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What is Abenomics and Is It Working?

What is Abenomics and Is It Working?. Day_4_Group_4 Ching-Hung, Yu-Hsin, Powen, Minh-Phuong. CONTENT. What is Abenomics ? The Three Arrows of Abenomics Effects of Abenomics Bright Future? Conclusion. What is Abenomics ?.

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What is Abenomics and Is It Working?

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  1. What is Abenomics and Is It Working? Day_4_Group_4 Ching-Hung, Yu-Hsin, Powen, Minh-Phuong

  2. CONTENT • What is Abenomics ? • The Three Arrows of Abenomics • Effects of Abenomics • Bright Future? • Conclusion

  3. What is Abenomics ? • Abenomics refers to the economic policies advocated by Shinzo Abe since the December 2012 general election, which elected Abe to his second term as Prime Minister of Japan. • Abenomics is based upon "three arrows" of fiscal stimulus, monetary easing and structural reform.

  4. The Three Arrows of Abenomics • Bold monetary policy • Printing money and easing monetary policy to jolt consumer spending and weaken the yen, thus boosting exports. • Flexible fiscal policy • Spending money by revving up fiscal stimulus. • Structural reform • Economic growth strategies to encourage private investment.

  5. The First Two Arrows • implemented in the first weeks of Abe's government. • Including a hefty stimulus package worth of 20.2 trillion yen • Specific policies include : • inflation targeting at a 2% annual rate, • correction of the excessive yen appreciation, • setting negative interest rates, • radical quantitative easing, • expansion of public investment, • buying operations of construction bonds by Bank of Japan (BOJ).

  6. The Third Arrow • Structure Reform • First attempt in June 2013 is fell flat • Second attempt in June 2014 • measures • Industry liberalization and Increased workforce diversity • government pension fund investments • setting new guidelines for investment by the government pension fund (GPIF); increasing permitted allocations to equities • corporate governance: mandatory compliance with a “Corporate Governance Code” • tax policies: cut the corporate tax to below 30% from the current level of over 35% next year

  7. Effects of Abenomics Exchange rate 25% lower against the U.S. dollar in the second quarter of 2013 compared to the same period in 2012 XE Currency Chart

  8. Effects of Abenomics (cont.) • Stock market • By May 2013, the stock market had risen by 55%

  9. Effects of Abenomics (cont.) GDP growth

  10. Effects of Abenomics(cont.) • unemployment rate • The unemployment rate in Japan fell to 3.6%.

  11. Effects of Abenomics (cont.) • Inflation rate (YoY)

  12. Bright future? Inflation v. third arrow Tom Orlik of Bloomberg

  13. Bright future? Too much public debt

  14. Conclusion • Abenomics seems working • Japanese economy is gradually healing and growing modestly • Long term performance not clear • Whether the political will to undergo the structural reforms can be sustainable?

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