Abe's Reflationary Policies Aren't Cutting It

Widely hailed for his standout economic policies, Japanese prime minister Shinzō Abe has gone about weakening the yen in order to promote exports and reduce the widening trade deficit. Alas, while Abe's logic is sound, the numbers suggest that the trade deficit still stands at a solid ¥2.79 trillion ($23.7 billion), and export growth, while rising, is still far outstripped by import growth. This has rendered Japanese companies pessimistic about the future barring further stimuli, and the national bank seems likely to comply. So, what's to be done? At some point, the inflation will have to yield to common-sense concerns about any kind of currency devaluation. Much of the task ahead is psychological: Abe wants to convince firms that the economy is sufficiently stable, such that they can grow and export more. Bolstering tariffs seems like another common-sense endeavor. But the government also has to be reasonable with which industries it decides to burden with tariffs: in the wake of the Fukushima disaster, the country's had to bump up fuel imports to compensate for lost nuclear energy production. Perhaps if the Abeites can find a way to bring about economic stimulus without trashing the yen--through careful taxation strategies, among other things--a decent solution to the export crisis can be achieved.