Will Abe­nomics be ex­ported?

Financial Mirror (Cyprus) - - FRONT PAGE -

As the global econ­omy seems to be bury­ing the down days of its de­pres­sion and grow­ing slowly but surely, Ja­pan proves to be an in­ter­est­ing il­lus­tra­tion of eco­nomic progress. In some ways it seems to func­tion as an anom­aly but its cur­rent fis­cal state could be ex­actly where the rest of the world is head­ing.

By some mea­sures, Abe­nomics, the fa­mous se­ries of mon­e­tary stim­u­lus poli­cies in­tro­duced by Prime Min­is­ter Shinzo Abe, is work­ing like magic. The gross do­mes­tic prod­uct is up, un­em­ploy­ment is down, and ex­ports are en­joy­ing a re­bound thanks to de­mand from the U.S. and Asia. The Ja­panese stock mar­ket has re­ceived a boost and the coun­try is now of­fi­cially out of re­ces­sion… just about.

Not all the in­di­ca­tors are so pos­i­tive. Ac­cord­ing to opin­ion polls in De­cem­ber, only 7% of the public an­tic­i­pated that the econ­omy would im­prove in 2015. A re­port last week re­vealed that house­hold spend­ing fell more than ex­pected, down for the tenth con­sec­u­tive month, while Jan­uary re­tail sales were down for the first time in seven months. The Bank of Ja­pan is hop­ing that mon­e­tary print­ing will raise con­fi­dence and prompt higher spend­ing. How­ever, skep­tics point out that wages still haven’t risen enough to com­pen­sate for the in­crease in sales tax last April. There’s also hope that low oil prices will ease the pres­sure on con­sumers, but it is pos­si­ble that the benefits of this will not be ap­par­ent for sev­eral months, and that con­sumers will choose to save, not spend, if they still lack con­fi­dence in the eco­nomic out­look.

Amid th­ese seem­ingly mixed sig­nals, the real de­bate is whether Abe’s poli­cies will cre­ate real and sus­tain­able progress: the econ­omy has crawled out of re­ces­sion and is be­gin­ning to show signs of life, but can this growth now pick up pace?

Ja­pan is fight­ing against the odds with its stag­nat­ing pop­u­la­tion and zero-per­cent in­ter­est rate pol­icy, and that’s ex­actly why the Abe­nomics model of­fers such an in­ter­est­ing anal­y­sis for the West. Euro­pean Cen­tral Banks have avoided com­plete dis­as­ter but are still fig­ur­ing out how much mon­e­tary stim­u­lus is the right amount, while their coun­tries face the fu­ture chal­lenge of aging pop­u­la­tions. If Ja­pan’s poli­cies can ef­fec­tively re­vive the econ­omy from its multi-decade slug­gish­ness, then maybe we should be tak­ing note and con­sid­er­ing sim­i­lar ac­tion.

Will the shaky ground on which the Ja­panese eco­nomic re­cov­ery stands soon be­come more sta­ble? It is cer­tainly easy to en­vis­age the coun­try’s fu­ture growth but we’ll have to wait pa­tiently to see if that’s the case in prac­tice. Abe will cer­tainly be hop­ing that the cur­rent es­cape from re­ces­sion is not merely tem­po­rary, and that the com­ing months will bring higher ex­ports and wages, which in turn will give public and in­vestor con­fi­dence a must needed boost.

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