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January 6, 2016

What is Japanese Abenomics? What's the concept and How does it work?

Japanese Abenomics explained. The Economic Monetary Policy of the Prime Minister of Japan.

Another new financial word “Abenomics” explained.

What is Abenomics?

The phrase “Abenomics” was created after the Economic Monetary Policy of Shinzo Abe, the Prime Minister of Japan.

To be specific, it is the Monetary Policy which has started from December 26th in 2012, and the policy follows the three main pillars, which is called “Three Arrows” in Japan.

The goal of “Abenomics” is the overall economic recovery with by bailing out of the deflationary spiral.

The policy has drawn many attentions not only from in Japan, but also from all over the world, although there are variety of opinions about the policy itself.

For your information, “Abenomics” was named in this way, as following the “Reaganomics” (the nickname of monetary policy by 40th US President, Ronald Reagan.).

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“Abenomics” consists of “Three Arrows”

“Abenomics” sounds very interesting, but it is just like many other normal monetary policies of other countries, although the expected achievement is high hurdle and there are levels that the “Abenomics” needs to follow.

1. Dynamic Monetary Policy

“Abenomics” has defined the deflation is the main motive of the recession of past 20 years after the bubble economy burst, thus they have set the Inflation target.

To make this happened, “Abenomics” will continue with unlimited “Quantitative Monetary Policy” until 2% of price increase happens.

2. Flexible Fiscal Policy

“Abenomics” has issued a budget repair bill of over 13 billions dollars.

The breakdown of the bill is about 4 billions dollars for reconstruction, about 3 billions dollars for regional activation and another 3 billions dollars for regenerative medicine.

3. Growth Strategy to encourage Private Investment

“Abenomics” has held 7 different “council for industrial competitiveness” and made each detailed proposals.

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Overall plans of Abenomics

“Abenomics” didn’t just create the plan for Japanese continuous deflationary spiral.

But they have certain lines to follow for the recovery of Japanese economy.

And here is what “Abenomics” is expecting now:

  1. Announcement of Inflation Measures made
  2. JP Stock Rise/JPY Price Rise
  3. Profit of Exporting Companies Rise
  4. More Jobs/Income Rise
  5. More Spendings/Inflation Expected
  6. Commodity Price Rise to 2%
  7. Profit of Domestic Industries Rise
  8. Economic Recovery

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