Japan’s head of government Abe withdraws

Japan’s Prime Minister Shinzo Abe has announced his early resignation for health reasons. With Abe, a politician will go who will leave great marks and who has above all ensured more stability and predictability in Japanese politics. His „adventomics“, i.e. the mix of extremely loose monetary policy and expansive (debt-financed) fiscal policy, combined with numerous reform promises, has shaped his almost eight-year term of office. And it is likely to continue to set the basic direction of economic policy until the next parliamentary elections in a year’s time and probably beyond.
Abenomics‘ assessment is mixed at best, because Japan’s economic growth could only accelerate noticeably in the first half of Abe’s term of office. Above all, sustainable structural reforms for the economy have been disappointingly neglected. But its policies have brought Japan out of permanent deflation. The last time there were negative rates of price change there was in the summer of 2016. However, no really dynamic inflation trend has yet been able to assert itself, and the inflation target of +2 percent has been permanently missed.
Therefore, any possible successor to Abe has every reason to maintain Abenomics‘ expansive guideline for the time being, especially since the current corona crisis and the associated economic crash this year provide additional justification for this. As long as Japan’s central bank under its Abe-appointed head, Haruhiko Kuroda, remains prepared to monetize its national debt – which is to be expected – Japan’s high national debt ratio should not provoke a fundamental change in policy for the time being.
One of Abenomics‘ successes is undoubtedly the fact that employment in the years before Corona was able to expand visibly despite a shrinking work force. New labor laws and a higher participation rate in the labor market, especially among women, have helped here. However, a good portion of the labor market gains under Abe resulted from the fact that part-time jobs and temporary work with lower wages and lower or no social benefits have gained significantly in importance. Japan’s gradual opening to foreign labor, which began under Abe, is likely to continue nonetheless, because there is no alternative due to the country’s progressive aging.
Abe has also made politically courageous decisions that are directed against long-established special interests, for example in the agricultural sector, and are intended to stimulate competition and thus growth. The trade agreement with the Asian-Pacific neighbors (TPP ex USA) and the free trade agreement with the EU should be mentioned here. Here he was very determined. It is still unclear whether his successor, whoever he may be, will be as decisive and assertive in the field of trade policy. In the future, however, a special measure of assertiveness will be required, especially in view of the overdue structural reforms. Without these reforms, Abenomics would remain an unfinished concept.

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