Japan Abenomics

After decades of economic stagnation that started in 1990 and lasted for more than a decade and resulted in a slow GDP growth that was unable to absorb the increasing unemployment rate and the different interventions during the years was unable lift the GDP, like when The Japanese government raised consumption tax rates from 3% to 5% in 1997, which worsened the recession and deflated the economy. The lost decade was followed by the 2007 global recession during which Japan suffered a 0.7% loss in real GDP in 2008 followed by a severe 5.2% loss in 2009. Also exports decrease by 27% from 2008 to 2009, a 27% reduction.

Now it was obvious that something needs to be done. And the answer was with MR Abe shinzo who was elected in December 2012, who promised to restore the Japanese economy with his bold measure, so called Abenomics which consists of a massive fiscal stimulus, an 0aggressive monetary easing for BOJ and a structural reform to boost Japan’s competitiveness.

Specific policies include:

 inflation targeting at a 2% annual rate

 correction of the excessive yen appreciation

 setting negative interest rates

 radical quantitative easing

 expansion of public investment

 buying operations of construction bonds by Bank of Japan (BOJ)

 and revision of the Bank of Japan Act

1st Monetary easing:

Printing money to push consumer spending and weaken the yen, thus boosting exports

April 2013, the BoJ introduced its bold “Quantitative and Qualitative Monetary Easing” policy, which aims to double Japan’s monetary base over two years.

April that it would boost the money supply, by 60 trillion yen to 70 trillion yen ($589 billion to $688 billion), in a bid to reach 2% inflation in two years

Exports

The monetary policy of Bank of Japan was able to devaluate the Yen from ¥ 80/$ to ¥99/$ in three month from November 1,2012 to March 1, 2013. A devalued yen will make the Japanese exports price competitive in the world market which was the...