The economic legacy of late Japanese Prime Minister Shinzo Abe is defined by a namesake strategy.
Under ‘Abenomics’, Abe, who was shot dead at an election campaign event on Friday, sought to revive Japan’s economy after more than two decades of stagnation following the collapse of an asset bubble in the early 20s. 1990s.
Abe’s strategy had three “arrows” aimed at reviving economic growth and raising wages: loose monetary policy, fiscal stimulus, and structural economic reforms.
Under the first two ‘arrows’, Abe, who served as prime minister from 2006-07 and 2012-20, presided over ultra-low interest rates and quantitative easing alongside tens of billions of dollars in spending for new infrastructure and cash distributions.
The Abenomics reform plan aimed to boost productivity by reducing red tape and corporate taxes, as well as to develop the country’s aging workforce by encouraging the participation of more women, seniors and immigrants.
“We should be looking to the future, rather than worrying about the present,” Abe said in a 2016 speech outlining his economic vision.
“Japan may be getting old. Japan may be losing its population. But these are incentives for us.
Mixed success
By most accounts, Abe, who resigned for the second time in 2020 citing health issues, was only partially successful in turning around the world’s third-largest economy.
During his tenure, economic growth resumed after the slump of the 1990s and 2000s, exports rose and unemployment fell to its lowest level in decades.
Between 2015 and 2017, Japan recorded eight consecutive quarters of positive growth – the longest streak in nearly 30 years.
But compared to the exhilarating decades of expansion that followed World War II and the performance of many of its peers, Japan’s economy has failed to impress.
During Abe’s nearly eight-year second term as prime minister (excluding 2020, when COVID-19 derailed the economy), real GDP growth averaged just 0, 9%, according to an analysis by economist Kaya Keiichi.
Abe’s ambitious goal of raising nominal GDP to 600 trillion yen by 2020 never materialized and remains unattained to this day.
In addition, inflation and wage growth have not lived up to expectations, which has dampened the economic gains made.
“While government policies can create an enabling environment for reform and innovation by market players to some extent, in order to actually increase labor productivity and increase investment in innovative technologies by businesses, more efforts for household and business self-reliance are also essential,” Min Joo Kang, senior economist for South Korea and Japan at ING, told Al Jazeera.
“In this regard, the improvement in the real economy has been limited. However, I think it was a semi-success insofar as it shielded the Japanese economy from a sharp downturn.
While Abe’s immediate successor and ally Yoshihide Suga has pledged to pursue Abenomics, current Prime Minister Fumio Kishida has sought to distance himself from the strategy, instead touting a more sensible ‘new capitalism’ the gap between rich and poor.
Abe last month called an economic policy paper drafted by politicians from his Liberal Democratic Party “silly” after the former leader deemed the proposals critical of his economic policy, Asahi Shimbun reported.
Jeffrey Halley, senior market analyst for Asia-Pacific at OANDA, said Abenomics had produced “mixed results.”
“The lack of will to implement the third arrow of economic and trade reform, as Japan fell back into entrenched ways, meant that the other arrows only really managed to keep the lights on during the 2010s” , Halley told Al Jazeera.
“Inflation is still non-existent, public debt is much higher, and Japan’s trade barriers and corporate governance remain more insurmountable than ever. The lack of progress was not because Abe got it strategically wrong, but rather because of his inability to overcome entrenched national interests and government inertia to fully embrace and execute all arrows.
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