Showing mixed results, Abenomics to face votersʼ verdict

October 4, 2017

TOKYO- In the upcoming general election, Japanese Prime Minister Shinzo Abe will seek voters' verdict on his signature Abenomics economic policy mix, which he has strongly promoted but is yet to achieve the full range of its intended targets.

The yen has weakened against the dollar and stock prices have risen sharply, supported by the Bank of Japan's massive monetary easing, which is believed to have helped the Japanese economy to match the second-longest uninterrupted expansion in the post-World War II period.

But the Japanese economy has not yet overcome entrenched deflation, one of the priority targets for Abenomics. Also, the government has faced difficulty balancing economic growth with fiscal reconstruction.

Abenomics is composed of three "arrows"--bold monetary easing by the BOJ, flexible and timely fiscal spending, and growth strategy. Of the three, the BOJ's monetary easing has attracted the most attention.

In January 2013, the month after Abe returned to power, his government and the BOJ issued a joint statement in a bid to help the Japanese economy get out of deflation.

In line with the joint statement, the BOJ introduced its 2 pct inflation target. For its part, the government pledged to pursue the duel goals of boosting the economy's growth potential and securing a sustainable fiscal framework.

At the initiative of Governor Haruhiko Kuroda, the BOJ decided to launch "quantitative and qualitative" monetary easing in April 2013 as the first allow of Abenomics.

Under the scheme, the BOJ has bought massive amounts of Japanese government bonds to provide ample funds to the banking system.

The benchmark 225-issue Nikkei stock average has since rocketed and recovered the psychologically important 20,000 line, from around 10,000 when the Abe administration was launched, with the dollar jumping over 30 pct to above 112 yen from around 85 yen.

An increasing number of Japanese companies, mainly manufacturers, have booked record earnings.

The seasonally adjusted ratio of effective job openings to seekers stood at 1.52 in August, flat from the previous month and the highest level since February 1974.

The current economic expansion is believed to have entered its 57th month in August, matching the "Izanagi" boom between November 1965 and July 1970, the second-longest growth in the postwar period.

While Abenomics has produced some results, the BOJ has failed to achieve its 2 pct inflation target, more than four years after the central bank set the goal, despite its initial promise to hit it in two years. Jiji Press