Japan’s economic policy under Prime Minister Shinzo Abe is being referred to as “Abenomics”
Japan’s economic policy under Prime Minister Shinzo Abe which is being referred to as “Abenomics”, the Government attaches the highest priority to exiting from prolonged deflation partly accompanied by the appreciation of the yen, and revitalizing the economy. Japan’s latest GDP figures for the first quarter of 2013 announced on 16 May featured a net growth of 0.9%, or 3.5 % in annual terms from the same quarter last year, with the contribution of domestic growth accounting for 0.5% and that of foreign demands accounting for 0.4%.
Basic Framework of Abenomics
The distinctive feature of Abenomics is to develop and implement a three-pronged strategy consisting of aggressive monetary policy, flexible fiscal policy, and a growth strategy that encourages private-sector investment. By implementing these measures simultaneously, Japan will aim at reversing the long-lasting trend of a shrinking economy and realizing a sustained economic growth with more job creation and higher incomes.
Emergency Economic Measures
As the first step, Japan adopted the Emergency Economic Measures for The Revitalization of the Japanese Economy on 11 January 2013. In accordance with these measures, Japan is implementing public works for accelerating the post-quake reconstruction and strengthening the nation’s infrastructure to improve disaster prevention and mitigation. In addition, Japan is adopting measures that will contribute to sustained growth through promoting business investment and innovation and strengthening human capital development. The fiscal stimulus in these measures is 1.3 trillion yen (or about 119 billion rands). We expect the emergency measures will boost real GDP by around 2% and generate about 600,000 jobs.
Aggressive Monetary Policy
The Government and the Bank of Japan (BOJ) announced the joint statement on overcoming deflation and achieving sustainable economic growth on 22 January 2013. The BOJ set the price stability target at 2 percent in terms of the year-on-year rate of change in the consumer price index. At the Monetary Policy Meeting of Policy Board of the BOJ on 4 April 2013, the first meeting under the new BOJ Governor Haruhiko
Kuroda, it decided, inter alia, to achieve the 2% inflation target “at the earliest possible time, with the time horizon of about two years”. For this purpose, it will double the monetary base and the amount of Japanese government bonds (JGBs) outstanding as well as exchange-traded funds (ETFs) in two years, and more than double the average remaining maturity of JGBs. The BOJ will continue with the quantitative and qualitative monetary easing as long as necessary.
Over the mid- and long-term, Japan will take measures to strengthen the competitiveness of the Japanese economy, to overcome energy constraints, and to enhance the innovation platform based on a well-defined growth strategy, while at the same time accelerating the removal of domestic institutional obstacles, including regulation. The past growth strategies tended to fail to raise growth because business investment did not respond in the absence of a clear commitment from government to the implementation of the growth strategies. Taking into account these lessons, Japan is strongly committed to a growth strategy, which will utilize all the available policy tools including fiscal, regulatory, and monetary measures. Japan plans to adopt a new growth strategy in the middle of the year, though some part of the strategy will be front-loaded even before the finalization.
With regard to external economic policies, Japan will facilitate the expansion of Japanese businesses in overseas markets, further promote high-level economic partnerships, implement measures to secure energy and food, and encourage tourism and internal investment. One notable progress in this regard was the decision to participate in the negotiations on the Trans-Pacific Partnership on 15 March 2013. In addition, the 5th Tokyo International Conference on African Development (TICAD V) will be held on 1-3 June in Yokohama.
As for fiscal policy, Japan will manage the short-term fiscal policy in a timely and flexible manner, while we note the importance of firmly expressing the political will to restore fiscal balance over the mid- and long-term. Japan also considers it is necessary to stick to the current target of fiscal consolidation, which aims to cut the primary deficit, at the level of 2010, of the central and local governments in half by FY2015 and to achieve a surplus in the primary balance by FY2020. We will take a step towards fiscal consolidation from the FY2013’s budget.
The Japanese economy has been facing difficult challenges that the rest of the world has not yet experienced, such as the need to overcome deflation and coping with a falling birth rate and aging population. Japan intends to contribute on a worldwide level by working to solve these issues ahead of other nations.
Mr. Yutaka Yoshizawa
Ambassador of Japan in South Africa