Duringtheglobaleconomicrecession,Japansuffereda0.7%lossinrealGDPin2008followedbyasevere5.2%lossin2009.Incontrast,thedataforworldrealGDPgrowthwasa3.1%hikein2008followedbya0.7%lossin2009.Aswell,exportsfromJapanshrunkfrom746.5billioninU.S.dollarsto545.3billioninU.S.dollarsfrom2008to2009,a27%reduction.AbenomicsisasetofpolicymeasuresmeanttoresolveJapan'smacroeconomicproblems.Itconsistsofmonetarypolicy,fiscalpolicy,andeconomicgrowthstrategiestoencourageprivateinvestment.Specificpoliciesincludeinflationtargetingata2%annualrate,correctionoftheexcessiveyenappreciation,settingnegativeinterestrates,radicalquantitativeeasing,expansionofpublicinvestment,buyingoperationsofconstructionbondsbyBankofJapan(BOJ),andrevisionoftheBankofJapanAct.Fiscalspendingwillincreaseby2%ofGDP,likelyraisingthedeficitto11.5%ofGDPfor2013.In2012,theNationalpassedthebilltoincreasetheconsumptiontaxrateto8%in2014and10%in2015tobalancethenationalbudget,anditisexpectedthatthetaxhikewilldiscourageconsumption.In1997theconsumptiontaxwasincreasedfrom3%to5%,andthendeflationstarted;thenominalGDPgrowthratewasbelowzeroformostofthe5yearsafterthetaxhike.AsofMay2013,ithasachievedthedepreciationoftheyento102yentoadollar,whichwasstagnatingaround80in2012.Also,accordingtoasurveycarriedoutbyNikkeiNewspaperinJapan,74%oftherespondentspraisedthepolicyinalleviatingJapanfromtheprolongedrecession.Intermsofrecenteconomictrends,theunemploymentrateofJapanhasdecreasedfrom4.0%inthefinalquarterof2012to3.7%inthefirstquarterof2013,continuingapasttrend.AbenomicsreferstotheeconomicpoliciesadvocatedbyShinzōAbe,thecurrentPrimeMinisterofJapanwhoassumedofficeon26December2012.It’srefersAbeproposedaseriesofeconomicpolicies,currencydevaluationasthemainbody.Abenomics’JapanesenameismadefromthewordofAbeandeconomics,whichtermhasbeenwidelyusedsinceNovember2012.ThenewCabinetheadedbyShinzoAbe,presidentoftheLiberalDemocraticParty,whichwonacrushingvictoryinthegeneralelection,cameintoofficeonDecember26oflastyear.Duringhiselectioncampaign,Mr.Abeadvocatedaneconomicpolicyforbreakingawayfromdeflationthatiscompletelydifferentfrompreviousones.InresponsetoMr.Abe’spronouncements,theyendepreciated,andstockpricesrose.Ittargetsa2%inflationrate,thecreationof600,000newjobsintwoyearsandastimuluspackagevaluedat￥20.2trillionor$210billion.Sincehiselectioncampaign,PrimeMinisterAbehasadvocatedathree-prongedmacroeconomicpolicyconsistingofboldmonetaryeasing,flexiblefiscalpolicy,andagrowthstrategy.Thethreepillarsofthepolicycanbedescribedasfollows:(1)AninflationtargettobesetbytheBankofJapan,additionalquantitativeeasing,andthelaunchofafundtobuyforeigngovernmentbonds.(2)Increasesinpublicinvestmentsforthelongtermundera‘nationallandstrengtheningplan,’andthecompilationofalargesupplementarybudgetasthefirststep.(3)AgrowthstrategytoenhancethecompetitivenessofbusinesslocationsinJapanintermsoftaxationandregulations.Withregardstothefirstpillar,ataMonetaryPolicyMeetingheldonJanuary22,theBankofJapansetaninflationtargetof2%andbroughtinanopen-endedassetpurchasingmethod.Onthesameday,thegovernmentandtheBankofJapanannouncedajointstatementregardingovercomingdeflationandachievingsustainableeconomicgrowth,whichindicatedtheBankofJapan’sstanceofincreasedcooperationwiththegovernmenttoovercomedeflation.Withregardstothesecondpillar,sincehiselectioncampaignMr.Abehasadvocated200trillionyenworthofpublicw...
