Japanese Prime Minister Shinzo Abe is shifting gears and spending priorities in his latest effort to get Japan's fading economy out of the critical-care unit. But it's mostly a case of the government spinning its wheels as the economic rut deepens.
Abenomics, Mr. Abe's troubled reform agenda, isn't quite the unmitigated disaster painted by some critics. But after a promising start three years ago, it has turned out to be a dud when it comes to getting Japan back on the economic rails, ending years of crippling deflation and tackling deep-seated structural impediments to growth.
Despite record injections of fiscal and monetary stimulus, the economy is mired in its fourth recession in the past five years. And the latest data underscore the failure of Abenomics on other key fronts.
The unemployment rate fell in October to 3.1 per cent, a two-decade low. But a majority of the job gains were part-time, and that was as far as the good news went.
Consumer prices dipped for the third consecutive month. Even excluding falling energy costs, inflation rose a mere 0.7 per cent on the year, matching the International Monetary Fund's forecast for 2015 and well below the Bank of Japan's ever elusive target of 2 per cent.
Household spending slid 2.4 per cent, the second consecutive monthly decline, while average incomes shrank 0.9 per cent, despite strenuous government efforts to boost both. These include direct appeals to profitable employers to increase pay levels.
Economy watchers predict year-end bonuses will fall for salaried workers and wage growth will remain muted next year, as companies focus on improving their bottom lines.
So the government is turning on the taps again. A fresh round of public spending expected to total up to ¥3.5-trillion ($38.1-billion) will target social programs for families and the elderly and put more cash in the hands of poor pensioners on fixed incomes – ¥30,000 to each of the country's 10 million elderly who are classified as poor.
The hope is that more day-care facilities, nursing homes and assistance for elderly relatives will enable more women to enter and remain in the labour market to counter the effects of an aging, shrinking population.
Minimum wages will also go up next fiscal year, with a targeted annual increase over the next few years of 3 per cent, although rates are set locally by the country's 47 prefectures. The national average hourly gain in fiscal 2015 was ¥18 – or slightly less than 20 cents – not exactly the stuff of a consumer spending boom.
The government's failure to stimulate wage growth is inexorably tied to the rapid greying of the population.
More than half the 1.82 million jobs added to Japanese payrolls since the launch of Abenomics in late 2012 have gone to people over the age of 65, many of them working part-time to stay active and bolster thin incomes.
The Abe government embraced bold Keynesian monetary and fiscal policies from the outset. But it hasn't been brave or politically adroit enough to tackle entrenched interests or remove the barriers to greater foreign and domestic competition and red tape that strangles entrepreneurs.
That failure poses a major threat to the economy, the IMF warned in July. "Abenomics needs to be reloaded so that policy shortcomings do not become a drag on growth and inflation," the fund said in its annual report card.
The early successes of Abenomics stemmed mainly from a sharp drop in the value of the yen. This, along with judicious cost-cutting, did wonders for the profit margins of Japanese export powerhouses such as Toyota, which are at record highs. But stagnant revenues at Japanese companies over all reflect weaker demand in the key Chinese and other emerging Asian markets, as well as feeble domestic growth.
Mr. Abe describes the focus of his latest iteration of Abenomics as "inclusion" of those who rightly regard his agenda as essentially meaningless to them. It will take more than a little extra social spending and handouts to the elderly poor to change that view.