Abenomics
1960s 1970s 1980s 1990s 2000s 2010s 2020s Abenomics (アベノミクス, 安倍ノミクス, Abenomikusu) refers to the economic policies implemented by the Government of Japan led by the Liberal Democratic Party (LDP) since the 2012 general election.
[3] The Economist characterized the program as a "mix of reflation, government spending and a growth strategy designed to jolt the economy out of suspended animation that has gripped it for more than two decades".
[4] During Abe's tenure, the rate of Japan's nominal GDP growth was higher, and the ratio of government debt relative to national income stabilized for the first time in decades.
Abe's supporters drew explicit parallels between Abenomics and the Meiji era program of fukoku kyōhei (enrich the country, strengthen the army).
In addition to providing a stronger counterweight to China in the Asia-Pacific region, strengthening the Japanese economy is also intended to make Japan less reliant on the United States for defense.
Abe quickly announced a ¥10.3 trillion stimulus bill and appointed Haruhiko Kuroda to head the Bank of Japan with a mandate to generate a 2% target inflation rate through quantitative easing.
Structural reforms have taken more time to implement, although Abe made some early moves on this front such as pushing for Japanese participation in the Trans-Pacific Partnership.
[4] The 2013 House of Councillors election gave Abe complete control over the Diet, but the government showed some internal division over specific structural reforms.
[21] By May 2013, the stock market had risen by 55%, consumer spending had pushed first-quarter economic growth up 3.5% annually, and Shinzo Abe's approval rating ticked up to 70%.
A Kyodo News poll in January 2014 found that 73% of Japanese respondents had not personally noticed the effects of Abenomics, only 28% expected to see a pay raise, and nearly 70% were considering cutting back spending following the increase in the consumption tax.
[23] Under a weaker Yen, Abenomics increased the cost of imports, including food, oil, and other natural resources upon which Japan is highly reliant.
[25] BMI Research expressed the view that the Japanese economy would fall into fiscal crisis before 2020 due to basic structural issues including high government debt, worsening demographics, and loss of competitiveness in key industries.
Koichi Hamada, a monetary adviser for Shinzo Abe, warned that the planned VAT hike could hurt Japan's economy which started to recover from a long recession and deflation.
Making up for lost electricity generation, Japan has imported[32] extra fossil fuels, which worsened the country's trade deficit partly because of a weaker yen.
In a 2003 speech in Tokyo, Ben Bernanke suggested that the Bank of Japan should implement quantitative easing in order to put an end to the deflation spiral.
5 years after his speech, Bernanke started quantitative easing as chair of the Federal Reserve, to fend off a Japanese-like lost decade due to a bubble in housing prices.
[42] Paul Krugman said that the consumption tax hike from 5% to 8% raised serious doubt about Japan's economic recovery, and that in order to lift the economy, the government should decrease the VAT to 5% and work to build up inflation expectations.
[43] Lawrence Summers supported the view that the Japanese government should postpone the planned tax hike, suggesting that steady economic growth should be more important for the country than fiscal discipline.
[48] The International Monetary Fund characterized the program as "a unique opportunity to end decades-long deflation and sluggish growth and reverse the rise of public debt," but argued that "all three arrows need to be launched for the policies to succeed.
[50] The Washington Post journalist Neil Irwin cited successful expansion by Toyota, with operating profit rising 88% in the second quarter of 2013, as evidence that the economic program of Japan is working.
He has stated that "the fact that one of Japan's biggest and most important companies is again finding ways to make money on the homefront is a good sign that the nation's economic torpor may not last too much longer."
[21] In addition, there is rising skepticism regarding Abenomics, pointing out that the policy is too focused on demand rather than on supply, such as the case of the Japanese government's push for generic medicines within its universal healthcare system without actually addressing the root causes.
[52] First, the government commitment to spending on pensions, medical expenses and social security will continually act as a substantial burden to the already indebted country with a public debt of 240% its GDP.
[52] Goldman Sachs chief economist Naohiko Baba has criticized the infrastructure spending component of Abenomics, arguing that the Japanese construction industry is inefficient and short of workers.
[55] Thomas Piketty said that Japan needed to change the structure of its taxation in order to help the Japanese young generation, suggesting that the world's third largest economy should increase taxes on the wealthy and big firms from 10% to 20%.
Household spending fell 5.9% in July 2014 from the same month a year earlier, more than the median forecast of economists polled by Reuters of a 3% drop, because of the higher consumption tax.
Kyohei Morita and Yuichiro Nagai[60] said that they believed that Japan's real GDP would return to growth exceeding potential, mentioning economic indicators such as public works and housing construction orders.
[67] Akira Amari, however, said that there was a positive ongoing cycle in the economy and they could not sum it all up with the word recession, conceding that the consumption tax hike in April 2014 dented consumer spending.
Abenomics aimed at ending the deflation which continued for more than 15 years, focusing on massive monetary stimulus to build up self-sustaining expectations of moderate inflation.
[77] In early October 2014, the IMF revised its 2014 global growth forecast downwards from 3.4% to 3.3%, although many central banks continued to provide liquidity to the world financial market.
