n 26 December, 2012, Shinzóō Abe took office to become Prime Minister of Japan for the second time, and in doing so once again became head of government of the third largest world economy by GDP. In the year since his return to power, Prime Minister Abe has perhaps been most synonymous across the plant with the term ‘Abenomics’. A portmanteau of Abe and economics, Abenomics refers to the economic policies advocated by Prime Minister Abe, policies aimed at expanding the economy of Japan, boosting its annual GDP growth, through a combination of measures including aggressive quantitative easing, an increase in public infrastructure spending and the well-published devaluation of the yen. During the global recession Japan suffered a particularly severe loss in real GDP, with 2009 seeing it fall 5.2 percent against a global average of 0.7 percent, and a 27 percent reduction in exports. Naturally this resulted in an increase in unemployment and an almost complete suspension of major infrastructure projects. With a target of resolving Japan’s macroeconomic problems, Prime Minister Abe’s government went to work immediately by introducing a raft of monetary and fiscal policies, and
economic growth strategies in the hope of encouraging public investment. Specific policies have included inflation targeting at a two percent annual rate, correction of the excessive yen appreciation, setting negative interest rates and the expansion of public investment. So, based on what we have seen over the last twelve months, is it safe to say that the adoption of Abenomics has been a success? While the yen has indeed depreciated, to the point that it was 25 percent lower against the US dollar in the second quarter of 2013 compared to the same period in 2012, what has this meant for the citizens of Japan? For starters the country’s unemployment rate has lowered from 4.0 percent in the final quarter of 2012, to 3.7 percent in the first quarter of 2013, a small yet positive continuation of a recent trend. Abenomics meanwhile has certainly helped Japan’s stock market, which has risen by 55 percent in the past year, and consumer spending has helped push first quarter economic growth up 3.5 percent annually. Taken at face value all of the above evidence is cause for optimism, optimism that has seen Prime Minister Abe’s approval ratings soar to 70 percent of the electorate who consider him to be the architect behind Japan’s progress away from recession .
“The broad goal of Abenomics was to boost annual GDP growth, which stood at two percent at the end of 2012, and raise inflation to two percent via short-term stimulus spending, monetary easing, and reforms” 60 |