Abenomics

Abenomics (アベノミクス, 安倍ノミクス, Abenomikusu) refers to the economic policies advocated by Shinzō Abe since the December 2012 general election, which elected Abe to his second term as Prime Minister of Japan. Abenomics is based upon 'three arrows' of monetary easing, fiscal stimulus and structural reforms. The Economist characterized the program as a 'mix of reflation, government spending and a growth strategy designed to jolt the economy out of suspended animation that has gripped it for more than two decades'. Abenomics (アベノミクス, 安倍ノミクス, Abenomikusu) refers to the economic policies advocated by Shinzō Abe since the December 2012 general election, which elected Abe to his second term as Prime Minister of Japan. Abenomics is based upon 'three arrows' of monetary easing, fiscal stimulus and structural reforms. The Economist characterized the program as a 'mix of reflation, government spending and a growth strategy designed to jolt the economy out of suspended animation that has gripped it for more than two decades'. The term 'Abenomics' is a portmanteau of Abe and economics, and follows previous political neologisms for economic policies linked to specific leaders, such as Reaganomics, Clintonomics and Rogernomics. The Japanese government raised consumption tax rates from 3% to 5% in 1997, which worsened the recession and deflated the economy. The government raised the consumption tax in 1997 for the purpose of balancing its budget, and then the government revenue decreased by 4.5 trillion yen because consumption stumbled. The country recorded a GDP growth rate of 3 percent in 1996, but after the tax hike the economy sank into recession. The nominal GDP growth rate was below zero for most of the 5 years after the tax hike. Japan's averaged annual wages grew during 1992-1997, but the wages started to decrease after the consumption tax hike came into effect in 1997. After 1997, the wages decreased faster than the nominal GDP. In 2012, the Diet of Japan under previous Prime Minister Yoshihiko Noda passed a bill to increase the consumption tax rate to 8% in 2014 and 10% in 2015 in order to balance the national budget; this tax hike was expected to further discourage consumption. During the global economic recession, Japan suffered a 0.7% loss in real GDP in 2008 followed by a severe 5.2% loss in 2009. In contrast, the data for world real GDP growth was a 3.1% hike in 2008 followed by a 0.7% loss in 2009. Exports from Japan shrank from 746.5 billion in U.S. dollars to 545.3 billion in U.S. dollars from 2008 to 2009, a 27% reduction. By 2013, nominal GDP in Japan was at the same level as 1991 while the Nikkei 225 stock market index was at a third of its peak. Abe's economic policy is also related to the rise of China as an economic and political power. Abe's supporters drew explicit parallels between Abenomics and the Meiji era program of fukoku kyohei (enrich the country, strengthen the army). In addition to providing a stronger counterweight to China in the Asia-Pacific region, strengthening the Japanese economy is also intended to make Japan less reliant on the United States for defense.