Abenomics: Why was it so successful in changing market expectations?

Abstract

a b s t r a c tFukuda, Shin-ichi-Abenomics: Why was it so successful in changing market expectations? 'Abenomics' refers to a new unconventional economic policy regime in Japan since late 2012. It consists of three arrows: unconventional monetary policy (the first arrow), expansionary fiscal policy (the second arrow), and economic growth strategies to encourage private investment (the third arrow). After the new regime started, both the stock and the foreign exchange markets reacted very favorably. The purpose of this paper is to investigate why the markets reacted to the new regime so favorably. Unlike orthodox arguments, we focus on asymmetric behavior between local and foreign investors after December 2012. We show that under the new regime, foreign investors were aggressive in purchasing Japanese stocks and in selling the Japanese yen, while local investors were not. By using high frequency intra-daily data, both structural break tests and regression analysis show that various news shocks had more significant impacts on the stock prices and exchange rates in nighttime than in daytime even if they were revealed in daytime. Noting that local investors tend to trade in daytime, while foreign investors tend to trade in nighttime, this implies that more dramatic market responses to the new regime happened in time zones when foreign investors were active. However, the asymmetry became less significant after the market http://dx.

Impact of economic policy on international tourism demand: the case of Abenomics

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Time varying pass-through: Will the yen depreciation help Japan hit the inflation target?

“…They find some cases in which the policy announcements have significant effects on the exchange rate. Also, in relation to the current round of monetary easing in Japan, Fukuda (2015) shows that investors, most notably foreign investors, reacted to recent series of expansionary policy announcements. Ueda (2013) also agrees with the view that the strong yen depreciation was a reaction to the aggressive monetary policy stance.…”

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