Abenomics it will prove to be a complete failure in ending the Japanese economic malaise

Most people think that a strong economy leads to strong earnings growth and rising share prices, and while that sounds logical, it is not always the case. Yesterday data revealed that Japan grew at +0.6% q/q in March, which was ahead of expectation. However, when you lift up the bonnet and examine the composition of Japanese growth, it is hardly cause for celebration. The vast majority of the rise was generated by inventories (annual growth was just +0.4% excluding inventories), consumption declined for the first time in nine months and employee compensation was unchanged. In the end, Abenomics has done, and will do very little moving forward, to lift domestic demand and help Japan overcome the structural issues of its ageing population, its inflexible labour laws and its completely inefficient industries. Ultimately, I think Abenomics it will prove to be a complete failure in ending the Japanese economic malaise, but it will prove to be more constructive for the Japanese sharemarket given the lower Yen, high cash reserves sitting on balance sheets and the cleaning out of unproductive corporate boards.