The end of Abenomics
CHO HYUN SOOK
The author is deputy editor of JoongAng Ilbo’s economic policy team.
“I will use the Bank of Japan [BOJ] rotary press to print an unlimited amount of money,” said Shinzo Abe, then leader of the Liberal Democratic Party in November 2011. The market was delighted by the startling remark to release money to revive the trapped Japanese economy. the “lost 20 years”. The Nikkei index rose more than 10% in one month. Abe, an emblematic figure of the Japanese far right, has emerged as a symbol of hope for the Japanese economy.
In lower house elections held the following month, Abe’s Liberal Democratic Party (LDP) won a landslide victory. On becoming prime minister, he announced an economic recovery plan he had 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.
Early in Abe’s tenure, Abenomics seemed to work. Stock prices surged and the value of the Japanese yen fell sharply. In 2013, the first year of his term, the economic growth rate rose to 2% and his policy seemed on the road to success. But that was it.
The fear that this will turn into an “asset bubble economy” – abbreviated “Abe” – has become a reality. While in office from 2013 to 2019, the average real annual growth rate was only 0.98%, far from his promise to achieve an average growth of 2% for 10 years.
The unemployment rate of 4% at the start of his term fell to 2%, but that was more due to low birth rates than Abenomics. Corporate profits from the weak yen and lower corporate taxes have not flowed into workers’ pockets. Worsened household indicators. His stature was further shaken when Covid-19 broke out. Although he resigned in August 2020 for health reasons, he remains Japan’s longest-serving Prime Minister (7 years and 8 months).
Even in Japan, the assessment of Abenomics is cold. In his book “30 Years of Japanese Economics”, economist Yukio Yanbe wrote: “Abenomics has failed. Exit targets from prolonged deflation and recession have not been met. The working generation has been impoverished and many people are suffering.
Abe was shot dead by a former member of the Maritime Self-Defense Forces on July 8. It was an ending no one expected, just as the three arrows shot by Abe point to an ending he didn’t foresee.