Japan’s rosy short-term outlook masks the failure of Abenomics

The Elcano Royal Institute is a think-tank for international and strategic studies that analyses world events and trends from a Spanish, European and global perspective.

The Analyses of the Elcano Royal Institute (ARI)are short pieces - of around 3,000 words - on aspects of current international affairs considered to be of relevance to Spain, its foreign policy or its security. In broad terms ARIs are intended to have a predictive bearing on events.After calling for snap elections again, Japan’s Prime Minister Shinzō Abe capitalised on the relatively unexpected economic recovery. The problem is that the ongoing economic uptrend is cyclical, supported by a large fiscal stimulus package, which will end next April, and a much stronger global economy.

The long-term outlook for Japan is clearly less upbeat. Even if the government were to achieve the ambitious goal of doubling the number of inbound tourists, this would still be negligible for the size of the Japanese economy. The key for long-term growth is the somewhat forgotten third ‘arrow’ of Abenomics, namely structural reforms. The two most important ones –labour reform and deregulation– have been held back, keeping potential growth very low. At the same time, Abenomics’ first two ‘arrows’ (Bank of Japan ultra-expansionary monetary and government fiscal stimulus) are exhausting their effectiveness.

Abe advocated the success of Abenomics during the election campaign. However, without meaningful structural reforms, the Japanese economy will continue to be highly sensitive to global economic developments and have an increasingly gloomy long-term outlook. As for Abe’s idea that ‘Japan is back’, it should be borne in mind that Japan is a much smaller economy than it used to be, contributing less to global growth than other Asian peers, including not only Indonesia but also Korea.

https://www.europeansources.info/showDoc?ID=1228769&SI=1137909&SS=D&PN=1&CI=0&PS=25&FT=B&searchTerm=japan Joint letter of congratulations following general election and the reconfirmation of Shinzō Abe as Prime Minister of Japan

---