The “quantitative easing” policy has inflated massive financial bubbles, aiming to preserve the wealth of the super-rich....

~~...This has produced a perverse and unsustainable situation: US stock markets have hit record highs, and the Nikkei has risen 39 percent this year, despite falling living standards and a deeply depressed world economy. According to AP business reporters, yesterday’s recovery in US stock markets was based largely on the understanding in US financial markets that concerns about Bernanke withdrawing this quantitative easing policy were “overdone.” That is, the Fed would avert a stock collapse by printing more money.

The adoption of such policies in the United States and Japan not only reflects the economic desperation and disorientation of the ruling elites, but is producing increasingly deep tensions on both sides of the Pacific and demands for attacks on the working class.

East Asian economies have come to depend on the infusion of massive amounts of cash. Bank of Korea Governor Kim Choong Soo said yesterday criticized US moves to exit from quantitative easing, warning it could spur a dangerous increase in interest rates worldwide.

At the same time, financial markets are increasingly complaining that Abe’s government is using the availability of easy money to delay carrying out unpopular social cuts. Such calls come both from Japanese business circles, and US and European financiers investing in Japan and looking for quick, high returns. AP business writer Elaine Kurtenbach noted that the “verdict is still out” on Abe’s policies.

A recent report of the Organization for Economic Cooperation and Development (OECD) laid out its demands for social cuts in Japan. It wrote, “Given the unprecedented size of its debt ratio and the risk of higher interest rates, Japan needs a detailed and credible medium-term plan of spending cuts and tax increases, accompanied by improvements in the fiscal policy framework.”

As examples of such “improvements,” the report proposed increasing the retirement age, a further increase in sales taxes, and increases in environmental taxes.

These demands were echoed by Hiromasa Yonekura, the chairman of Sumitomo Chemical Co. and the head of Japan’s Keidanren business lobby, who demanded that Abe demonstrated his “commitment to achieve fiscal health.”

In fact, the right-wing Abe government is eager to attack the workers. If it is not moving faster, it is because it fears provoking popular opposition. The government is simultaneously making social cuts and unpopular moves to eliminate the pacifist clause in the Japanese constitution—in line with US demands that Japan re-arm and step up its confrontation with China, as part of the US “pivot to Asia.”


Credit Suisse’s chief market strategist in Tokyo, Shinichi Ichikawa, said: “The incentive to carry out structural reforms is weakening … It requires a lot of strength for the prime minister to change the constitution. And of course a lot of power is needed to start the structural reform of the economy. I don’t believe that one prime minister can achieve both at the same time.”

Global finance circles are intensifying pressure for immediate social cuts inside Japan to boost profits available to international capital—while warning that otherwise Japan’s policy would be seen simply as a hostile effort to improve Japanese competitiveness by pushing down the value of the yen.

Former Goldman Sachs vice chairman Ken Courtis commented that if Abe did not accelerate pro-business austerity policies, all Abe’s monetary policy “really amounts to is a big devaluation. That’s the monetary equivalent of Pearl Harbor.”

Global finance circles are intensifying pressure for immediate social cuts inside Japan to boost profits available to international capital—while warning that otherwise Japan’s policy would be seen simply as a hostile effort to improve Japanese competitiveness by pushing down the value of the yen.

Former Goldman Sachs vice chairman Ken Courtis commented that if Abe did not accelerate pro-business austerity policies, all Abe’s monetary policy “really amounts to is a big devaluation. That’s the monetary equivalent of Pearl Harbor.”

http://www.globalresearch.ca/global-stock-markets-fall-after-7-percent-collapse-in-japans-nikkei-index/5336229