Abenomics: has it worked? Will it ultimately fail?

Questioning Abenomics and a Keynesian Approach to Japan’s Deflation Problem via Input-Output Analysis

“…In addition, many mainstream (orthodox and unorthodox) economists have, qualitatively and quantitively, criticized Abenomics and argued supply-side remedies of a mix of the new Keynesian in the nancial and monetary policies and the neoliberal policies in terms of the structural reform (GOJ, 2019). Accordingly, their main results highlighted that those policies not only have caused an insecure environment for employees due to the deregulate working system but could also destabilize policy shock (power) to stabilize and stimulate the economy through scal de cit, making younger generations fearful about their future (Noguchi, 2019); and hyperin ation -an increase in asset-price (Armstrong & Okimoto, 2016;Shibata, 2017;Lechevalier & Monfort, 2018). Thereafter, this study, thirdly, suggested some possible policy paths based on the demand-side remedies which account for Keynesian-inspired Japanese economic policy to resolve the economic issues; structural reforms in scal sustainability, mainly wage increase (especially low and middle incomes), working practice, and fair tax system.…”

“…Explicitly, the three-arrow policy boosted the productivity growth, thus creating a business-friendly environment, which not only helps weaken of the keiretsu network (a nancially independent network of Japanese businesses that closely work together) through integrating with the international market but also made a more competitive international market (Lechevalier & Monfort, 2018). The innovations were triggered by the realization that the technological level of the Korean, Chinese, and Taiwanese companies have been at par with the Japanese companies.…”

“…Hence, the Japanese market economy has been evaluated to increase its trust index due to the national and international supporter (by OECD, IMF, and Krugman) (Shibata, 2017); moreover, the world growth has arisen since Abe took o ce as the Prime Minister of Japan on December 2012. This means that under the positive environment of politics, the announcement effect, and world growth: these have led to the improvement of Japan's production rate (Lechevalier & Monfort, 2018). Moreover, the Japanese government under Abe administration has a strong role especially in Southeast Asia through the Comprehensive and Progressive Agreement for Trans-Paci c Partnership (CPTPP) and has taken to wave the free trade ag, especially nowadays with the withdrawal of the United States under the new Trump-led government (Urata, 2018).…”

“…The other challenge is that while reducing the corporate tax bene ts for the capital and SME, increasing the consumption tax may lead to only burden the workers to handle the scal de cit. Thus, this policy could destabilize the society (social texture) and the consumption balance and then could cause an increase in the poverty level and their Gini ratio (Lechevalier & Monfort, 2018). Thomas Piketty (2014) has pointed out that a sudden increase in income inequality-causality has yet (di cult) to be proven-is often followed by a great crisis (Vallier, 2019).…”

“…In general, scholars expressed that Abe's policies are essentially the same as Koizumi-led government, have a lack of alternative growth engines (Shibata, 2017), has solved some productivity-related issues (Ito, et al, 2018), and has been, however, failing to address inequality and environmentally related issues (Lechevalier & Monfort, 2018). In that context, this study analyzes the Japanese economy by applying updated 2012 I/O, investigates how to solve some Japanese economic problems such as growth engines through strategic demand and sector, and proposes the Keynesian-inspired Japanese economic policy to deal with de ation which highlights the demand-side remedies such as structural reform in income, working practice, and tax system, as mentioned in Keynes' theory.…”