1. Group3 Day4 Shun-Yi LI Yi-Ping CHEN

2. Background Introduction Despite years of near-zero interest rates, Japan has suffered chronic deflation over the two decades since the bursting of its real estate bubble in the late 1980s. Despite years of near-zero interest rates, Japan has suffered chronic deflation over the two decades since the bursting of its real estate bubble in the late 1980s. The Japanese government raised value added tax rates from 3% to 5% in 1997, which worsened the recession and deflated the economy. The nominal GDP growth rate was below zero for most of the 5 years after the tax hike. The Japanese government raised value added tax rates from 3% to 5% in 1997, which worsened the recession and deflated the economy. The nominal GDP growth rate was below zero for most of the 5 years after the tax hike.value added taxvalue added tax So existing policies do not work. Just worse. So existing policies do not work. Just worse.

3. GDP growth before Abenomics

4. CPI YoY before Abenomics

5. Defination of Abenomics Abenomics(December 2012) refers to an aggressive set of monetary and fiscal policies, combined with structural reforms, geared toward pulling Japan out of its decades-long deflationary slump. Abenomics(December 2012) refers to an aggressive set of monetary and fiscal policies, combined with structural reforms, geared toward pulling Japan out of its decades-long deflationary slump.

6. Abenomics have three arrows The BoJ will spend 117 billion dollars on public work. Agricultural Health care Energy market Labor market Pilot initiatives

12. Significant effect of 1 st arrow In early 2013, soon after Mr Abe took office, the central bank duly launched a radical programme of quantitative easing.

13. Significant effect of 1 st arrow CPI shows inflation.

14. Significant effect of 1 st arrow The stock market soared.

15. Significant effect of 1 st arrow

16. Will it work in the long term? GDP growth

17. Some concerns from IMF

18. Concerns inside Japan: 1 st arrow Mr. Kuroda (central-bank governor) wanted the government to stick with the plan to raise the consumption tax to 10. But soon after the central bank’s action, Mr. Abe postponed the rise anyway until April 2017, arguing that the economy could not bear it. Mr. Kuroda is making it clear that he does not believe Mr. Abe is trying hard enough to bring the deficit down. Mr. Kuroda promised to push inflation up to 2%. The Bank of Japan may not be doing enough to achieve this. Prices are at a standstill. Mr. Abe now appears to be undermining Mr. Kuroda’s ability to reach it.

19. Concerns inside Japan: 2 nd arrow The main point of contention is fiscal policy with a primary budget deficit of 6.6% of GDP.. Even if the economy grows by 3% in nominal terms in each of the next five years—an optimistic assumption—the government says it will need to find an extra ¥9 trillion to balance the budget, before interest payments, by 2020 as planned.

21. Thank you.