Looking Back on “Abenomics” and Japan’s Economic Trends in the “Post-Abe Era”

  After Shinzo Abe became the prime minister of Japan again in December 2012, he launched “Abenomics” focusing on stimulating economic growth and getting rid of deflation. Since then, “Abenomics” has continued to expand. Abe announced his resignation in August 2020, which lasted nearly Eight years. During this period, Japan experienced the second longest economic recovery period after the war, which lasted for 71 months. Its economic policies also produced certain positive effects on Japan’s stock price, exchange rate, employment, and foreign economic and trade relations, but it also left many problems. In the context of the new crown epidemic in Japan and the postponement of the Tokyo Olympics, the resignation of the prime minister will inevitably have multiple impacts. What will happen to the Japanese economy in the “post-Abe era” has also become a focus of domestic attention.
  The main policy, “Abe economics”
  As its name implies, “abenomics” has a distinctive personal touch, is Abe policy Ren Shiqiang potential flagship. Starting with the “three arrows” of “bold monetary policy,” “flexible fiscal policy,” and “growth strategy to stimulate private investment,” the Abe government has successively introduced a series of economic policies. In January 2013, the Cabinet Office of Japan, the Ministry of Finance and the Bank of Japan issued a joint statement, clarifying the inflation target of a 2% increase in consumer prices. In April of the same year, the Bank of Japan’s “quantitative and qualitative financial easing policy” followed closely. The main contents included expanding the base money supply, doubling the supply within two years, increasing the purchase of treasury bonds and risky assets, and extending treasury bond holdings. During this period, the interest on medium and long-term loans was reduced and investment was promoted. This policy is also known as the “different dimensional easing policy.” In June, the Japanese government issued the “Japan Rejuvenation Strategy”, emphasizing industrial revitalization, market development and expansion of the international market, and decided to revise the strategy every year thereafter. In December 2013 and December 2014, supported by central and local fiscal expenditures, the Japanese government launched economic stimulus policies totaling 18.6 trillion yen and 3.5 trillion yen respectively. At this point, the first-stage policy combination of “Abenomics” has basically been launched.
  ”Abenomics” achieved remarkable results in the early stage, and Japan’s GDP, prices and employment have all improved. However, after the consumption tax rate was raised from 5% to 8% in April 2014, the momentum for the improvement of the Japanese economy has significantly weakened. In September 2015, Abe put forward the goal of “100 million total active society” and showed the “three new arrows”, “Abenomics” entered the second stage. The “new three arrows” are “a powerful economy that breeds hope”, “childcare support for dreams”, and “reassuring social security”, corresponding to the “post-war highest nominal GDP of 600 trillion yen” and “total fertility rate.” 1.8″ and the policy goal of “work and caring for the elderly can be balanced”. In January 2016, the Bank of Japan introduced a negative interest rate policy, also known as the “quantification and qualitative financial easing policy of negative interest rates”, and the financial policy was upgraded again. In August of the same year, the Japanese government implemented an economic stimulus policy of 28.1 trillion yen with a total capital scale of 28.1 trillion yen, and the fiscal policy continued to follow up. In September, the Bank of Japan once again launched the “quantitative and qualitative financial easing policy with long- and short-term interest rate operations,” including maintaining negative interest rates, expanding the supply of funds, and purchasing government bonds to maintain long-term interest rates at around 0%.
  After 2017, as the financial policy has been pulled to the maximum, the policy focus has changed. In June 2017, the Japanese government changed its practice of revising the “Japan Rejuvenation Strategy” every year, and instead proposed a new “Future Investment Strategy”, which was revised in 2018. The two-year theme was “For Society 5.0 “Reforms” and “Reforms towards Society5.0 and a data-driven society” focus on applying cutting-edge technologies such as the Internet of Things, big data, artificial intelligence, and robotics in the fourth industrial revolution to industrial development and social life. Use the latest technology to solve economic development and social problems. In June 2019, the Japanese government launched the “2019 Growth Strategy” and the “Declaration of Creating the World’s Most Advanced Digital Country”. “Digital economy”, “technical innovation”, and “generational social security system” have become key areas. However, after the consumption tax rate was raised from 8% to 10% in October 2019, the Japanese economy took a sharp turn, and the new crown epidemic in 2020 will deal a major blow to the economy. Although the Japanese government has issued a super-large-scale emergency economic response of 117.1 trillion yen, since the fourth quarter of 2019, real GDP has fallen into negative growth for three consecutive quarters, and the annual rate conversion value in the second quarter of 2020 has reached -27.8%. Set the biggest drop in Japan after the war.
