Japan’s unconventional monetary policy and the impoverishment of the working class: The failure of the “cheap Japan strategy”

Since the late 1990s, Japan has pursued unconventional monetary policies to overcome the prolonged recession that followed the bursting of its economic bubble. These policies can be summarized into three phases: the zero interest rate policy from 1999, the quantitative easing policy from 2001 to 2006, and Abenomics from 2013. The driving force behind these policies was the monetarist idea that increasing the money supply could overcome both deflation and recession. However, despite the radical implementation of quantitative easing, the money supply did not increase as expected and the targeted inflation rate was not achieved. Furthermore, even though real interest rates turned into negative, both capital investment and economic growth continued to stagnate. Meanwhile, corporate profits and surplus capital expanded, and surging dividends and stock prices rapidly increased foreign investors’ gains. Additionally, yen depreciation, brought about by monetary easing, boosted the profits of export industries, primarily large companies. Conversely, real wages continued to decline, and negative real interest rates eroded workers’ savings. Thus, Japan’s unconventional monetary policies did not succeed in resolving its problem of secular stagnation. Instead, they had the effect of transferring wealth from workers to the rich.