Japan’s Abenomics: Recovery Leading to Good Growth?

Abstract

As Japan enters an era of political stability under Prime Minister Shinzo Abe, Japan is poised to recover from the past two decades of mediocre performance toward good, sustained economic growth. Abe, a strong leader who will not be replaced until at least 2016, is giving priority to a much‐touted economic program termed Abenomics, comprising three “arrows”: ending deflation and achieving price stability, defined as a 2 percent annual increase in the CPI; achieving stable, long‐run, full employment GDP growth over the next decade; and fiscal consolidation bringing an end to enormous government budget deficits and debt. This paper explores these programs, focusing on macroeconomic demand management and the growth strategy. I briefly consider the Trans‐Pacific Partnership, and changes in the agricultural, electric power, corporate, and international trade sectors, and identify the key challenges to implementing good economic growth. Despite these challenges, Abe’s strong political statements, public support, and the power of the LDP leadership provide hope for long‐awaited change in Japan.