Scorecard of Japan’s ‘Abenomics’ stimulus policies

16-Nov-2019 Intellasia | Reuters | 6:02 AM Print This Post

Just as Shinzo Abe becomes Japan’s longest-serving prime minister, he may be leading the world’s third-biggest economy into a downturn, with little ammunition left over from his landmark “Abenomics” stimulus policies deployed seven years ago.

The three arrows of Abenomicsbold monetary easing, fiscal spending and structural reformsboosted stock prices, brightened business sentiment and brought exporters windfall profits via a weak yen.

But years of fiscal spending and ultra-loose monetary policy have failed to fire up inflation to the BOJ’s 2 percent target and left policymakers little firepower against another recession.

Here are the benefits brought by Abenomics and the challenges that remain for Japan’s economy.


Many analysts say its biggest benefits were the attention the policies provoked from foreign investors, who bought Japan’s shares on hopes it would finally take drastic measures to pull its economy out of deflation.

The Nikkei share average.N225 rose to around 24,450 in October 2018, its highest since late 1991, and more than doubling from levels before Abe took power in December 2012. It now hovers around 23,300.

The policies also helped reverse a damaging spike in the yen currency that hurt Japan’s exporters and weighed on inflation by keeping import prices low.

The yen weakened nearly 50 percent to stand at 125.80 against the dollar in June 2015, from a December 2012 high of 85 when Abe became prime minister.


As a weaker yen boosted manufacturers’ profits, the benefits began trickling down to broader sectors of the economy as companies started hiring more.

Japan’s real gross domestic product (GDP) hit 540 trillion yen in October, up 8.6 percent from 2012 levels. But there are signs the economy may have peaked, as the US-China trade war hits exports and factory output.

Japan’s economy has grown under prime minister Abe

Real GDP has expanded since 2012, though its growth has largely stalled in the last quarter


Improvements in the economy and a dwindling working-age population have worsened labour shortages. The unemployment rate stood at 2.4 percent in September, hovering near a 27-year low hit in August. In December 2012, it was at 4.3%.

Tightening job market

Japan’s unemployment rate fell to 2.2 percent this year, its lowest level since 1992, while the jobs-to-applicants ratio hit 1.63, its highest level since 1974


Despite a prolonged economic recovery and years of heavy money printing by the Bank of Japan, inflation had failed to accelerate toward its 2 percent target.

After peaking at 1.4 percent in 2014, the core consumer price index slowed, on slumping oil costs and the hit to household spending from a sales-tax hike in 2014. Inflation never got close to 2%, and now hovers around 0.3%.


The Bank of Japan kicked off a massive asset-buying programme in 2013 to try and reach its 2 percent inflation target.

But the policy fell short, forcing the BOJ to return in 2016 to a framework targeting interest rates rather than the pace of money printing.

Despite pledging to boost bond holdings by 80 trillion yen a year, the BOJ has been steadily slowing bond purchases in what some market players describe as “stealth tapering”.

Bank of Japan’s stealth tapering

The BOJ has gradually scaled back the pace of expansion of its long-term JGB holdings over the past years


Category: Japan

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