In 2012, Mr. Abe announced the economic policy group Abenomics and Womenomics to revive Japan after two decades of deflation.
Shinzo Abe is Japan’s longest serving prime minister. In 2012, he took office as prime minister while the country was still recovering from the 2008 financial crisis. Japan was also experiencing two decades of deflation and slow growth.
To revive the economy, Mr. Abe deployed Abenomics – an economic policy group consisting of three arrows: fiscal easing, monetary easing and large-scale structural reform. In 2013, the Japanese government announced spending 10.300 billion yen ($116 billion) on infrastructure, building roads, houses and bridges. In 2014, the country added two more stimulus rounds, worth 5.5 trillion yen and 3.5 trillion yen.
The Bank of Japan (BOJ) also stepped in with an unprecedented asset buyback program. The BOJ continuously pumped money into the economy, at a rate of 80,000 billion yen a year, mainly through buying Japanese government bonds. In 2016, this agency also lowered interest rates to negative for the first time .
Abenomics has thus had some rapid success. The BOJ’s massive stimulus program has lifted business confidence, contributing to a weaker yen, helping Japanese exporters earn more, raise wages and create more jobs.
In June 2013, Japan had inflation for the first time in more than a year , when the consumer price index (CPI) increased by 0.4%. At the World Economic Forum (WEF) 2014, Mr. Shinzo Abe also said : “This spring, workers’ wages will increase, pulling consumption up. Japan is no longer in a twilight period, which has already entered the dawn”.
In 2017, Japan recorded its longest quarterly growth streak since 2001. David Kuo – Director of Motley Fool Singapore at the time commented that this data showed that “quantitative easing is working in Japan”. This is the result after more than 4 years of implementing Abenomics.
Corporate governance reform also attracted a large amount of cash flow from abroad. Foreign ownership of stocks listed in Japan also hit a record 31.7% in 2014, compared with 28% in 2012.
However, the goal of structural reform in Abenomics is not appreciated by analysts. “Structural reform is a failure of Abenomics,” commented Samuel Tombs, chief economist at Pantheon Macroeconomics.
Besides, after many years of implementing Abenomics, low inflation in Japan has not improved significantly, far from the BOJ’s 2% target. The average inflation in the period 2000 – 2020 of this country is only about 0.1% . Abe’s growth strategies have also been impacted by the 2019 tax hike and the US-China trade war.
Observers in Japan say that Abenomics has long struggled. The arrival of the pandemic may have put an end to this program, as the economy was plunged into recession.
Covid-19 deals a blow to Abenomics’ experiment to reverse “deflationary sentiment” in Japan. The country’s businesses and households remain restrained on spending on expectations of low GDP growth and flat wages.
Japan’s GDP fell to a record in the second quarter of 2020, to 507,000 billion yen ($4.8 trillion). This level is only equivalent to 2013 and far short of Abe’s target of 600,000 billion yen.
“Japan’s economy could have been better after Abenomics. But this policy is not enough to change people’s mentality,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.
After Mr. Abe resigned in 2020, Abenomics continued to be implemented under former Prime Minister Yoshihide Suga and current Prime Minister Fumio Kishida. However, the Japanese economy has not improved significantly. Even this policy is revealing many weaknesses.
In the context of a series of major economies around the world raising interest rates to control inflation, the Bank of Japan (BOJ) kept interest rates around 0% to stimulate the economy. This causes the Japanese yen to depreciate against the US dollar, pulling people’s living costs up. And while Abenomics creates a lot of jobs, most of them are sporadic.
In addition to Abenomics, Mr. Abe also initiated Womenomics, which aims to increase the participation rate of women in the labor market. In 2020, this rate is 73%.
The Japanese government also asked businesses to increase the appointment of women in leadership positions. They argue that increasing women’s income and status will also increase fertility rates, similar to countries like Sweden or Denmark. However, observers say that the success of this policy so far has been negligible.
Ha Thu (according to Reuters, Mainichi)