Abenomics Fails Japan Not Benefitting from Weak Yen

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.

via Mainichi

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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 has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. 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