The term Abenomics comes from the name of Japanese Prime Minister Shinzo Abe, who was elected in December 2012 on an economic platform based on three points or arrows, designed to ensure a coherent policy mix that would enable Japan to emerge from deflation and return to dynamic economic activity.
The first of the three arrows, already implemented in January 2013 (fiscal stimulus), consists of a flexible budgetary strategy. It focuses mainly on public demand and is concentrated on 2013 and early 2014.
The second concerns monetary policy. This involves a change in Japan’s monetary policy strategy, known as Quantitative and Qualitative Monetary Easing ( QQME), whose main objective is to end deflation. TheBank of Japan (BoJ ) set a new inflation target of 2% in January 2013. On April 4, the Monetary Policy Committee decided on the details of this new policy:
– Clarification of the timeframe for achieving the inflation target: within two years, with stabilization around the target.
– Targeting the monetary base, which should double within two years.
– Extension of the average maturity of government bonds held (from 3 to 7 years).
– Increase in purchases of risky assets (ETFs and J-REITs[1])
The last measure consists of structural reforms and has not yet been fully defined. However, in early June, the Japanese government announced several areas for reform in the labor market (women’s employment, competitiveness, etc.), investment, and business creation.
While initial results seem to show that this new economic policy has won over various stakeholders (increase in economic confidence indices) and has had its first positive effects on inflation (which stood at +1.1% in October after +1.0% in September), it is important to be cautious about drawing conclusions. In particular, the structural reforms needed to ensure that these short-term stimuli are transmitted to the medium to long term have not yet been implemented and remain below observers’ expectations. More concrete measures are therefore needed before a real assessment of this policy can be made.
