Abenomics Arrows Have Not Hit the Mark

Japan just cannot seem to get its economy growing. The latest drop in GDP marks the country’s fourth descent into recession in five years.

It is a blow to the prime minister, Shinzō Abe, who came to power in 2012 vowing to stamp out deflation and bolster a flagging economy with his so-called Abenomics policies.

Two recessions on from his electoral victory, it is becoming clear that for all the excitement around Abenomics when it launched, the plan is doing little in practice.

The idea was that three arrows would tackle chronic problems in the world’s third largest economy. They were looser monetary policy from the Bank of Japan (BoJ), a fiscal boost from increased spending on public works and sweeping structural reform to make the economy more productive and competitive.

What Japan’s policymakers are learning is that if the three “arrows” of Abenomics are to work at all, they have to work together.

Using the first two arrows of easier money and more spending to buy time and ease the path for the third, more difficult, arrow of reform has failed. By holding back on tackling longstanding problems such as sluggish private sector investment and labour shortages, Abe and his government have dampened the effectiveness of the other two arrows.

via The Guardian

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza