Abenomics at the Crossroads
- Original Broadcast Date:
- October 1, 2016(UTC)
In 2012, current Prime Minister of Japan Shinzo Abe unveiled a bold package of economic policies that advocates claimed would shake Japan out of what has been almost two decades of economic stagnation and deflation.
Termed “Abenomics,” the approach combined three “arrows” of aggressive monetary easing, intended to spur investment and consumption by pumping liquidity into the market; flexible fiscal policy, including increased government spending on large public works projects; and a growth strategy featuring structural reform and deregulation with the aim of encouraging private investment and transforming key industries into important economic drivers.
But, while Abenomics initially caused a big stir, raising expectations among the public and industry alike, almost four years into the project how successful has it been? And what adjustments are necessary to ensure that Prime Minister Abe’s government can meet its economic objectives moving forward?
These are the questions that a panel of experts including Prof. Motoshige Itoh of Gakushuin University, also a member of the Japanese government’s Council on Economic and Fiscal Policy; Prof. Franz Waldenberger of the German Institute for Japanese Studies; Prof. Naoyuki Shinohara of the University of Tokyo’s Policy Alternatives Research Institute; Prof. Gerald Curtis of Columbia University; and Hiroyuki Yanagi, CEO of Yamaha Motor, convened to discuss in this edition of Global Agenda.
On the question of whether Abenomics had been as success so far, all agreed that despite what some saw as a strong start, the policies have yet to bring results that are as positive as hoped.
While the first arrow of quantitative easing was intended to lower the value of yen, raising inflation to create a virtuous economic cycle of increased consumer spending, corporate profits, and employee wages, some panelists questioned the effectiveness of monetary policy in terms of generating real change. Our experts were also unsure about the wisdom of attempting to breathe life into this strategy by the implementation of a risky policy like introducing helicopter money.
As part of the second arrow, August this year saw the government announce a 28-trillion-yen (around 280 billion USD) fiscal stimulus package designed in part to further the economic engagement of all Japan’s citizens. While praising moves like increased support for child rearing and the elderly, and the improvement of ports, Prof. Curtis was dubious as to the value of planned measures such as one-off payments for those on lower incomes, or the rush to complete a high-speed “maglev” rail connection between Tokyo and Osaka. Prof. Shinohara also postulated that the likely impact of these measures would be lower than hoped.
On the structural reform and deregulation covered under the growth strategy of the third arrow, there are high hopes for the potential high-tech fields such as Artificial Intelligence, the Internet of Things, and Big Data to bring about a fourth industrial revolution on which Japan is particularly well-positioned to capitalize.
The panel agreed on the need for reforms to the labor market, something on which the government has placed a high priority among its planned structural reforms. One key facet of this is the idea of equal pay for equal work, seen as a necessary step to achieve parity between workers on permanent and temporary contracts. It was, however, agreed that the structural reform needed to promote a more innovative outlook would need to come from within Japan’s companies themselves rather than being imposed by government.
Professor, Gakushuin University
Professor Emeritus, The University of Tokyo
Director, German Institute for Japanese Studies
Professor, Policy Alternatives Research Institute, The University of Tokyo
Gerald L. Curtis
Burgess Professor Emeritus of Political Science, Columbia University
President, Chief Executive Officer and Representative Director of Yamaha Motor Co.,Ltd.