AbacusThe hidden agenda behind Japan’s Abenomics

Almost four years after Japan’s Prime Minister Shinzo Abe launched “Abenomics” to revitalise the country after 20 years of economic stagnation, most have judged it a dismal failure. But to dismiss Abenomics out of hand would be to misread Abe’s true objectives.

Admittedly, first glance shows the policy’s “three arrows” have all fallen far short of their targets. The idea was that by pursuing radical monetary, fiscal and structural reform all at once, Abenomics would succeed where previous attempts at revival failed.

Drastic action certainly looked necessary. After two decades in which entrenched deflation destroyed domestic demand, and only endless supplementary government spending packages kept growth in positive territory, Japan’s gross public debt had reached 210 per cent of gross domestic product. To put that into perspective, it was double the debt level that provoked fiscal panic in the United States, and was approaching a point Japan’s finance ministry believed unsustainable.