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Original Title: Abe’s Curtain Call to Add Variables to Japan’s Economic Recovery
On the afternoon of August 28, Japanese Prime Minister Shinzo Abe announced his resignation as Prime Minister due to health problems. Currently, the Japanese economy is in a deep recession due to the new epidemic of corona pneumonia. Will Abenomics, which has led to the recovery of the Japanese economy, stop here? How can the deep-seated Japanese economy start a new round of economic recovery? Abe’s sudden curtain call has caused Japan’s economy to restart and recover even more variables.
Japan’s Cabinet Office announced not long ago that hit by the epidemic, Japan’s economy fell a record 27.8% in the second quarter, a drop for three consecutive quarters. Earlier, the Cabinet Office’s Institute for Economic and Social Research held a special meeting to confirm that the cycle of economic expansion that began in December 2012 had stopped and, in October 2018, the Japanese economy had entered a cycle of recession.
According to the Cabinet Office, the economic recovery cycle that has ended is 71 months and is the second longest economic recovery period after World War II. It was Abenomics launched by Abe that led the Japanese economy to begin this round of economic recovery. After Shinzo Abe took office for the second time in December 2012, he introduced ultra-flexible monetary policy, proactive fiscal policy, and a series of structural reform measures known as Abenomics’ “three arrows.” Under the influence of a series of policy measures, the Japanese economy has embarked on a slow recovery.
During the period of economic recovery, benefiting from ultra-flexible monetary policy, the yen weakened significantly, corporate earnings improved, and the Japanese stock market and real estate market recovered strongly. In the stock market, the Nikkei stock index rose from 10,230 points on Abe’s inauguration day and rose to 24,270 points in October 2018, reaching a 27-year high. After the outbreak, the Tokyo stock market experienced a sharp decline and recently recovered to the 23,000 point level. In the real estate market, a report by the Japanese real estate research company Tokyo Appraisal shows that compared to the level of house prices in 2012, the median price of new houses in Tokyo has increased by 33% in 2018, a increase for seven consecutive years.
However, as the central representative of Abenomics, the ultra-flexible monetary policy did not help the Japanese economy emerge from deflation and reach the inflation target of 2%, nor did it significantly promote the development of Japan’s real economy. The economic growth rate during this round of recovery has always been 1%. Fluctuate up and down.
Following the outbreak, the Japanese cabinet launched a large-scale economic stimulus plan. With the lifting of the state of emergency and the appearance of the economic stimulus plan, the Japanese economy is hitting bottom. Most experts believe that due to weak domestic and foreign demand and the lack of momentum for economic recovery, the recovery process will be very slow. The latest data shows that Japan’s personal consumption remains sluggish, the recovery in industrial and mining production is weak, and the export distance is still quite a long way from fully recovering.
Nomura Research Institute researcher Tohide Kiuchi believes that Japan’s economy has posted a record decline in the second quarter, with about 60% due to a sharp drop in personal consumption. As the employment and income environment deteriorates, consumption is expected to continue to stifle in the future, demand for durable goods such as automobiles will lag, and service industries such as catering and entertainment still face severe conditions, that will greatly restrict the economic recovery in the third quarter and beyond.
Under the grim situation of internal and external economic difficulties, the change of command in Japan’s political arena has just shown signs of bottoming out and the Japanese economy faces new uncertainties: it is not possible to guess whether the next leader will continue to implement Abe’s line ; at the same time, it is experiencing a long-term slowdown. After the recovery, Abenomics has become a reality in the end of the battle and has left many problems unsolved for the successors. There is much room for adjustments in Japanese economic policies.
In addition to the deep recession, various economic and social problems such as market shrinkage, labor shortages, increased social security burden, and consumer psychology brought on by negative population growth have also plagued Japan and will drag Japan’s economic development for a long time. Long-term unresolved deflation, low birth rates and aging populations, insufficient social security to make ends meet, and severe fiscal deficits are undoubtedly severe tests for the new leaders. (Liu Chunyan)
