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Abenomics May Fail to Fully Revitalize Japan's Economy

Abe's polices have maintained Japan’s export competitiveness, but domestic demand is still slack and the national income gap is widening

By Han Bingbin Updated Oct.12

Japanese Prime Minister Shinzo Abe’s economic stimulus package, known as “Abeconomics,” may fail to achieve the desired objectives, said Dai Erbiao, research director at the Asian Growth Research Institute in Japan, writing for the 21st Century Business Herald.   

Based on the “three arrows,” Abe’s economic strategies include loose monetary policies, proactive and flexible fiscal policies and stimulus to private investment, Dai said.   

Abeconomics has proven effective in maintaining Japan’s export competitiveness, encouraging the growth of big companies, but it has failed to considerably expand domestic demand and ended up widening the national income gap, the scholar said.   

The stimulus package owes its short-term effect mainly to the first two arrows, while the third, designed to address structural problems such as labor shortages and the slowdown in technical progress, has failed to create a notable effect, Dai said.    

A strong economic performance will rely on the Japanese government for not only effective policy designs but also favorable relations with neighboring countries. An uneasy relationship with China has already cost Japan considerable economic loss, with the country’s share in China’s total imports dropping from 20 percent in the 1990s to around 9 percent in 2016, according to the scholar.   

The status of the two countries’ diplomatic relations will continue to have a direct influence over bilateral investment, trade and tourism. Were the current situation to continue, Dai said, Japan could hardly revitalize its economy.