The yen falls sharply on the foreign exchange markets and, hey presto, within a year we have an emerging market meltdown on our hands. That was the picture in 1996-97, but today’s Japan is no longer the export powerhouse of former years.
At the dawn of Abenomics, some trading partners did indeed worry that Prime Minister Shinzo Abe was adopting a “beggar thy neighbour” policy that might trigger a 1930s-style breakdown of the international system.
Team Abe riposted that returning Japan to the path of growth would be good for everyone. They were right. Far from launching an export drive, Japan saw its trade deficit well-nigh double last year. Even the current account – bolstered by massive inflows of investment income – recorded a few sizeable monthly deficits.
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