  The effects and problems of “Abenomics”
  After the term “Abenomics” was coined, it became familiar not only in Japan but also in the world. During Abe’s administration, from December 2012 to October 2018, Japan experienced the second longest post-war economic boom that lasted 71 months. The actual GDP growth rate averaged approximately 1.1% per annum, although compared with other durations. The long prosperous period is lower than the economic growth rate, but it can still show that “Abenomics” does play a certain role in Japan’s economic recovery. The Bank of Japan’s continuous financial easing policy has released a large amount of liquidity to the market, pushing up market expectations, and the effect of rising stock prices and devaluation of the yen. Coupled with fiscal policies to expand central and local fiscal expenditures, reduce corporate income tax rates, provide tax incentives for corporate equipment and R&D investment, and support loans to small and medium-sized enterprises, corporate income has been improved to a certain extent, bankrupt companies have decreased, and unemployment has fallen. Employment growth. According to statistics from the Nikkei, by the time Abe resigned, the average Nikkei stock price reached 2.33 times that of the time when he took office, and corporate operating income reached 1.34 times. In addition, in April 2014 and October 2019, the consumption tax was increased twice. Although it is quite controversial, this is something that no previous government has done. Under the effect of the consumption tax increase, the general accounting of Japan in 2019 Tax revenue reached 60.2 trillion yen, 1.37 times that of 2012.
  In terms of foreign economic and trade relations, Japan’s regional economic cooperation has made significant progress. Japan and the EU have been negotiating an economic and trade agreement since 2013. In July 2018, the two sides signed the Japan-EU Economic Partnership Agreement (Japan-EU EPA), which came into effect in February 2019. According to the agreement, Japan’s exports to the EU Commodities gradually reached 99% duty-free, and the EU’s exports to Japan gradually reached 94% duty-free. In 2013, Japan formally joined the Trans-Pacific Partnership Agreement (TPP) negotiations. Although the Trump administration of the United States withdrew from the negotiations immediately after taking office, under the impetus of Japan, the original TPP 11 countries other than the United States finally signed in March 2018. The Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP) has been effective since December 2018. During Abe’s administration, the “Tokyo International Conference on African Development”, the pillar of Japan’s economic diplomacy with Africa, was held twice in 2016 and 2019. 2016 was the first time the conference was held in Africa and the interval between the two meetings The period has also been shortened from the original five years to three years. Regarding bilateral economic and trade relations between Japan and the United States, Japan and the United States signed a preliminary trade agreement in October 2019. Although Japan has made certain concessions, the content involved is basically within the scope required by Japan. The signing of the agreement has also expanded Japan to a certain extent. Space for foreign economic and trade cooperation.

