What is Abenomics and Is It Working?

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Presentation transcript:

What is Abenomics and Is It Working? Day_4_Group_4 Ching-Hung, Yu-Hsin, Powen, Minh-Phuong

CONTENT What is Abenomics ? The Three Arrows of Abenomics Effects of Abenomics Bright Future? Conclusion

What is Abenomics ? Abenomics refers to the economic policies advocated by Shinzo 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 fiscal stimulus, monetary easing and structural reform.

The Three Arrows of Abenomics Bold monetary policy Printing money and easing monetary policy to jolt consumer spending and weaken the yen, thus boosting exports. Flexible fiscal policy Spending money by revving up fiscal stimulus. Structural reform Economic growth strategies to encourage private investment.

The First Two Arrows implemented in the first weeks of Abe's government. Including a hefty stimulus package worth of 20.2 trillion yen 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).

The Third Arrow Structure Reform measures First attempt in June 2013 is fell flat Second attempt in June 2014 measures Industry liberalization and Increased workforce diversity government pension fund investments setting new guidelines for investment by the government pension fund (GPIF); increasing permitted allocations to equities corporate governance: mandatory compliance with a “Corporate Governance Code” tax policies: cut the corporate tax to below 30% from the current level of over 35% next year There are two reasons for thinking that this time it will hit the target. First, the country has reached a point at which almost all Japanese realise that reform of some sort is needed. Second, Mr Abe is at last pursuing schemes of such breadth that they touch on nearly every area of the economy that demands change.

Effects of Abenomics Exchange rate 25% lower against the U.S. dollar in the second quarter of 2013 compared to the same period in 2012 XE Currency Chart

Effects of Abenomics (cont.) Stock market By May 2013, the stock market had risen by 55%

Effects of Abenomics (cont.) GDP growth

Effects of Abenomics(cont.) unemployment rate The unemployment rate in Japan fell to 3.6%.

Effects of Abenomics (cont.) Inflation rate (YoY)

Bright future? Inflation v. third arrow Tom Orlik of Bloomberg

Bright future? Too much public debt

Conclusion Abenomics seems working Long term performance not clear Japanese economy is gradually healing and growing modestly Long term performance not clear Whether the political will to undergo the structural reforms can be sustainable?