“Abenomics” will not be able to achieve the two percent inflation target in Japan, Eisuke Sakakibara, former vice finance minister of Japan told CNBC on Friday, referring to Prime Minister Shinzo Abe’s combination of ultra-loose monetary policy and fiscal stimulus.
But according to Sakakibara structural deflation in the world’s third largest economy is largely a result of the integration between the Japanese and Chinese economies and hence near impossible to move away from.
“Cheap Chinese goods come into Japan and push down the prices. And a lot of Japanese companies go to China to manufacture goods — so it’s not going to change,” said Sakakibara, who is currently a professor at Aoyama-Gakuin University in Tokyo.
Sakakibara, however, is more positive on the prospects for Abe’s policies to lift growth in the economy.
“We may able to get something like a 2 to 2.5 percent growth rate in real GDP [gross domestic product], this would be the year of recovery,” he added. The economy expanded 0.2 percent in the final three months of 2012, after contracting for two consecutive quarters from April through September.
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