Too quick to say that Abenomics has failed Japan

Reuters

Japan's Prime Minister Shinzo Abe and Myanmar's President Thein Sein toast during lunch at the Myanmar International Convention Center in Naypyitaw, May 26, 2013.

David Li would appear to be too hasty to dismiss Japan's bold new economic policy ("Abenomics will only damage Japan's neighbours", May 22). In particular, it would seem far too early for him to conclude that Abenomics will not extricate Japan from its deflationary mire or to surmise that it will fail to jumpstart the Japanese economy.

In pointing to the fact that Japanese inflation is yet to show any marked pick-up, Mr. Li glosses over the dramatic change that has occurred in long-run Japanese inflationary expectations since the launch of Abenomics. This change is reflected in all the standard measures of such expectations. As an example, since the beginning of this year, inflation expectations as measured by the difference between five-year Japanese Treasury Inflation-Protected Securities and JGBs has increased from no inflation to an expected inflation rate of more than 1¾ per cent a year over the next five years.

Mr. Li is most likely correct to expect that Japan's weaker currency policy will get pushback from its Asian neighbours. However, the same would not appear to be the case with Japan's US and European trade partners. At the recent Group of Eight meeting, Japan was effectively given the green light to continue with its policy of aggressive quantitative easing that has seen further significant yen depreciation. Considering that it generally takes at least a year for the full impact of a currency depreciation to be felt, one has to expect that, in the months ahead, the Japanese economy will get a big boost from the 25 per cent effective Japanese yen depreciation to date.

 

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Desmond
Lachman

What's new on AEI

Making Ryan's tax plan smarter
image The teacher evaluation confronts the future
image How to reform the US immigration system
image Inversion hysteria
AEI on Facebook
Events Calendar
  • 01
    MON
  • 02
    TUE
  • 03
    WED
  • 04
    THU
  • 05
    FRI
Wednesday, September 03, 2014 | 9:00 a.m. – 10:30 a.m.
From anarchy to Augustus: Lessons on dealing with disorder, from Rome’s first emperor

We invite you to join us for two panel discussions on how Augustus created order from chaos 2,000 years ago, and what makes for durable domestic and international political systems in the 21st century.

Wednesday, September 03, 2014 | 12:00 p.m. – 1:30 p.m.
Multiple choice: Expanding opportunity through innovation in K–12 education

Please join us for a book launch event and panel discussion about how a marketplace of education options can help today's students succeed in tomorrow's economy. Attendees will receive a complimentary copy of the featured book.

Thursday, September 04, 2014 | 12:00 p.m. – 1:30 p.m.
How conservatives can save the safety net

Please join us for a luncheon event in which our panel will discuss what conservatives can learn from how liberals talk and think about the safety net and where free-market economics, federalism, and social responsibility intersect to lift people out of poverty.

No events scheduled this day.
No events scheduled today.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.