is an employee in a small tobacconist’s shop in Mito, north of Tokyo.

Already, Japanese tourists are flocking to see Hachi. The shop owner told Mainichi newspaper that a lot of them had good things happen after seeing Hachi’s face.

Japan has a fixation with cats. Think Hello Kitty and Doraemon and the maneki neko cats with paws up that sit in shop and restaurant windows. There’s also Tashiro Island, where cats outnumber humans. Japan’s cat population is almost 10 million, set to surpass the 11.5 million dogs.

Spa! calculates that the cat business, counting cat food, TV commercials, smartphone games and the boom in cat tourism may add 2.3 trillion yen to the economy.

But it is time for a reality check. Nekonomics may make Japanese feel more cheerful, but the sums do not add up. The 2.3 trillion yen sum may seem large, but it is only US$20 billion, a small sum in the US$4.6 trillion economy.

Japan’s conventional politicians have no idea where they are floundering

What is certain is that Japan’s conventional politicians have no idea where they are floundering. Abenomics is about to be laid to rest because of a lack of care and attention from its progenitor. An important contributory factor has been the failure of the Japanese establishment to do a proper job in challenging politicians to articulate and shape policies properly.

Abenomics was always controversial. Professor Noriko Hama of Doshisha University mocked it as “ahonomics” (silly, stupid or idiotic economics) or “awanomics” (bubble economics). It supposedly consisted of three arrows – monetary policy, fiscal policy and structural reform. But Abe did not fire three arrows: he left Bank of Japan governor Haruhiko Kuroda alone shooting the monetary arrow of quantitative easing, relatively more massive than that of the US Federal Reserve.

QE is like pushing on a piece of string. In better global economic times, Kuroda weakened the yen to 120-125 against the US dollar, boosting the stock market and improving earnings of Japanese companies. But the companies have not played their part. They have salted away a record 247 trillion yen in cash reserves, resisting Abe’s pleas to increase wages or invest, which might kick-start the economy.

Now, as the global economy is weakening, QE won’t be as effective. The Bank of Japan’s desperate resort to negative interest rates succeeded in weakening the yen for a few days before there was a flood of money from a nervous world into the yen as a “safe haven” currency and it went to 112-113 against the dollar, where it has stayed, enough to pinch falling exports.

Japan is caught in a vicious circle with declining prospects for exports as companies shift production abroad, the global economy slows and the yen strengthens. Kuroda might deepen negative interest rates and apply them broadly, with banks charging ordinary Japanese for keeping money in the bank. But this would be the nuclear option: it might lead to the dangerous denouement of Japanese taking their money out of the banks; would foreigners still see the yen as a safe haven?

READ MORE: Markets’ limp response to negative rates underscores Japan’s confidence problem

Abe might fire another stimulus arrow via more money for boondoggle construction projects, easy pickings for the big companies that fund the politicians and deeper debts for Japan. But any beneficial effects would be short lived.

The mystery is where Japan’s leading politicians are living. Nobutero Ishihara, who succeeded the disgraced Akira Amari as economic and fiscal policy minister, confidently declared faith in Japan’s economic recovery, claiming it is in a virtuous cycle.

Abe has forgotten Abenomics in his quest for Japan to be a “normal” nation with a constitution to his liking. You have to ask: What is the price of being normal?

Kevin Rafferty is a journalist and commentator, and former professor at Osaka University