By Despoina Kanta,
Like any economic policy, because it is policy, Abenomics has had both supporters and critics. Naturally, the critics were skeptical since the time of the economic plan’s proposal. And if they could, they would be against it even before the idea was conceived.
Hyperinflation, a threat looming over most economies, was the first major point of criticism, as some feared the economic policy would be a new source of it. Unpredictable and rapidly escalating, extreme price increases would certainly lead to economic instability. The fear that a product that once cost $10 would suddenly cost $100 was a challenge that would concern the entire society rather than a portion of experts.
The other side of this same coin, was the fear of government’s inadequacy regarding the response to deflation. Some critics have expressed concern that Abe’s government’s economic policy may not be able to effectively deal with deflation, which, let’s not forget, has been plaguing Japan’s economy for years. Many believed at the time that a steady reduction in the general price level would not be possible in this way.
Moving forward, there had been a lot of pyre that Abe’s government received for the issue of national debt, which exceeded 11 trillion dollars. Tax increases and the economic impact were also an issue, as already in 2014 taxes had been increased in order to contain the national debt. However, a natural consequence of tax increases was the reduction in consumer’s spending. This has meant that increases were not an option for Abenomics, as many attempts to raise taxes further had already failed, fearing additional negative economic impact. Part of this colossal debt was the ongoing and extensive spending on large-scale infrastructure projects—necessary and unnecessary—built mostly during the 1990s. It is easy to see that critics had every reason to be skeptical of a policy that promoted additional spending on infrastructure projects.
There was also criticism from experts who argued that the use of negative interest rates, as they impose a commission payment to the bank, for depositors to keep their funds while they could receive interest income instead. This would result in saving and thus further curbing spending, in an effort to exert pressure on deflation.
The implementation of Abenomics was a challenge for the Abe government from the beginning. As with any policy, the effectiveness of the structural reforms envisaged depended on several factors. The government had to prove its ability not only in planning but also in implementing the policy, as this could only be achieved if citizens showed confidence and trust in the new measures.
Some elements of Abenomics have survived to this day, but subsequent governments have continued to address the problems that Abe’s economic policies sought to correct. The current government retained some Abenomics measures such as monetary easing by the Bank of Japan, but mainly focused on new avenues that it deemed would benefit Japan’s economy. New economic planning revolves around digital transformation, population aging, and environmental sustainability.
The reality is that, despite Japanese society and culture being a catalyst for the successful elements of Abenomics, it did not bring the desired stability, nor the strong economic growth to the extent Japan sought. The biggest immediately apparent and immediately perceived problem by society was that it did not eliminate deflation. But rarely can we talk about “eliminating” a problem in politics. The success of Abe’s economic policy lies in the government’s management. Despite its ambitious design, progress was made but not elimination.