Japanese Prime Minister Shinzo Abe resigns, but what remains of the "Abenomics"?

Its economic program has been scrutinized by all economic specialists, to the point of landing a nickname: "Abenomics". In 2012, on his arrival at the head of Japan, Prime Minister Shinzo Abe proposed a daring stimulus plan to cope with a sluggish economy. Declined in "three interdependent arrows", the program was based on a massive monetary easing, budgetary expenditure, as well as structural reforms.

Eight years later, at a time when Shinzo Abe announced his resignation on Friday August 28 for health reasons, what remains of this program and what conclusions can be drawn from it? Update with Jean-Yves Colin, North Asia expert at Asia Center.

France 24: First of all, what are the Abenomics and what did they have as an objective?

Jean-Yves Colin: The starting point is the economic crisis at the end of the 1980s and the explosion of the Japanese real estate bubble. The investors are gone, and that plunged the country into very weak growth which lasted until the 2000s. When Shinzo Abe arrived in 2012, he was looking to restore Japan. He wants to "Make Japan great again", if I may, and introduces the three arrows of the Abenomics. This name is a direct reference to the Reaganomics [nickname given to the economic program of former US President Ronald Reagan, Editor's note].

The first arrow is an economy that is very abundant and lax in liquidity , with the aim of pulling the country out of deflation and reaching an inflation rate of 2%. This policy was seen as innovative at the time, but in reality, it had already been initiated by the Bank of Japan just after the financial crisis of 2008, in a more timid way. Since then, all Western central banks have rallied to this policy: we can therefore say that Western economies have become Japanese, in a way.

The second arrow is the more traditional public stimulus , with social spending planned in particular in view of the aging of the population. It should be noted that Tokyo did this without paying attention to the public debt, which currently stands at 250% of GDP!

The third arrow consists in carrying out very varied structural reforms : the modernization and adaptation of companies, the flexibility of the labor market, financial techniques, the opening up of the labor market to women, the development of nurseries, or even the opening up of the labor market. foreign investment.

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Why have these policies not yielded the expected results?

If you had asked me for my analysis in 2015, I would have said the Abenomics were a 60% full glass. Today, I see these policies more as a 60% empty glass: it is a semi-failure.

The Abenomics had an immediate effect early on: there was growth that wiped out the gloom and companies started investing again. This was the case until the end of 2014, when the indicators started to give strong signals of weakness.

The third arrow is the weakest point: structural reforms have been far too timid . As for the flexibility of the labor market, for example, it has also favored its precariousness . It would have been necessary to facilitate the emergence of new companies, since Japan only sat on its laurels, trusting its old groups, without seeing that others, like Samsung, would sweep them off the market. .

Despite the "lax" policy of access to credit, Japan has still not managed to get rid of deflation and gloom. Why was it not enough?

First of all, the Japanese demographic evolution has not favored economic growth . The population has been decreasing in quantity and declining for several years, and aging has become more pronounced. 

Another negative factor: many companies preferred to fill their coffers and save rather than invest. Consumers have had this same suspicious policy. Even though the unemployment rate is very low, consumption has not taken off. The Japanese labor market is divided between long-standing jobs in large corporations, and precarious contracts in SMEs. While the country has never known the mass unemployment that France, for example, has known, there are many precarious people.

All this did not encourage a strong recovery in growth. 

Many believe that these measures have benefited only the most privileged Japanese. Do you think this is the case ? Why ?

Yes, overall, I think that these are measures intended first of all for businesses and then for advantaged consumers , with significant purchasing power. The Abenomics widened inequalities, but they already existed before and were especially created in the 1980s, with the real estate bubble. However, Japan needed to become more flexible.

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Will the coronavirus crisis further weaken what remains of the Abenomics ?

It is certain that the coronavirus crisis is a very negative factor for the Japanese economy and the lasting effect of Abenomics. In addition, the Japanese are mostly unhappy with the way in which the government has handled the pandemic, despite the relatively low figures. Shinzo Abe's concern was twofold. First of all, he wanted to do everything to maintain the Olympic Games, which were to be the culmination of his eight years in power, in particular because of the sums invested. On the other hand, he was concerned to avoid the consequences of total containment, as we have seen in Europe. But he had to take similar measures, more locally.

The next Prime Minister will be forced to have a different discourse on budgetary or societal matters. However, in Japan, there are never any announcements and major changes. Still, the Abenomics are dead: by the departure of Shinzo Abe and by the Covid-19 .

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Will this be the most memorable point of his time as Prime Minister?

Shinzo Abe will remain a very prominent figure in Japanese political life, especially since many of his predecessors have been forgotten. As for the Abenomics, they are an attempt to revive and restructure the Japanese economy which will certainly not have brought all the expected fruits, but which will have marked a sort of return to confidence, towards firmer growth. We had an economy in a swamp… but the car didn't start as fast as he thought.

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