In early 2013, former Japanese Prime Minister Shinzo Abe launched a grand experiment designed to lift Japan’s economy out of decades of stagnation. Known as “Abenomics,” it included three arrows: massive monetary stimulus, increased government spending, and significant economic reforms.
“Abenomics” was, in very simple terms, a throw-it-all, buy-it-all strategy to try to stimulate growth. So putting massive spending into the economy, buying government bonds, also implementing economic reforms,” CNN’s Anna Stewart explained. “It was a way of trying to get mass employment, making people richer so they might spend more money, and just try to get the economy going.
“During his tenure, the Bank of Japan was seen taking interest rates into negative territory,” he said, adding that such a move was highly unconventional at the time, combined with “huge quantitative easing.”
Since then, this measure has become much more conventional, especially in the last few years since the pandemic, with all kinds of central banks around the world — the US Federal Reserve, the ECB, the Bank of England—all making similar moves, he added.
Abenomics was also successful, at least for the first few years, according to experts, Stewart noted. “Critics would say all three arrows weren’t hit, and as a result, success was unfortunately limited.”
“The problem for Japan was how to get rid of what was very loose monetary policy, and also some of the structural problems, particularly with the aging workforce,” Stewart added.
