A new government took office the day after Christmas, led by prime minister Shinzo Abe, pledging to, in effect, go whole-hog on the Keynesian remedies for Japan's long recession, particularly by pushing for a combination of fiscal stimulus on a mass scale, and, through appointment of Haruhiko Kuroda as governor of the Bank of Japan; he has pledged to do "whatever it takes" to get annual inflation to 2 percent in a country where inflation has averaged -0.3 percent since 2000. The Japanese stock market is on a tear and the yen has been falling steeply on currency markets, exactly the kind of reaction the BOJ hopes to see. – WashingtonPost

Dominant Social Theme: A glorious new era is developing.

Free-Market Analysis: We wrote about this recently but wanted to return to the topic because it is turning into some sort of litmus test for Keynesianism itself.

Keynesianism (really neo-Keynesianism) thankfully is on the proverbial ropes these days, having shown nowhere in the civilized world that government can create an expansion out of a depression simply by printing money. Given its total failure and the loyalty it enjoys, nonetheless, among top political and business leaders, we are not surprised it is receiving another go round in Japan.

The Japanese, a long-suffering, hard-working and docile people are just the group to experiment on. And this is indeed what is going on. The Post (excerpt above) minces no words about it.

Japan is the most interesting story in global economics right now … Through the last six years of rumbling global financial crisis, Japan has been an afterthought. In 2008, the world's second-largest (soon to be third-largest) economy was still dealing with the consequences of its own banking crisis from the 1990s, its economy mired in a generation of economic stagnation and low-level but persistent deflation. If you had taken a snapshot of the Japanese economy in 2002 and again in 2012, you wouldn't have missed much.

There is a lot riding on Haruhiko Kuroda's new leadership at the Bank of Japan–and not just for Japan. (Haruyoshi Yamaguchi/Bloomberg) There is a great deal riding on their success, and not just for the 128 million residents of Japan. Because Japan has quite suddenly become perhaps the best natural experiment that economics could offer for weighing how the United States and Western Europe ought to respond to their own economic woes.

There are a series of open questions that have haunted those who argue for a more aggressive Keynesian prescription of easy money and fiscal stimulus in the United States and Europe. I'll limit it to the two most important: Can a central bank always create higher inflation in a depressed economy, or will lots of money-printing just affect asset prices and the international value of the currency without affecting the real economy? And can public debt levels reach a "tipping point" in a large country that has its own central bank and considerable domestic demand for its bonds, which would in turn make fiscal stimulus risky when there is already high debt relative to GDP?

If everything works as planned, Japan's industrial will return on the back of a weaker yen, an improving economy will improve its deficit picture, and the nation will soon have a goldilocks economy of prices rising about 2 percent a year and debt to GDP levels coming down. If things go awry, we could soon be staring at the mother of all sovereign debt crises. Whatever path the Japanese economy takes, it is one that will have lessons and implications for all of us.

This is really verbiage "beyond the pale." One gets the idea reading it that the Japanese are some kind of aggregate lab animal subject to financial experimentation for the good of the rest of us.

Presumably the globalists who organize these massive interventions are desperate for a victory and are hoping that Japan provides it. But past experience with Keynesianism doesn't give us much to go on or hope for.

We've been reading articles lately that predict older Japanese could lose up to a third of their savings or more if the current planned stimulation works.

And we assume even if it doesn't work that the announcement will inevitably come that it HAS worked. What we figure is that printing a great deal of money will start to boost the stock market, enrich Japan's multinational corporate sector and generally make it seem like Japan is emerging from its long slump.

But this will not be the case, any more than in the US or Britain. People could be "helped" temporarily if central bankers were willing to print and distribute money directly to them. But this no sane central banker would do because it would give away the game.

Instead, the two areas to be enriched are banks and corporations. As the market drives up as a result, victory will no doubt be declared. Because it is so far away from the West and because its own media is so docile, it will be easier to portray Keynesianism as a success in Japan than in the West.

At least we figure that is the plan. Neo-Keynesiansm needs a boost and perhaps the globalists are determined to create one no matter the consequences.

And, of course, as this "success story" is created, the savings of the average industrious Japanese citizen will be depleted by price inflation and the general debasement of the currency.

But the travails of the "little people" won't be reported, only the zooming stock market.

Is another Big Lie taking root in the Land of the Rising Sun? Let us watch and see if we are correct. The more adventurous may wish to invest, as it is perfectly possible that this desperate gambit will drive Japanese equity to new heights.

A cynical world, indeed.