Did Abe’s “three arrows” Save Japan?

In the 75 years after World War II, there were 45 prime ministers in Japan. The average term of office of each prime minister was only one year and eight months. On August 24, Shinzo Abe just surpassed his uncle Sato Rongzuo to become Japan’s “longest serving” prime minister. However, four days later, on August 28, Shinzo Abe announced that he officially resigned as Prime Minister due to physical reasons. What is the effect of his biggest economic heritage, abenomics? Will it wither with it? < / P > < p > since 2012, the greatest achievement of Abe’s second long-term governance is his “abenomics” with the brand of “three arrows”. These three arrows have different meanings in the three stages. < / P > < p > the first stage is from 2006 to 2007, which is one year after he took office for the first time in 2006. It starts with the history of his coming to power. In 1995, Abe was elected by Junichiro Koizumi as one of the core members of his presidential electoral college. As the direct family of Abe’s father, Junichiro Koizumi escorted Abe to a high level. In the presidential election of the Liberal Democratic Party on September 20, 2006, when Koizumi’s term of office expired, with the slogan of amending the constitution, reforming education, increasing taxes, improving finance, and continuing to promote Koizumi’s reform, Abe won ASO Taro and Tanaka were elected the 21st president of freedom. On September 26, Shinzo Abe was elected the 90th Prime Minister of Japan. Therefore, when he took office for the first time in 2006, “abenomics” was the continuation of the “Koizumi reform” line, and the “three arrows” were fiscal expenditure reduction, public investment reduction and continuation, trying to promote economic growth by easing regulation. < / P > < p > the second stage is from 2012 to 2015, that is, within three years of his second assumption of power. At this stage, “abenomics” has evolved into “three arrows 2.0 stage”, including positive and promising quantitative easing monetary policy, active expansion of government expenditure fiscal policy and reform and growth of private investment economic policy. Abe did not hesitate to amend the “Japanese Banking Law” for this purpose, and his determination to pull Japan’s economy out of the deflation quagmire and restart Japan’s economic prosperity through government reform is well known. < / P > < p > the first arrow: positive and promising monetary policy – real quantitative easing. The former governor of the Bank of Japan was replaced by Toshiko Kuroda and began to implement QQE. The monetary side continued to release water by a large margin, and the negative interest rate policy has been implemented since 2016, finally meeting the inflation targeting target and setting the target inflation rate at 2%. < / P > < p > the second arrow: the fiscal policy of active expansion – the increase of government expenditure. On the one hand, Abe seeks large-scale public investment. On January 11, 2013, Japan approved a total of $226.76 billion of government investment. On the other hand, by raising the consumption tax rate to make up for government revenue, Abe’s government increased to 8% from 5% in 2014. In addition, the consumption tax will be raised to 10% in 2019, which is also the second time that Abe raised the consumption tax rate during his administration. < / P > < p > the third arrow: changing the economic policy of growth — boosting private investment. Abe took the first step to take the slogan of “healthy and long-lived society” and take the industrialization of social security and welfare as the main means. Then he launched the Japanese version of “National Institute of medicine”, focusing on biomedical research and promoting the “development strategy of universal participation”, including retired elderly, unemployed people of school age, young people and housewives into the system to supplement the shortage of labor force In the middle. In addition, in 2013, Abe also released the second wave of “revitalization of private investment development strategy” to stimulate the development of high-tech and substantive industries. < / P > < p > the third stage is 2015-2020. Prime Minister Abe upgraded the “three arrows” during the third cabinet reform in October 2015. The first arrow is the economic stimulus plan; the second arrow is the birth support plan; the third arrow is the social security plan. In terms of specific measures and vision, Japan’s GDP is expected to increase to 600 trillion yen in 2020, and it plans to raise consumption tax. < / P > < p > only when abenomics constructs the internal ecological positive growth flywheel, can it realize the sustainable development of economy. At the end of 2013, when Abe took office again for one year, the average share price of Tokyo stock market set a new record, the unemployment rate dropped to 4%, and the number of foreign tourists visiting Japan exceeded 10 million, which started a good start. However, since 2014, “abenomics” has begun to turn from prosperity to decline, and the follow-up power is insufficient. The reason is that three arrows are only means. What abenomics needs to solve is the realistic dilemma of Japan’s long-term economic deflation and the deterioration of Japan’s population and structure. Abenomics tries to overcome deflation through ultra loose monetary policy and fiscal stimulus policy, and solve the problem of aging population and shrinking population in Japan through structural reform. However, real data show that abenomics has not yet seen any effect in boosting real GDP and inflation. < / P > < p > what is most criticized by abenomics is that Japan has a long way to go before the 2% inflation target, and it is hard to say that it has even got rid of deflation. Since March 2013, under the leadership of the then governor of the Bank of Japan, Akihiko Kuroda, who was appointed by Abe, the Bank of Japan has launched qualitative and quantitative easing policy, aiming to achieve 2% inflation within two years. In fact, this is the core content of the first arrow, which promotes the depreciation of the yen through a series of quantitative easing policies. In October 2014, the Bank of Japan implemented additional monetary easing, and in January 2016, it adopted a negative