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Abenomics Beyond the Nikkei

By Jasper Tolsma

SNA (Tokyo) — The Nikkei, Japan’s most important stock index, hit a 15-year high last Friday with closing figures above the 19,000 mark. The advance of the stock market, which is largely owed to multinationals operating overseas profiting from Abenomics’ policy of monetary easing, along with a stable increase in demand from the United States, is a welcome success for Prime Minister Shinzo Abe, whose hesitance to implement or clearly define the crucial “third arrow” of his economic policy has been criticized by politicians and economists alike.

According to some analysts, however, this doesn’t mean much for stable economic growth. During a press conference at the Foreign Correspondents Club of Japan, Robert Shiller, a professor in Economics at Yale and bestselling author, praised Japan for its groundbreaking policy of monetary easing, but also stated that a surge on the stock market doesn’t mean a great deal in terms of real growth: “Both Nasdaq and Nikkei went through a period of extreme overpricing, and neither of them is back, in real terms, anywhere close to where they were.”

Real growth is also an issue that Japanese households have to deal with. While the recent success of multinationals has helped lead to a rise in nominal wages, Japanese households have had to weather a slow decrease in purchasing power, mainly due to last year’s hike in the consumption tax. This has resulted in a decrease of household consumption. On top of that, the Bank of Japan announced that it is likely that the 2% inflation target that the Abe government advertized at its outset isn’t going to be met anytime soon, stating that it might be as low as 0% or even fall back into a state of deflation.

The International Monetary Fund has once again urged Japan to implement the second consumer tax hike to better address the widening public debt. Fearing another dive in economic growth, however, Prime Minster Abe seems hesitant to do so.

For now, the success of the stock market seems to be a victory without great glory. Wedged between national pressure to implement the necessary structural reforms and to stimulate domestic spending, as well as the pressure from the International Monetary Fund to keep the fiscal deficit in check, the critique that Abenomics is favoring the powerhouse multinationals over ordinary Japanese households is not likely to subside in the immediate future.

Jasper Tolsma is a contributing writer to the Shingetsu News Agency.