Abenomics – What it is, definition and concept

Abenomics is a word used to describe the monetary policy adopted by Japan during the term of Prime Minister of Japan, Shinzo Abe. The term comes from the union of the words Abe, which is the minister’s surname, and economics, which is economics.

We are literally talking about Abe’s economy, that is, Prime Minister Shinzo Abe’s way of doing economy.

And it is that, even in other countries, this type of expressions have been frequently used by the economic world to indicate the way in which numerous leaders managed the economy.

Among the best known, we can see the example of the President of the United States Ronald Reagan, coining his policies as “Reaganomics.” We also have the example of US President Bill Clinton, to whom the term “Clintonomics” was attributed.

That said, we must know that the term Abenomics refers to the reforms that Japan promoted in relation to economic policy in 2012, when the winner of the elections was Shinzo Abe. These policies were based on increasing the money supply and practicing what we know as “monetary expansion”, applying fiscal stimuli and, finally, on the application of structural reforms that the Japanese economy had to apply and that it had not applied.

Why Abenomics?

Since 1997, Japan’s economy was in a severe recession from which it would be difficult to get out.

Certain actions carried out by previous governments caused economic activity and, therefore, GDP to fall significantly. While GDP grew at a rate close to 3% in 2016, in 2017 it would fall into a recession from which it would never emerge again.

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Hence we use the term “Japanization” to speak of the case of Japan. Being a strange case, since it is an economy that is not doing badly, but that sees how its GDP was stagnant and cannot grow.

To stimulate the economy, and after winning the 2012 elections, Prime Minister Shinzo Abe promoted various policies that tried to restore the lost dynamism to GDP.

This ultra-expansive economic policy strategy, which is unprecedented in this country, was based on three fundamental pillars.

The first, a monetary expansion never done before, added to the establishment of an inflation target (2%). The second, greater fiscal flexibility, understood as the ability to combine fiscal consolidation with measures to support growth. Finally and thirdly, the application of structural reforms in the medium and long term.

Abenomics Results

At Economipedia, we do not usually measure the economic policies applied by the leaders until there are valid conclusions that are generally accepted by economists.

And in the case of Abenomics, the discrepancies between colleagues tell us that it is still too early to see the effects of these policies in the Japanese country.

However, there are many experts who believe that the stable growth that Japan has experienced in recent times may be due, in part, to Abenomics. However, there are those who think that these policies have had no effect on the Japanese economy, which has seen its imbalances widen.

And it is that, be that as it may, it is still too early to see the effects, which is why, to date, the discussion facing monetary pigeons and hawks all over the planet.

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End of Abenomics

In 2020, the Japanese prime minister announced that he was leaving office.

Specifically, on August 28, 2020, he announced his resignation for health reasons, choosing his successor in an indirect election on September 14.

With the departure of Shinzo Abe, Abenomics is frozen and awaiting whether the new prime minister will launch a new monetary policy strategy, or if he will continue with that of his predecessor, which we are analyzing here: Abenomics.

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