Abenomics Suffers Crippling Blow: Economy Sputters As Inflation Soars, BOJ QE Delayed Indefinitely
Following last night's record plunge in Japanese retail sales, tonight was another slew of crushingly bad data for Abe and his motley crew of money printers to reflect on. First Household Spending cratered 4.6% YoY - its biggest drop since the Tsunami (and markedly worse than expectations which were bad enough due to the tax hike repurcussions). Then,Industrial Production tumbled 2.5% MoM - its biggest drop since the Tsunami(considerably worse than the 2.0% drop expected and the slowest YoY growth in 8 months). While this would typically be the kind of bad news that is great news for QQE-hopers, it was disastrously capped by a surge in Japanese CPI (well above BoJ target 2% levels) crushing moar-easing hopes as Barclays see no further easing in 2014 (and even Goldman pushes any hope off til October at the earliest).
First Houshold spending missed and plunged...
Then Industrial Production missed and plunged...
And then inflation took off - as Goldman so handily exposes below, adjusted for the tax-hike, this was a major spike in inflation...
We accordingly revise our outlook for the BOJ’s next easing action to October 2014, from July 2014 previously.
and then Barclays gets even more bearish...
- BARCLAYS SEES NO FURTHER BOJ EASING IN 2014 IN 'BASELINE' VIEW
Goldman sounds glum, having already given up on the J-Curve...
We get the impression the correction is larger than the government anticipated, but in line with our expectations. With domestic demand likely to fall, we see external demand leading growth in FY3/15. We highlight risk factors in the form of protracted weakness in China and other Asian economies and a decline in corporate Japan’s structural export capacity.
Time to stock up on Depends...Time to blame El Nino again
The reaction so far...
China's Housing Bubble Desperation In Six Words: "Buy One Floor, Get One Free"
Having gone from the sublime (zero-money-down mortgages for Chinese homes) to the ridiculous (when China's largst property developer says "the period in which everybody makes money out of property is gone,") the latest desperate act of a dying Chinese property bubble is stunning. As WSJ reports, Season Joy City (a remote suburb of Beijing) offers not only a party bag of bonuses to lure potential buyers; but the development'sbig selling point is "buy one floor, get one free." The government's reluctance to bail the nation out may soon be tested as Barclays notes "this downturn is more serious than in 2008."
But the biggest draw is a “zero down payment” scheme, available for a two-and-a-half-week period only. At first sight this seems to go against government regulations, brought in to keep house prices under control, which stipulate a minimum 30% down payment on ordinary residential purchases.Zero down payment schemes have popped up around China as developers go to ever greater lengths to shift apartments, but Season Joy City may have the distinction of being the first to try it in Beijing, said Tang Li, an analyst at North Square Blue Oak, an investment bank.“They will help homebuyers to apply for this consumer loan that they can use as a down payment,” said Mr. Tang. “It’s very difficult to judge whether this is in line with the regulations or not. So far there’s been no punishment from the government.”
And then there is the really desperate...
Season Joy City offers a party bag of bonuses to lure potential buyers. The development’s original selling point was “buy one floor, get one free.”When China Real Time visited last week, helpful sales assistants also offered to throw in kitchen fittings and four air conditioning units for nothing.
As developers are desperate to avoid cutting prices..
All this is to avoid cutting prices, which developers could fear could tank public faith in the housing market and ultimately pummel sales further. Instead, they resort to ingenious “promotions,” throwing in freebies worth thousands of dollars and even whole free rooms rather than slashing prices outright.
And it is not likley to end well...
It’s very clear that developers are in a hurry to sell,” said Rosealea Yao, a Beijing-based analyst at research firm Gavekal Dragonomics. “Developers in the suburbs always see the biggest decline in sales and prices [during a downturn].”“If the property sector is in deep trouble, it’s going to affect a whole lot of industries and that will drag down the entire economy,” said Liu Qinglong, assistant sales manager at the development. “I think in the future the government will set up a long-term mechanism to ensure steady growth of property market.”
Barclays is less sanguine than your average Wall Street silver-lining hunter...
"The downturn this time is more serious compared to 2008 and 2011," said Barclays Bank analyst Alvin Wong...."The very fact that the PBOC had to provide that window guidance means there is a problem," said Xiang Songzuo, chief economist at Agricultural Bank of China Ltd., using industry jargon for central bank jawboning. "Now, what you're hearing from banks' local branches is that 'we just don't think the property is worth that much money anymore.'"..."I don't believe that the local governments will be allowed to reverse the home purchase restrictions."
As WSJ concludes, with buyers standing on the sidelines and some developers starting to sound desperate, the government’s ability to support the market may soon be put to the test.
What can possibly go wrong?
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