Prime Minister Shinzo Abe’s “Abenomics” policy mix has failed to create a favorable economic cycle as Japanese exporters have not been able to enjoy the benefits of a weak yen.
“We have succeeded in creating a favorable economic cycle in which corporate earnings are increasing and they are reflected in wages. But it will not be completed unless it repeats itself several times,” economic and fiscal policy minister Akira Amari said at a news conference on Nov. 17. He made the comments when asked whether “Abenomics” was a failure.
“Abenomics” consists of so-called “three arrows: Bold monetary easing; fiscal measures such as public works projects; and a growth strategy such as deregulation. It is based on a scenario that a weaker yen prompted by an easy monetary policy helps boost exports, resulting in improved corporate earnings. More exports supposedly help increase domestic production and push up gross domestic product (GDP).
Nevertheless, manufacturers, plagued by a strong yen in the past, struggled to increase their exports because they had already shifted their production overseas. Although share prices have risen on expectations of the effects of a weaker yen, import prices have soared to weigh on household finances and small- and medium-sized companies. Thus, the government has failed to reckon with the impact of a weak yen which it had anticipated.