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The name "Abenomics" refers to a series of economic measures that former Japanese Prime Minister Shinzo Abe put into place between 2012 and 2020. Abenomics' primary objectives were to end the long-running deflation in Japan, accelerate economic growth, and reestablish fiscal soundness. Three "arrows" made up Abenomics: fiscal stimulus, monetary easing, and structural reforms.
Monetary easing, which aimed to boost the money supply and raise inflation expectations, was the first arrow of Abenomics. In order to increase its asset purchases, the Bank of Japan (BOJ) declared a 2% inflation target and introduced a number of initiatives, including buying corporate and government bonds as well as exchange-traded funds and real estate investment trusts. The BOJ also implemented a negative interest rate policy in 2016, which required some commercial banks to pay interest in order to deposit their surplus reserves with the central bank.
The second arrow of Abenomics was the fiscal stimulus, which aimed to support domestic demand and public investment. A number of supplemental budgets were introduced by the Japanese government, and expenditures on infrastructure, social security, education, and defense were all raised. However, the government twice delayed plans to raise the consumption tax from 8% to 10% before finally enacting them in 2019. These delays occurred in 2015 and 2017, respectively.
The third arrow of Abenomics was structural reforms, which aimed to enhance the productivity and competitiveness of the Japanese economy. The administration promoted a number of efforts to support corporate governance, innovation, trade liberalization, and the empowerment of women. The Trans-Pacific Partnership (TPP) agreement was signed in 2016, the Corporate Governance Code was revised in 2018, and the Work Style Reform Law was passed in 2019. These were some of the noteworthy accomplishments of this arrow.
Abenomics has had a conflicting effect on the Japanese economy. Abenomics was successful in reversing the deflation and accelerating nominal GDP growth, on the one hand. The stock market rose to its highest level since 1991, and the jobless rate decreased to its lowest point since 1992. Nonetheless, Abenomics' 2% inflation target was not met, and real GDP growth remained weak. In advanced economies, the public debt-to-GDP ratio increased to over 230%, the highest level. The COVID-19 epidemic also delivered Abenomics a serious setback by precipitating a dramatic decline in economic output and an increase in fiscal deficits.
Abe's resignation due to health problems in September 2020 marked the end of Abenomics. Yoshihide Suga, who succeeded Abe, vowed to uphold his ideas and introduced "Suganomics," his own take on Abenomics. Suga, however, had to deal with a number of difficulties, including controlling the pandemic, recovering the economy, and holding the postponed Tokyo Olympics. Suga also declared his desire to leave office in September 2021 after losing favor from the public due to how he handled the COVID-19 problem. As Japan gets ready for a fresh leadership election, the future of Abenomics is still unclear.
