Abenomics explained: what it means for you

When he was re-elected prime minister of Japan in December 2012, Shinzō Abe laid out a plan to end the country’s decades-long economic slump. His short term goals were to boost GDP and raise inflation to 2%. Long term, he hoped to stimulate competition and cement trade partnerships. But despite its successes, Abenomics is facing increasingly vocal opposition. Opinion in Japan is fiercely divided, so what do these policies mean for you?

How it works

Japan’s economy has fluctuated hugely since World War II. Post-1945, the country entered a so-called “miracle” era of growth; by the 1980s, Japan’s was the second-largest economy in the world. But in 1990, the stock market crashed and the economic bubble burst, sending the country into a period of deflation from which it hasn’t recovered.

Abe, who served as prime minister in 2006-07 before being re-elected, introduced a three-pronged set of policies to improve the economy. His methods were:

  • Printing more currency to reduce the yen’s value (quantitative easing).
  • Increasing government spending.
  • Structural and regulatory reforms designed to make Japan more competitive.

Although these policies have successfully devalued the yen, increased lending and boosted the stock market, Abenomics’ opponents believe that a lack of fiscal discipline means Japan is sliding into debt crisis.

What it means for you

Quantitative easing will have the biggest impact on international money transfer. Devaluing the yen makes it cheaper for people importing Japanese products, tourists and people sending money home from jobs abroad. But Japanese importers will suffer as their money won’t go as far. It’s had a negative impact on Japanese citizens too as everyday items become relatively more expensive.

Opponents of Abenomics are worried about fiscal stability. They say inflation will make the country’s vast debts more difficult to repay, and worry that it facilitates irresponsible spending which will eventually lead to a crisis. Public opinion is divided in Japan, with some people claiming Abenomics has left them much poorer.

But Abe isn’t worried yet, despite large losses due to expensive fuel imports and an export market that hasn’t performed as well as expected. The nuclear power industry is growing again following a shut-down after the 2011 Fukushima disaster, so fuel costs should decrease, driving down the cost of production of goods. Foreign commentators are tentatively confident that Japan’s fortunes are improving.

Why is India so keen on plastic currency?
Previous post
The top three international money transfer startups to know about
Next post
%d bloggers like this: