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Financial Advisor Warns Japan's 'Magic Pill' Wasn't Magic

Tubbergen also posts his radio shows as podcasts on his website.


Grand Rapids, MI -- (SBWIRE) -- 08/22/2013 -- Have trouble keeping up with what is going on in the U.S. economy?

Dennis Tubbergen, a financial advisor, author, radio show host and CEO of PLP Advisors, LLC can help out. Whether people enjoy his monthly newsletter at or his blog at, Tubbergen is dedicated to sharing his viewpoints and opinions. On August 21, 2013 his blog was titled Japan's Economic 'Magic Pill' Not Really Magic - Maybe a Temporary Illusion?

"Japan’s Prime Minister Abe took office and cranked up the printing presses engaging in massive easing that seemed to stimulate the Japanese economy," began Tubbergen. "Some reporters and commentators observed that the Prime Minister had it figured out; he’d discovered a ‘magic pill’ that was going to be the cure for Japan’s economic woes."

Tubbergen goes on to say, “(At the time) I respectfully disagreed with that assessment of the Prime Minister’s policy. I argued instead that any prosperity that came about as a result of the policy was only temporary and likely only a prosperity illusion."

Tubbergen notes The Guardian recently ran a story that may at least partially confirm his position, although it hasn’t yet proven it entirely. He quotes below from the August 12, 2013 article.

The honeymoon is over for Japan's Prime Minister, Shinzo Abe. The financial markets loved it when Abe announced a three-arrow strategy last year for ending his country's two decade struggle with deflation and sluggish growth. Share prices soared and the yen fell after the new government pledged large-scale quantitative easing, higher public spending and structural reform in a package dubbed Abenomics.

The article continues:

Problems have emerged with every bit of the three-quiver policy. Firstly, driving down the value of the yen was supposed to boost the Japanese economy by making life easier for its key export sector. But it has also raised the cost of imports, particularly fuel, at a time when domestic energy production remains hampered by the Fukushima nuclear plant. Dearer energy raises business costs and eats into consumers' real incomes. As some analysts noted, Japan is getting higher inflation as planned, but it is the wrong sort of inflation.

A second problem is that doubts are starting to surface about the government's commitment to structural reform. Japan is an elderly and conservative country where the dynamics of an ageing population make it mightily difficult to raise participation rates in the labour market or reduce subsidies to farmers, even if ministers were prepared to make themselves unpopular.

But the biggest immediate problem for Abe is that the weak growth has raised doubts about whether he will go ahead with the increase in consumption tax next year, designed to show markets that Tokyo is serious about tackling Japan's public debt, currently 240% of GDP. The increase in sales tax from 5% to 8% is chunky and, with a second increase to 10% planned for 2015, clearly has the capacity to derail economic recovery.
Japan has history in this respect, with tentative recoveries in the 1990s aborted due to over-hasty tightening of policy. Ideally, the increase in sales tax should take place at a slower rate over a longer period, which is what one of Abe's advisers suggested on Monday. The question is whether this can be achieved without the government's credibility being shredded. A final decision will be taken next month: the hesitancy adds to the sense that Abenomics is essentially smoke and mirrors.

"There are three reasons in my view that Japan will follow Greece into a deflationary environment that may ultimately end up being more painful than what Greece has endured," explained Tubbergen. Below is a summary of his reasons.

Reason One: Money printing creates inflation, or at least pockets of inflation in certain areas while the deflationary forces of debt excesses dominate other areas.

Reason Two: “Structural reform” as the article calls it is, in plain spoken terms, the ability for the government to deal with the debt as it prints money. .

Reason Three: Adding new taxes at a time when an economy is slowing will, in my view, act as a catalyst and accelerate the slowing.

"While printing money seemed like it was working, it will ultimately fail," concludes Tubbergen. "History teaches that exchanging newly printed, Monopoly style money for tangible assets may work short term. But, it’s never worked long term."

To read the blog in its entirety go to and select his August 21, 2013 entry.

Tubbergen’s syndicated radio show can be heard on metro Michigan stations WTKG 1230 AM and WOOD Newsradio1300 AM and 106.9 FM.

About Dennis Tubbergen
Dennis Tubbergen has been in the financial industry for over 25 years and has his corporate offices in Grand Rapids, Michigan. Tubbergen is CEO of PLP Advisors, LLC and has an online blog that can be read at To view Tubbergen’s latest Moving Markets? newsletter, go to

The opinions expressed herein are those of the writer and not necessarily those of USA Wealth Management, LLC. This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. Therefore, no forecast should be construed as a guarantee. Prior to making any investment decision, individuals should consult a professional to determine the risks, costs, benefits and fees associated with a particular investment. Information obtained from third party resources is believed to be reliable but the accuracy cannot be guaranteed.