Daily Management Review

Shinzo Abe’s Efforts To Revitalise The Japanese Economy


Shinzo Abe’s Efforts To Revitalise The Japanese Economy
Former Japanese Prime Minister Shinzo Abe, who was killed on Friday, had hoped to restructure the country's economy. He was the country's longest-serving prime minister, retiring in late summer 2020.
Perhaps the most visible initiative of his presidency was "Abenomics," the economic programme that bears his name.
Although a slew of stimulus measures and big changes helped to re-energize the world's third largest economy, they fell short of expectations.
Abe took office in 2012, during a period when Japan was in recession, and Abenomics was considered as aiding the country's recovery throughout his first term.
However, his efforts to revitalise Japan's economy were thwarted as the country entered a recession in 2020.
This, along with other hiccups, cast doubt on his strategy's efficacy.
Abe's flagship economic policy was a collection of policies he implemented beginning in 2012. His objective was to use the so-called three "arrows" of Abenomics to kick-start Japan's economy after two decades of stagnation:
Monetary policy: Japan's hyper-easy monetary policy of negative short-term interest rates was implemented to make it cheaper for consumers and businesses to borrow and spend money.
Fiscal stimulus refers to the government investing more money on items like infrastructure or providing financial incentives to businesses such as tax reductions.
Corporate reform, more women in the workforce, labour liberalisation, and allowing more migrants into the workforce are all structural reforms that will assist reduce labour demands and contribute to economic growth.
Abenomics was a success as a political branding exercise, despite it fell short of Abe's own major economic aim.
When his administration began office, it faced the arduous job of reviving Japan's once-vibrant economy, which was still reeling from the effects of the so-called "lost decade" from about 1991 to 2001.
Abenomics did contribute to growth, though not at the same rate as the country's postwar prosperity.
Even now, the economy is less than the 600 trillion yen target set by Abe's administration for 2020.
However, as he left office, many analysts credited Mr Abe with putting the country in a stronger position to handle economic shocks such as the epidemic than when he took office over eight years ago.
When Japan fell back into recession in early 2020, Abe's economic strategy was called into doubt.
He was also chastised for how he handled Covid in the country. He promoted domestic tourism, which opponents claimed contributed to a rise of illnesses.
Critics also claim that Abenomics failed to deliver on promises such as providing women in the workforce more clout, combating nepotism, and reforming toxic workplace environments.
However, Bank of Japan governor Haruhiko Kuroda said on Friday that Mr Abe has done a lot to "bring Japan out of chronic deflation" and "achieve sustained economic development."
He went on to express his "sincere respect for Abe's strong leadership" as well as his "contribution to Japan's economic prosperity."
When Abe stepped down as Prime Minister and Leader of the Liberal Democratic Party in spring 2020, he was succeeded by Yoshihide Suga, who continued to push Abenomics policies.
Fumio Kishida, Japan's current Prime Minister, took over from Mr Suga in October. He is a member of the Liberal Democrat Party (LDP), as were his two predecessors, but in an interview shortly after taking office, he told the Financial Times: "Abenomics definitely provided results in terms of GDP, corporate profitability, and employment." However, it fell short of establishing a "virtuous cycle."
"I want to achieve a virtuous economic cycle by raising the incomes of not just a certain segment, but a broader range of people to trigger consumption. I believe that's the key to how the new form of capitalism is going to be different from the past," he said.
In response to Omicron and the rise in energy prices, the present administration has provided assistance to disadvantaged households and companies.
The Organization for Economic Cooperation and Development (OECD) now forecasts that after a poor start to the year, with demand pulled down by Covid and the Russia-Ukraine crisis, the economy will recover up and rise by 1.7 per cent in 2022. However, it warns that the economic recovery would be "sluggish."