Japanese Abenomics: What We Hope to See - Essay Example

Japanese Abenomics: What we hope to see Japanese Prime minister adopted a new economic strategy set to improve the nation’s economy after the 2008 financial crisis and recession that hit Japan. We hope to see economic progress in Japan after successful implementation of the new strategy, called Abenomics. Since its adoption, the Abenomics has proved to be successful in improving Japan’s Economy as evident by the increase in the country’s economic growth to 2.8 percent in 2013 from the previous 2.6 percent in 2012. The increase in economic growth is a positive achievement at a time when other developed nations are struggling with recession and aftermath effects of the global financial crisis. Despite the increase in economic growth for Japan, the future of the Abenomics in developing Japans economy is uncertain. The Abenomics refers to an economic recovery strategy developed by Abe after taking office in 2012. The strategy focuses on a more relaxed fiscal policy for Japan and an increased depreciation of the exchange rate of the Japanese Yen. We hope to see growth in Japan’s economy based on the three arrows of the Abenomics policy. In the first arrow, people expect the nation to reach the goal of 2 percent inflation rate with two years and an unlimited easing policy. The first arrow of the policy also aims and solving the Yen’s rate of appreciation and amend the nation’s banking laws to integrate and collaborate with the government. However, based on the second arrow of the Abenomics, we hope to see an increase in the public investment and buying processes of construction bonds by Japan’s central bank. The abenomics registered early positive signs. If Abe and his supporters succeed with the new policy, Japan could offer investment opportunities for the near future for the Japanese people and foreign investors. In addition to the initial success of the abenomics, other factors particularly the structural reforms can propel economic recovery of Japan and investment interests in Japan (Uchida 4). Structural reforms are expected from the Abenomics. The various structural reforms represent the third arrow of the abenomics. Successful implementation of the third arrow of the abenomics may result in increased female participation in Japan’s labor market and consolidation of Japan’s farmland. From the growth strategy proposed by Abe’s economic policy, a more cosmopolitan workforce is expected. If the Abenomics succeed in implementing its policies, we expect a change in the longevity and health of the society. Such change is stipulated in the third arrow of the abenomics that focuses on a growth strategy for all citizens. It is expected that the third arrow of the abenomics will increase Japan's potential GDP growth. The Abenomics brings hope for the Japanese Economy as Abe’s revitalization strategy promises good ideas for the country. Most of the proposals and efforts emphasized by the abenomics are very promising to investors. Some of the reforms proposed by the abenomics will help Japan's economy become more efficient and equitable. We expect a reduction in monopolies such as regional electricity utilities and an increase in opportunities for women and the elderly persons. Measures such as cutting corporate taxes will directly help firms in japan thus, increasing the nation's economy. The Abenomics will also help firms indirectly by encouraging a diverse number of people into the workforce and reducing labor shortages by extending working lives of people. It is expected that the abenomics policies will improve the economy of Japan and improve the lives of the Japanese people. It is also expected that the abenomics will solve Japan’s problems (Uchida 6). Success of the abenomics economic strategy was evident only after the first few months of its development. Implementation of the abenomics gives hope of a better future to the people of Japan. People hope that the abenomics will improve the economy of Japan and lure investors to japan. So far, the results of the abenomics are very positive. The sharp gains in the stock market build business confidence among investors and other people doing business in Japan. There is an annualized GDP growth of 3.5 percent within the first three months of adoption of the policy. Loosening of the monetary policy has caused a sharp depreciation of the Japanese Yen raising competitiveness of Japanese firms and boosting exports. At this rate of positive results, it is expected that entrepreneurs will directly benefit from the government planned structural reforms that form the third aspect of the abenomics economic strategy. The planned structural reforms give hope to investors and entrepreneurs in Japan because it focuses on deregulation, changes in corporate tax regimes and liberalization of international trade (Kashima and Cox 6). Japan expects the level of investment opportunities and activities within Japan. The Japanese people need to be optimistic. Although Japan will not grow as fast as china, when assessed, there are multiple reasons to believe that Japan will grow. The long-term reforms proposed by the abenomics are broad based and the Japanese prime minister appears to be having support among people. There are two implications for investors because of the abenomics. First, a reinvigorated japan with a new economy is positive for Japanese shares. Japanese shares are now attractive to investors. So far, the boost to Japan’s economy and share market is due to the first phase on the abenomics strategy through monetary easing. Secondly, Japan offers a good environment for investing because it will have a stronger and more sustainable economic growth especially at a time when other developed countries are recovering from the global financial crisis (Oliver 2). Despite the fact that abenomics raised Japan’s GDP in 2013 with monetary and fiscal policies contributing to this increase, the future of abenomics in improving the economy of Japan are uncertain. Critics question the credibility of the policy. However, inflation may be accompanied by higher growth and higher expectations of growth in the future for Japan. It is clear that the abenomics has registered short-term success in japan through increase in GDP and stock market shares. However, the long-term effects of abenomics remain uncertain especially the policies related to structural reforms. Developments in Japan's economy should be of great interest to macroeconomists. However, expectations from both investors and Japanese people are very high. The outcome of the abenomics may determine whether Japan will recover from the global economic crisis or experience another lost decade. The success of the abenomics may also influence policies in other places such as Europe and the U.S (Hausman and Wieland 52). Works Cited Hausman, Joshua and Johannes Wieland. Abenomics: Preliminary Analysis and Outlook. Michigan: International Policy Center at the Ford School of Public Policy, 2014. Kashima, Miyuki and Simon Cox. "Abenomics: What's Left in the Quiver?" 2014. Oliver, Shane. "Abenomics: good for Japan, good for investors and good for Australia." AMP capital 09 July 2014. Uchida, Mahito. "Towards the End of Deflation in Japan: Monetary Policy under Abenomics and the Role of the Central Bank." L'Institut d' Asie Orientale (IAO). Lyon, 2014. Read More