The Japanese Economy - Abenomics
Abenomics - PM Shinzo Abe's Plan to Revitalize the Japanese Economy
Since coming to power in late 2012, Prime Minister Shinzo Abe and his government unveiled a comprehensive policy package to revive the Japanese economy from two decades of deflation, all while maintaining fiscal discipline. This program became known as Abenomics. While Abenomics started as a stimulus measure based on three arrows, over the years it has evolved into a broader blueprint for pro-growth socioeconomic change that aims to lead Japan in tackling today's challenges head-on. The changes are designed to benefit all parts of Japan's economy—the people, companies, investors, and the country as a whole.
While Abenomics has substantially lifted up the economy, it has yet to sufficiently cope with the rapid changes taking place in the rest of the world. Behind these developments are several characteristics of policy formulation in the Abe administration. There are numerous policies that can be potential legacies of this administration – a fundamental overhaul of the social security system to thwart the social divide; the major reform of the individual identification system as the key infrastructure in the Fourth Industrial Revolution; and the beefing up of the concession scheme to meet new infrastructure demand. Takenaka anticipates that the administration will embark on even bolder economic reforms for future generations.
In many ways, the Japanese economy continues to be at war – with itself. It continues to struggle breaking from the past, as it seeks to strike the right balance between traditional domestic values and modern international norms. After World War II ended, many countries dismantled their wartime economic system. However, Japan arguably adopted an even more extreme version of a centralised economy. An interventionist Government policy, backed by a main-bank system, facilitated the country’s meteoric rise as an economic and political powerhouse. The mystique of Japan’s miracle economy endured until 1990, when fueled by years of excess capacity, employment and easy credit supply, the asset bubble which had been building through the 80s, burst. While the country did emerge from the crisis in early 2000s, economic stagnation became entrenched to such an extent, that policymakers continue to grapple with the consequences of the lost decades. However, perhaps, there’s some room left for optimism – Abenomics seeks to reinvigorate the economy via regulatory reforms and a productivity revolution. Recent economic data has been positive and while the jury is still out on the success of the implementation of the second arrow, we believe that there are grounds to feel confident that the current regime remains committed to reform and that the economic recovery is on sound footing.