interest rate policy. However, the effect is not satisfactory. In Japan, both CPI inflation and wage growth do increase slightly, especially from 2015 to 2019, the year-on-year growth rates of core CPI and wage increase to about 0.5%. However, Japanese enterprises and the public are skeptical about the economic recovery, and their willingness to expand production and consume is low. They have a long way to go from the 2% inflation target, and even get rid of deflation. < / P > < p > secondly, although the unemployment rate in Japan has decreased, it shows the helplessness of changing the employment structure. The continuous improvement of Japan’s employment has always been the key supporting argument of abenomics and Abe himself. However, it is not difficult to observe the employment structure of Japan. The employment proportion of informal employees remains high, and there are some employment parts such as temporary workers, part-time workers and contract workers. According to the report of Japan’s Ministry of general affairs, as of October 1, 2017, Japan’s informal employees accounted for nearly 35%, which was only 18% in 1990, nearly doubling. Under the reality that “equal pay for equal work” can not be achieved, the unemployment rate remains at a low level, such as the latest data of 2.8% in June, but many employees complete one person’s work and receive one person’s salary in total. The income of employees has not increased, the consumption boost is even less, and the economic development lacks the pillar of domestic demand. < / P > < p > thirdly, although the Nikkei stock market rose significantly, the financial difficulties exacerbated its unsustainability. The effect of abenomics on Japanese stock market is obvious. Over the past eight years, the Nikkei 225 index has risen from about 10000 to about 23000, more than doubling. But to be specific, on the one hand, financial investment is constantly expanding, especially public investment, to stimulate the economy and the stock market to rise; on the other hand, the big “water release” of monetary policy, that is, the negative interest rate policy plus quantitative easing, is a completely non-traditional monetary policy. Japan relies on debt and monetary “water release” to prop up the economy and the stock market, and its strength is unprecedented There is no precedent. < / P > < p > finally, although Abe’s administration created the longest economic cycle in history, the economic growth rate was sluggish and was beaten back to its original shape by the epidemic. One of Abe’s greatest achievements is to create a 71 month long economic boom. The Cabinet Office of Japan has determined that the current round of economic expansion period lasts from December 2012 to October 2018, second only to the 73 month boom of yizang ran. However, the real GDP growth rate of this round is only 1.1%, which is the lowest in the top five business cycles. Moreover, if we look at the size of GDP in dollar terms, Japan’s economy is still stagnant. In 2012, Japan’s GDP was US $6.203 trillion, while in 2019, it was only US $5.082 trillion, with a decrease of 20% instead of an increase. The housing leak happened every night, and the epidemic hit Japan’s weak economy. In the second quarter of 2020, Japan’s real GDP fell at an annual rate of 27.8%, the largest decline since the Second World War. It is optimistic that Japan’s economy will not return to its pre epidemic level in the past two years. < / P > < p > looking forward to the post Abe era, abenomics may continue in the short term, but in the long term, the probability of abenomics will change greatly with the new Japanese Prime Minister. < / P > < p > in the short term, abenomics is still there. According to the constitution of Japan, the prime minister is usually the leader of the majority party. At present, Abe’s LDP is the party that holds the majority of seats in Japan’s parliament, so the successor of prime minister will be born in the LDP. Looking forward to the post Abe era, the successors come from within the LDP, but there are many candidates, including Chief Cabinet Secretary Kan Yiwei, Deputy Prime Minister Taro Aso, former defense minister Shi pomao, former foreign minister Wenxiong Kishida and Defense Minister Taro Kono. Not only from the party’s inheritance, the short-term epidemic reality will also continue for abenomics. Kan said on August 27 that the main goal of the Japanese government in the short term will still be to “stop the cliff like decline of the macro economy.”. First, the positioning of abenomics’ economic stimulus is wrong, and the tourism industry is unable to recover. Take the Tokyo Olympic Games originally scheduled to be held this summer as an example. It was originally a grand event aimed at activating Japan’s economy, but it was forced to be postponed due to the uncertain factors of the epidemic situation. According to an online survey of 12857 companies conducted by Tokyo business research company, percent of people hope to cancel the Tokyo Olympic Games, and 25.8 percent believe that sports events should be postponed again, hoping to realize the economic recovery of the Olympic Games and tourism Sue, it’s even more difficult. < / P > < p > Second, abenomics promotes imports and exports through the depreciation of the yen by taking advantage of its neighbors, which is an almost impossible task before the global epidemic is over and populism is rising. Third, the internal circulation of abenomics is not a long-term solution. For the “arrow” of monetary policy, the monetary policy box of the Bank of Japan has almost run out of ammunition. For the “arrow” of fiscal policy, the debt level of the Japanese government is the highest in the world. However, the large-scale government expenditure is constrained by the high leverage rate of the government and the huge amount of debt. In addition, as the new three arrows, economic stimulus, birth support and social security are all based on the premise of substantial economic growth. In the current situation that the cake has not been enlarged, how to carry out the redistribution of birth support and social security is even more weak. If the plight of negative population growth in Japan continues for a long time, the deflation of Japanese economy may return.