5 years on, Abenomics raises hope for ending deflation

December 25, 2017

Tokyo- The Japanese economy has been recovering moderately since Prime Minister Shinzo Abe's second administration was launched in December 2012, with a gleam of hope now seen for pulling out of deflation.

This reflects the yen's weakening, higher stock prices and a recovery in corporate earnings.

At the same time, there are concerns over the side effects of the Bank of Japan's prolonged massive monetary easing, part of Abe's five-year-old reflationary policy agenda, dubbed Abenomics. One focus is the appointment of a successor to BOJ Governor Haruhiko Kuroda, whose term expires next spring.

"Our consistent policy of monetary easing has achieved results to a certain extent and led to the current economic situation," Kuroda told a press conference last week, endorsing his own handling of monetary policy.

Positioning monetary easing as the "first arrow" of Abenomics, Abe appointed Kuroda, a proponent of easing policy, as chief of the central bank.

In April 2013, just after he took office, Kuroda introduced aggressive monetary easing of a "different dimension," featuring the doubling of the balance of the monetary base in two years. He continued to take additional easing steps after that.

In the meantime, the yen weakened after excessive appreciation and the benchmark 225-issue Nikkei average on the Tokyo Stock Exchange more than doubled to approach 23,000.

The employment situation also improved substantially, with the seasonally adjusted ratio of effective job openings to seekers in October standing at 1.55, the highest level in 43 years and nine months.

The Japanese economy entered an expansionary phase in December 2012, at the same time as the launch of Abe's second administration. The continuing economic boom is believed to be the second longest in post-World War II history.

On prices, however, the BOJ's 2 pct inflation target is yet to be achieved.

But Abe and Kuroda have repeatedly said the Japanese economy is no longer in deflation, because consumer prices are not on a sustained downtrend. Jiji Press