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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:
  • Yoshino, Naoyuki

    (Asian Development Bank Institute)

  • Taghizadeh-Hesary, Farhad

    (Asian Development Bank Institute)

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

  • Yoshino, Naoyuki & Taghizadeh-Hesary, Farhad, 2014. "Three Arrows of “Abenomics” and the Structural Reform of Japan: Inflation Targeting Policy of the Central Bank, Fiscal Consolidation, and Growth Strategy," ADBI Working Papers 492, Asian Development Bank Institute.
    • Handle: RePEc:ris:adbiwp:0492
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    References listed on IDEAS

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    1. Farhad Taghizadeh-Hesary & Naoyuki Yoshino, 2016. "Which Side of the Economy Is Affected More by Oil Prices: Supply or Demand?," ADB Institute Series on Development Economics, in: Naoyuki Yoshino & Farhad Taghizadeh-Hesary (ed.), Monetary Policy and the Oil Market, edition 1, chapter 0, pages 29-53, Springer.
    2. Naoyuki Yoshino, 2012. "Global imbalances and the development of capital flows among Asian countries," OECD Journal: Financial Market Trends, OECD Publishing, vol. 2012(1), pages 81-112.
    3. Farhad Taghizadeh Hesary & Naoyuki Yoshino & Ghahraman Abdoli & Asadollah Farzinvash, 2013. "An Estimation of the Impact of Oil Shocks on Crude Oil Exporting Economies and Their Trade Partners," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 8(4), pages 571-591, December.
    4. Naoyuki Yoshino & Tomohiro Hirano, 2011. "Pro-cyclicality of the Basel Capital Requirement Ratio and Its Impact on Banks-super-∗," Asian Economic Papers, MIT Press, vol. 10(2), pages 22-36, Summer.
    5. Farhad Taghizadeh Hesary & Naoyuki Yoshino, 2014. "Monetary policies and oil price determination: an empirical analysis," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 38(1), pages 1-20, March.
    6. Naoyuki Yoshino & Tetsuro Mizoguchi, 2013. "Change in the Flow of Funds and the Fiscal Rules Needed for Fiscal Stabilization," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 9(1), pages 51-70, January.
    7. Taghizadeh Hesary Farhad & Naoyuki Yoshino, 2013. "Empirical Analysis of Oil Price Determination Based on Market Quality Theory," Keio/Kyoto Joint Global COE Discussion Paper Series 2012-044, Keio/Kyoto Joint Global COE Program.
    8. Naoyuki Yoshino & Farhad Taghizadeh-Hesary, 2014. "Monetary policy and oil price fluctuations following the subprime mortgage crisis," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 7(3), pages 157-174.
    9. Naoyuki Yoshino & Sahoko Kaji (ed.), 2013. "Hometown Investment Trust Funds," Springer Books, Springer, edition 127, number 978-4-431-54309-1, June.
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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. Naoyuki Yoshino & Farhad Taghizadeh-Hesary, 2014. "Effectiveness of the Easing of Monetary Policy in the Japanese Economy, Incorporating Energy Prices," Macroeconomics Working Papers 24520, East Asian Bureau of Economic Research.
    4. Naoyuki Yoshino & Farhad Taghizadeh-Hesary, 2016. "Causes and Remedies of the Japan's Long-lasting Recession: Lessons for China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 24(2), pages 23-47, March.
    5. Yoshino, Naoyuki & Taghizadeh-Hesary, Farhad, 2014. "Hometown Investment Trust Funds: An Analysis of Credit Risk," ADBI Working Papers 505, Asian Development Bank Institute.
    6. Kuwahara, Satoshi & Yoshino, Naoyuki & Sagara, Megumi & Taghizadeh-Hesary, Farhad, 2015. "Role of the Credit Risk Database in Developing SMEs in Japan: Lessons for the Rest of Asia," ADBI Working Papers 547, Asian Development Bank Institute.
    7. Naoyuki Yoshino & Tetsuro Mizoguchi & Farhad Taghizadeh-Hesary, 2017. "Optimal Fiscal Policy Rule for Achieving Fiscal Sustainability: A Japanese Case Study," ADB Institute Series on Development Economics, in: Naoyuki Yoshino & Farhad Taghizadeh-Hesary (ed.), Japan’s Lost Decade, chapter 0, pages 59-75, Springer.
    8. 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.
    9. 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.

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    More about this item

    Keywords

    Abenomics; structural reform; hometown investment funds; monetary policy; fiscal consolidation; growth strategy;
    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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