CEPII, Recherche et Expertise sur l'economie mondiale
Can the magic of Abenomics succeed?

Evelyne Dourille-Feer

 Points clés :
  • Abenomics is a unique policy combining short and mid to long term policies and supply and demand programmes.
  • Exiting deflation has been prioritized. Domestic and external factors have impacted CPI negatively from FY 2014, but moderate inflationary pressure is building up in the Japanese economy.
  • Abenomics has not yet achieved its stable 2% real growth target, but nominal and real growth rate since the FY 2013 exceeds those of the FY 2002-2012 period.
  • As Shinzo Abe’s growth policy will take 5 to 10 years to be fully implemented, Abenomics should succeed provided Abe’s successors have the political will to continue pursuing it.

 Résumé :
Prime Minister Shinzo Abe’s pro-growth economic policy, dubbed Abenomics, combines monetary policy and fiscal policy as well as growth reforms. It has attracted much attention worldwide because it combines short and mid to long term policies, and supply and demand programmes. The quest for growth is explained by its ballooning public
debt and the increasing social cost of its fast population aging. Exiting deflation has been prioritized by Shinzo Abe to energize growth.
Abenomics raises the central question of why the quest for growth in a context of shrinking population and a quite high standard of living? However, this eagerness for growth, which translates into higher fiscal revenues, is explained by its ballooning public debt, and the increasing social cost of its fast population aging. The Abe government has set the ambitious goal of an annual 2% real GDP growth rate.
The first two arrows (expansionary monetary and fiscal policies) were successful in 2013. But, in the 2014 fiscal year, the coincidence of a VAT increase, a steep fall in energy prices and a smaller supplementary budget generally drove down the CPI index (excluding consumption tax) and led to zero growth of real GDP and, in the 2015 fiscal year, the developments of CPI and growth were disappointing. In order not to fall back into deflation, demand must be boosted. Shinzo Abe is betting on institutional and technological innovations to foster economic growth in the long run. Abenomics will work its magic if Shinzo Abe has sufficient time and sufficient political strength to fully implement
his third policy arrow.

 Mots-clés : Growth | Macroeconomic policy | Deflation | innovation

 JEL : o40, e61, e31, o38
CEPII Working Paper
N°2015-24, December 2015

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 Domaines d'expertise

Politique économique