Abenomics and the Japanese Economy

While Japan prospered throughout the 1980s, it’s since become mired in deflation, with weak consumer spending and low growth. Japanese Prime Minister Shinzo Abe plans to implement new economic policies and jolt his recession-riddled country out of the deflationary malaise. Beina Xu of the Council on Foreign Relations analyzes the history of Japan’s economy and examines Abe’s grand Keynesian-inspired proposal, coined “Abenomics.” Abe’s plan, Xu reports, aims to take a three-pronged approach to reflate the economy through monetary, fiscal, and structural policies. Such dramatic economic restructuring is virtually unknown in Japan. The policies of the world’s third largest economy will have impact in the international arena, especially as export-led economies like Germany and China fight for low exchange rates to boost demand for their own domestic industries. Policies to promote inflation could also reduce value of Japan’s debt and stir nationalism, but may also offer an exit plan for the “zero interest rate liquidity trap” disrupting many economies. – YaleGlobal