  But at the same time, “Abenomics” also has many problems. The most obvious point is that the quantitative indicators proposed by it have not been realized on schedule, and it will be difficult to achieve in the future. The 2% inflation rate was once a landmark indicator of “Abenomics.” It was originally expected to be achieved within two years, but it was not achieved until Abe resigned. According to the Bank of Japan’s forecast, it may only reach half of the target, or 1%, by 2022, while some private think tanks believe that even 1% will not be reached. The fiscal goal will be postponed from 2020 to achieve the blackening of the basic fiscal revenues and expenditures of the central and local governments to 2025. However, according to the calculations of the Japanese government, the goal will not be completed on time even under ideal conditions of economic growth, let alone the impact of the new crown epidemic on the Japanese economy. It caused a major blow. The “New Three Arrows” proposed the target of “600 trillion yen in nominal GDP.” We can roughly estimate that Japan’s nominal GDP in 2019 is 553.8 trillion yen, the benchmark value of nominal GDP growth rate used in the Japanese government’s economic forecasts Generally less than 1.5%. At present, Japanese domestic institutions and scholars estimate that the economy will not be able to recover to the level before the new crown epidemic in 2022-2024. So assuming that the economy in 2023 returns to the level of 2019, with a GDP growth rate of 1.5%, the nominal GDP will reach 600 trillion yen by at least around 2028, and it is more likely that the growth rate will not reach 1.5%. The population indicator “total fertility rate of 1.8” is the level of Japan in the mid-1980s. In 2019, Japan’s total fertility rate was only 1.36. The prerequisite for reaching the 1.8 target is that all people who are willing to get married can get married and each couple has an average birth rate. About 2.1 children. With the obvious trend of decriminalization, late marriage and declining birthrate in Japan, it is almost impossible to reverse the fertility rate to the level of the 1980s. According to the forecast of Japan’s National Institute of Social Security and Population Issues, by 2050, Japan’s total fertility rate will be around 1.44.

Japanese elementary and middle schools were closed for several months during the epidemic, and schools will start in August 2020.

  Although there was the second longest prosperous period after the war, the people had no real sense of the economic prosperity, and private consumption, which supported GDP growth, fell into a downturn. The two consumption tax increases both dealt a blow to household consumption and reduced their disposable income in disguise. Although the number of employed people has increased, most of them are informal employees, and the improvement in salary is not obvious. The gap between the rich and the poor has widened. According to calculations by Japanese scholars, after the implementation of Abenomics, the proportion of Japanese households with annual incomes of less than 4 million yen and more than 7 million yen has increased, while the annual income is 4 million yen. The proportion of middle-income households between 7 million yen and 7 million yen has fallen, and the middle class has been squeezed. The declining birthrate and aging population are accelerating. In 2019, the number of new births in Japan was only 865,000, a record low, and the total population continued to decrease. At the same time, the increase in the aging population caused the rapid expansion of social security expenses and put huge pressure on the finances. The negative effects of the ultra-loose monetary policy and the economic stimulus policies that rely on expanding fiscal expenditures have begun to highlight. Financial institutions’ profits have shrunk and the balance of national debt has increased year after year. At 15 times the annual tax revenue, the ratio of long-term central and local debt to GDP reached 207%. The declining birthrate and aging population, instability in employment, the gap between the rich and the poor, social security, and financial difficulties have increased Japanese people’s sense of anxiety about the future, and will also affect the stable development of Japanese society and economy in the medium and long term.
  Japan’s Economic Trends in the “Post-Abe Era”
  At present, it is generally believed in Japan that there will be no major reversal of Japanese economic policies in the “post-Abe era”. Under the impact of the new crown epidemic, responding to the epidemic and pushing the economy back on track should be a priority for the next government to solve. At the same time, the uncertainty of world economic development is still strong, and the domestic consumption slump in Japan has not been alleviated. Both domestic and external demand are facing severe challenges. The risk of deflation still exists. Under such circumstances, loose monetary policy and proactive fiscal policy It will probably continue to be maintained, and structural reforms will also be the focus of medium and long-term policy. Recently, the President of the Bank of Japan Haruhiko Kuroda has stated that he will continue to maintain the ultra-loose financial policy. However, in view of the fact that the quantitative indicators proposed by “Abenomics” have not been achieved, which has negatively affected the government’s reputation, the next government may be more cautious in terms of quantitative indicators. The Abe government put forward many policy concepts during its administration, such as the “100 million active society”, “educational revolution”, “generational social security”, and “future investment strategy”. The next government may also create its own new policy concepts. . Although it is generally believed that there will be no major reversal in the direction of economic policy, in the context of continuous expansion of government fiscal expenditure and accumulation of debt, fiscal policy may be gradually revised, and the normalization of financial policy may also enter the scope of government discussion. In addition, Japan has emphasized in recent years to promote economic and social development through scientific and technological innovation, promote the development of the digital economy, and strengthen the leadership of digital rulemaking. This aspect will remain the focus of the Japanese government in the future.