What is Abenomics?
Shinzo Abe was shot from behind in the city of Nara, Japan
He was highly popular for his “Abenomics” policies
Abenomics is the nickname for the economic policies set out for Japan in 2012
Shinzo Abe, the former Prime Minister of Japan, has died after being shot earlier in the day, according to news agency NHK. Abe, 67, was shot from behind minutes after he started his speech Friday in Nara in western Japan. He was rushed to the hospital for emergency treatment but was not breathing and was in cardiopulmonary arrest.
Shinzo Abe was highly popular for his “Abenomics” policies to lift the Japanese economy out of deflation. The two arrows of Abenomics – structural reform and plans for fiscal consolidation – were considered intrinsic elements to achieve the inflation target and higher sustained growth in Japan.
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What is Abenomics?
Abenomics is the nickname for the economic policies set out for Japan in 2012 when prime minister Shinzo Abe came into power for a second time. Soon after resuming office, he launched his Abenomics plan to bolster Japan’s stagnant economy. In a speech following his election, Abe announced that he and his cabinet would "implement bold monetary policy, flexible fiscal policy and a growth strategy that encourages private investment, and with these three pillars, achieve results."
In Japan, the 1990s is known as the lost decade because it was a period when Japan was facing an overwhelming stagnation economically. This led to enormous budget deficits on the part of the Japanese government. Several techniques have been deployed to lift the economy out of its unsavory economic situation by governments and economists during that period. For instance, in 1998, Paul Krugman, an economist suggested that cutting long-term interest rates and increasing spending could help achieve inflation expectations in the nation. A method of quantitative easing was also adopted towards the beginning of 2005 but this did not in any way put an end to deflation. There were several other attempts to revive the economy between 2006 and 2009.
Abe’s program consisted of “three” arrows. The first was printing additional currency between 60 trillion yen to 70 trillion yen, to make Japanese exports more attractive and to attain inflation target of 2%. The second arrow was launching new government spending programs to stimulate demand and consumption, boost short-term growth, and achieve a budget surplus over the long term.
The third element of Abenomics suggested a reform of various regulations to make Japanese industries more competitive and to encourage investment in and from the private sector. This included various corporate governance reforms, easing of restrictions on hiring foreign staff in special economic zones, making it easier for companies to fire ineffective workers, liberalization of the health sector, and introducing measures to support domestic and foreign entrepreneurs. The proposed legislation also aimed to modernize the agricultural sector and restructure the utility and pharmaceutical industries. One of the most important reforms was the Trans-Pacific Partnership (TPP), which was described by economist Yoshizaki Tatsuhiko as potentially the "linchpin of Abe's economic revitalization strategy," by making Japan more competitive through free trade.
Abenomics helped to boost Japan`s economy
Like all Japanese economic policies since the bubble burst, Abenomics has worked well at times and stalled at others. Inflation targets have been met. Japan’s unemployment rate is over 2% lower than when Abe came to power for the second time. Likewise, nominal GDP has increased and corporate pre-tax profit and tax revenues have both seen significant rises. However, Japan’s period of success has been stalled at many times by global economic forces and the country’s most significant problem – a rapidly aging population – has increasingly taken the forefront.
Criticism of Abenomics
According to some critics of Abenomics including the opposition party, the policy upheld by the ruling Liberal Democratic Party (LDP) widened the country’s wealth gap as the policy only promoted corporate earnings and share prices but failed to achieve higher wages. Critics argue that the economic reforms have done little to boost the inflation and the national debt is still at a high of one quadrillion yen.