Abenomics–the “new economic policy” in Japan is failing badly. It is a policy of inflation targeting, quantitative easing, government spending and higher taxes. Initially, it seemed to work in that the Japanese stock market rose significantly. However more recent reports find the real economy still stagnating and shrinking. The latest reports indicating the impact of the recent increase in the sales tax reducing production, consumption, and investment.
Japan is facing a crucial period as the government presses ahead with its much-ballyhooed Abenomics revival strategy.
The country has been mired in a malaise brought on by falling prices and a strong yen for years. But the economy’s prospects have brightened since Prime Minister Shinzo Abe announced fresh spending by the government and encouraged the central bank to unleash a wave of asset purchases.
Under his leadership, the yen has fallen sharply and stocks have risen dramatically. The IMF has endorsed the plan and Japan has largely avoided charges of currency manipulation.
Related: Japan debt tops 1 quadrillion yen
But the third pillar of the Abenomics plan — structural reforms — has been tougher to implement.
Abe’s government has proposed reforms that would make the labor market more flexible, encourage immigration, bring nuclear power plants back online and draw more Japanese women into the workforce.
Many of those proposals have foundered, or have been slow to develop.
Look for a new Mises Weekends show this Friday, with our guest Mark Abela in Tokyo discussing failed Abenomics and Japanese monetary policy- ed.
HT: Mish’s GETA