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Three Arrows of “Abenomics†and the Structural Reform of Japan : Inflation Targeting Policy of the Central Bank, Fiscal Consolidation, and Growth Strategy

Author

Listed:
  • Naoyuki Yoshino

    (Asian Development Bank Institute (ADBI))

  • Farhad Taghizadeh-Hesary

Abstract

“Abenomics†refers to the economic policies advocated by Prime Minister Shinzo Abe who became prime minister of Japan for a second time when his party, the Liberal Democratic Party, won an overwhelming majority at the general election in December 2012. Abenomics has “three arrows†: (i) aggressive monetary policy, (ii) fiscal consolidation, and (iii) growth strategy. The Japanese economy faces an aging population and expanding social welfare expenses. No other country has experienced Japan’s rapid growth of retired people. In this paper we will explain these three aspects of Abenomics and the current state of the Japanese economy, and examine what further remedies may be required if Japan is to recover from its long-term deflation. We look at such proposals as hometown investment trust funds and postponing of the retirement age through the introduction of a flexible wage rate system.

Suggested Citation

  • Naoyuki Yoshino & Farhad Taghizadeh-Hesary, 2014. "Three Arrows of “Abenomics†and the Structural Reform of Japan : Inflation Targeting Policy of the Central Bank, Fiscal Consolidation, and Growth Strategy," Development Economics Working Papers 24362, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:develo:24362
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    Cited by:

    1. Gary Robinson, 2017. "Pragmatic financialisation: the role of the Japanese Post Office," New Political Economy, Taylor & Francis Journals, vol. 22(1), pages 61-75, January.
    2. Farhad Taghizadeh‐Hesary & Naoyuki Yoshino & Sayoko Shimizu, 2020. "The impact of monetary and tax policy on income inequality in Japan," The World Economy, Wiley Blackwell, vol. 43(10), pages 2600-2621, October.
    3. Yoshino, Naoyuki & Taghizadeh-Hesary, Farhad, 2014. "Hometown Investment Trust Funds: An Analysis of Credit Risk," ADBI Working Papers 505, Asian Development Bank Institute.
    4. Naoyuki Yoshino & Farhad Taghizadeh-Hesary, 2015. "Analysis of Credit Ratings for Small and Medium-Sized Enterprises: Evidence from Asia," Asian Development Review, MIT Press, vol. 32(2), pages 18-37, September.
    5. McNelis, Paul D. & Yoshino, Naoyuki, 2016. "Finding stability in a time of prolonged crisis: Unconventional policy rules for Japan," Journal of Financial Stability, Elsevier, vol. 27(C), pages 122-136.

    More about this item

    Keywords

    Abenomics; Japan; aging population; the Japanese economy; retired people; long-term deflation; a flexible wage rate system;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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