Abenomics is the term popularly given to the economic revival that Japans current prime minister seeks to administer under an economic plan popularly dubbed Abenomics. Abenomics has to deal with a lot because japan not only needs to grow but it needs to grow at a point where it is able to hand its great public debt. He gave himself an end goal to raise the nominal GDP from 500 Trillion Yen to 600 Trillion Yen, a rise of 20 percent. While the Economy has been shifting in the right direction, it is still woefully far from where it needs to be. Recovery has been stopping and has in fact slumped in the second quarter of the year. Prices are yet again falling and the "new core" inflation index has remained short of the 2 percent inflation target. The Monetary policy seems to not be stabilizing in order to counter Japans sovereign debt which is 240 percent of its national debt.
Abe hoped that his nation would quickly return to rapid growth and thus prosperity would follow but it has not panned out that way. Japan needs to make tax revenues from somewhere in between 30-40 percent in order to stabilize its GDP debt and the fact that raising taxes from 5-8 pecent in consumption tax slowed down consumption rates is worrying. Japanese peopel have always tended to save more and at a time when the economy needs them to spend it is ever worrying that they choose toa ct more conservatively with their money 9as they have eery right to do so however). Japan needs to be careful at current growth rates because any offsets introduces by tax rises or cuts could mean plunging back into the recession Abenomics is trying so hard to cut off. Productivity is also an issue because even though output per worker is high, the problem with a shrinking working population is that it offsets higher productivity per worker. Japan needs to increase its current inflation. Some options it could explore include
1. At current rate of bond purchases, the BOJ will own two thirds of government bonds by 2020. In effect, the govt will owe itself money in the form of seigniorage as debt payments made to the central bank will be returned to the govt itself.
2. Wait for a point where the government is pushed into a debt crisis of monetary madness which could potentiall spiral out of control or work either way...
Either way, Mr Abe has alot of work to do before he can say that his Abenomic policies can be called a definitive success.
http://www.economist.com/news/finance-and-economics/21677648-despite-shinzo-abes-best-efforts-japans-economic-future-will-be-leap
2 comments:
An economy that relies on debt for government spending is a very delicate matter. However; a short period of economic trends are not very indicative of a success or a failure. Five years of austerity in other cases have not been very fruitful. To essentially deem abenomics as a failure would not be a solid argument at this point. That being said Japan has a very intense issue at hand in terms of an ageing working population that could be detrimental for future production.
I agree that Japan has some issues with the abenomics strategy but I feel that there is a good chance that Japan will strive soon. I also agree how the working age is a problem, because it can cause future production to decrease and show major problems. Japan needs to see rapid growth to have a successful future ahead.
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