Shinzo Abe’s three arrows look to have missed their target. Can Japan get back on track?
For a country that specialises in false dawns this all looks worryingly familiar.
Digging itself out of a 20-year deflationary malaise was never going to be easy.
Where next for Abenomics?
by Tom Stevenson
https://www.fidelity.co.uk/investor/markets-insights/daily-investment-insight/details.page?whereParameter=daily-investment-insight/japan280814
The excitement that surrounded the election of Shinzo Abe as Prime Minister of Japan in December 2012 seems a long time ago. The big stock market rally of his first year in office has hit the buffers in the second 12 months. For a country that specialises in false dawns this all looks worryingly familiar.
Abe was elected on the promise of a three-pronged attack on Japan’s two decades of deflationary slump. He said he would boost the economy via monetary stimulus, more government spending and structural economic reforms. Investors bought the story initially and Japan was a stellar performer in 2013. But 2014 has painted a very different picture – they have realized that the first two arrows have failed to re-ignite growth as expected.
The significance of the first two arrows failing to hit their targets is that the third arrow, always the most difficult, now looks less likely to succeed. Key to pushing through the necessary economic reforms in Japan is Shinzo Abe’s continued popular support. In his first year, that was rock solid; today it is much shakier.
Digging itself out of a 20-year deflationary malaise was never going to be easy.