The end of Abenomics

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The end of Abenomics

The author is the deputy editor of the economic policy team of the JoongAng Ilbo.

“I will use the Bank of Japan [BOJ] rotary press to print an unlimited amount of money,” said Shinzo Abe, then Liberal Democratic Party leader in November 2011. The market was thrilled by the surprising remark to release money to revive the Japanese economy trapped in the “lost 20 years.” The Nikkei index rose by more than 10 percent in a month. Abe, the symbolic figure of Japan’s far-right, emerged as a symbol of hope for the Japanese economy.

In the lower house elections held the following month, Abe’s Liberal Democratic Party (LDP) had a landslide victory. On becoming prime minister, he announced an economic stimulus package he promised during the campaign. The central bank would release money (quantitative easing), the government would spend money (fiscal easing) and the economic structure would be changed (structural reform). The so-called three arrows are the essence of Abenomics.

In the early days of Abe’s term, Abenomics seemed to be working. Stock prices jumped, and the value of Japanese yen fell sharply. In 2013, the first year of his term, the economic growth rate rose to 2 percent, and his policy seemed to be on the road to success. But that was it.

The fear that it would end up as “Asset Bubble Economy” —abbreviated as “Abe” — became a reality. While he was in office from 2013 to 2019, the average real annual growth rate was merely 0.98 percent, far from his promise to attain an average 2 percent growth for 10 years.

The 4 percent unemployment rate at the beginning of his term fell to 2 percent, but it was due more to the low birth rates than to Abenomics. Corporate gains from the low yen and corporate tax cut did not flow into the pockets of the workers. Household indicators aggravated. His stature was further shaken as Covid-19 broke out. While he stepped down in August 2020 for health reasons, he remains Japan’s longest-serving (7 years and 8 months) prime minister.

Even in Japan, evaluation on Abenomics is cold. In his book “30 Years of Japanese Economy,” economist Yukio Yanbe wrote, “Abenomics has failed. The goals of getting out of prolonged deflation and recession were not achieved. The working generation has become poorer, and many people are suffering.”

Abe was shot and killed by a former Maritime Self-Defense Force member on July 8. It was an ending no one expected just as the three arrows shot by Abe are heading to an ending he didn’t foresee.
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