Abenomics’ Arrows Yet to Hit the Mark
By Jasper Tolsma
SNA (Tokyo) — One of the major reasons for Prime Minister Shinzo Abe’s reelection last December, apart from a weakened and divided opposition, was the stability of economic policy. With a weakened yen, a stock index that is surging, and long-awaited inflation instead of deflation, Abe has been able to claim several successes. But where internationally-operating businesses have been able to profit from his policies, Japanese households and many small businesses have been on the receiving end of them. Last April’s increase in the consumption tax, on top of the inflation figures, made for a decrease in consumer spending and prevented an increase in GDP. Because the negative impact of the tax increase, Abe postponed plans for increasing the consumption tax to a 10% rate.
According to recently published figures, the real growth in GDP over the calendar year 2014 amounted to exactly 0.0% percent. This raises questions about the effectiveness of Abe’s policies. Opinions are divided on whether or not Abenomics’ three arrow approach has been sufficient to deal with the many problems that Japan’s economy is suffering, and to push the nation’s economy into a pattern of sustained growth.
According to Kenji Eda, president of the Japan Innovation Party, economic developments are very hard to predict, but even so, he believes that Prime Minister Abe has made some wrong choices. In Eda’s view, the increase of the consumption tax was a “total failure” since it negatively impacted consumer spending.
In other respects, Eda feels that Abenomics isn’t nearly ambitious enough. He calls for more and faster reforms concerning public welfare, agriculture, and energy issues.
Lawmaker Keiichiro Asao, who now leads a small, regional political party, is more positive about Prime Minister Abe’s economic policy, but he calls for an increase in the minimum wage as being the most important measure that can be taken at the current juncture. He believes that the lack of economic growth is due to the second and third arrows of Abenomics not being properly implemented. He asserts that raising the minimum wage is precisely what the third arrow should be.
According to Asao, the current labor shortage provides a good opportunity to increase wages because the market for workers will remain tight. He also expects that an increase in the minimum wage will help to address the negative effects of last year’s consumption tax increase.
With a distinctly unimpressive performance in 2014, Abenomics still has much to prove if it is to be regarded as the solution to Japan’s economic growth problem. Among many opposition party leaders, at least, there is a sense that the arrows have yet to hit their mark.
Jasper Tolsma is a contributing writer to the Shingetsu News Agency.