Tuesday, December 18, 2012

Can Abenomics Save Japan’s Economy?

After the landslide victory that elected the LDP party into the Japanese parliament, will reelected LDP head Shinzo Abe be able to revive Japan’s two-decade long stagnant economy? 

By: Ringo Bones

Former Japanese P.M. Shinzo Abe’s sweeping return to power during the recent Japanese elections has been deemed a breath of fresh air to the Japanese economy stagnant for two decades now. Abe’s proposals for reviving the Japanese economy had already been dubbed as “Abenomics” and many tenured Japanese economists already have high hopes that it could end the two decade long Japanese economic stagnation. 
For all intents and purposes, Abenomics is just Keynesian Economics tailored in a way to end Japan’s two-decade long economic stagflation. Newly reelected Shinzo Abe already promises to print more money and spend it too boost the lagging infrastructure sector. Abe’s proposal for the Bank of Japan to print more money despite of the projected 2 percent resulting inflation could benefit Japanese exporters who had been hurt by the super-strong yen.

Even though Abe inherited a split parliament, a stagnant economy, the world’s biggest debt of any industrialized country which stands at twice the country’s own annual GDP, the Japanese economy recently slipping back into technical recession back in November and the country still reeling in from the earthquake and tsunami that caused the Fukushima nuclear power plant meltdown back in March, 2011, Tokyo stocks soared 1.6 % during Monday’s (December 17, 2012) opening over the news of Shinzo Abe’s reelection. Can Abenomics be the key in tackling all of this?

Shinzo Abe’s promise to fix the now third largest economy (sadly, Japan was overtaken by The People’s Republic of China as the world’s second largest economy this year) by allowing the Bank of Japan to print more stimulus money has its critics too. During the past few years, flushing newly printed money to the Japanese economy did manage to devalue the yen long enough for the benefit of the Japanese export industry seems to work only for a few days or so before the weakened yen became super-strong again.