Debating Abenomics

Abstract

This paper aims to outline and analyze the policy objectives and accomplishments of Abenomics, which has been in place for three years since the end of 2012 to restore the Japanese economy from its long-term recession. Abenomics is, in theory, a reflationist policy, and sets a specific target rate for inflation. The policy is essentially a strategy for growth, composed of the so-called three arrows, namely bold monetary easing, expanding government expenditure, and inducing private investment. Of the three, Abenomics places most emphasis on monetary easing, which was meant to reverse the economys deflation in a relatively short period of time. While the three years of Abenomics have been successful in raising the volume of corporate profits and asset prices, the aggregate demand figure—a composite of investment, consumption, and export levels—showed few changes, revealing the policys limitations in bringing about a solution to Japans long-term recession. Instead, the failure of this radical monetary policy may lead to a further breakdown of the Japanese economy.