Abenomics: A Work in Progress After Five Years

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Japanese voters returned Prime Minister Shinzō Abe’s Liberal Democratic Party to power for a third term with over 60% of the seats in the lower house of parliament on Sunday October 22.  The vote was an endorsement of Abe’s “three arrows” approach to reviving Japan’s economy though monetary policy, fiscal stimulus and structural reform.  Over the past five years Abe’s policies have borne some fruit.  Nominal GDP has had its first sustained period of growth since the mid-1990s (Figure 1) – its best performance since Japan’s financial crisis began in 1990; and unemployment rates have fallen to levels not seen since 1994 (Figure 2).  Abe’s third mandate appears to be aimed more at constitutional reforms that will enable Japan, the world’s third largest economy, to rebuild its military and play a more active role in regional security matters, including standing up to China and North Korea.  The nation appears set for economic-policy continuity, including continuing quantitative easing by the Bank of Japan (BoJ). 

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