Is there hope for” Abenomics”?

Is there hope for” Abenomics”?


Since his election as prime minister on December 26th, 2012, Shinzo Abe had three main objectives to boost the Japanese economic growth.  

1 / Monetary policy through quantitative easing program,

2 / Fiscal policy through public investment expansion

And  3 / Creation of Sustainable Growth

So he took the abbreviation “the 3 arrows”

Earlier this year, he began by voting a stimulus assigned to finance public works, especially in areas affected by the tsunami.

Then, in April, the Japanese central bank began its quantitative easing program by increasing the money supply to generate an inflation rate of 2 % within two years and get the country out of deflation.

Although the first two arrows have stimulated the devaluation of the Japanese currency overvalued by 20% against the dollar and achieving 4 % of economic growth of 4 % , the third arrow is a challenge to achieve.

Jesper Koll , chief economist of JP Morgan Tokyo, believes that structural reforms can only be achieved  by changing the investment behavior  in new businesses and the expansion of international trade .

Abe intends to reform the labor market by implementing deregulation measures and reducing taxes, in order to increase the employment rate for women and encourage more employees’ evolution. On the other hand, Mr. Abe launched a fiscal consolidation plan to reduce the debt, which is two and a half times the size of the third world economy.  Another main point of Obe’s plan is to reduce the prices and to increase consumption tax.

Despite the enormous efforts of Abe government, some experts believe that poor income distribution and weak domestic consumption would limit the recovery of the Japanese economy.

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