The economic legacy of the late Japanese Prime Minister Shinzo Abe is defined by a strategy of the same name.
Under ‘Abenomics’, Abe, who was shot dead Friday during an election campaign event, sought to revive Japan’s economy after more than two decades of stagnation following the collapse of an asset bubble in the early 1990s.
Abe’s strategy had three ‘arrows’ aimed at triggering economic growth and higher wages: loose monetary policy, fiscal stimulus and structural economic reforms.
Among the first two “arrows” Abe, who served as prime minister from 2006-07 and 2012-20, chaired ultra-low interest rates and quantitative easing, alongside tens of billions of dollars in spending on new infrastructure and cash.
Abenomics’ reform plan aimed to increase productivity by reducing bureaucracy and corporate taxes, and expand the nation’s rapidly aging workforce by encouraging the participation of more women, seniors and immigrants.
“We need to look to the future, rather than worrying about the present,” Abe said in a 2016 speech outlining his economic outlook.
“Japan may be getting older. Japan may be losing its population. But these are incentives for us.”
By most accounts, Abe, who resigned for the second time in 2020 due to ill health, had only partial success in turning the world’s third-largest economy around.
During his tenure, economic growth recovered from the doldrums of the 1990s and 2000s, exports surged and unemployment fell to its lowest level in decades.
Between 2015 and 2017, Japan posted eight consecutive quarters of positive growth – the longest streak in nearly 30 years.
But compared to the tumultuous decades of post-World War II expansion and the achievements of many of its ilk, Japan’s economy failed to impress.
Over the course of Abe’s nearly eight-year second term as prime minister (excluding 2020, when COVID-19 derailed the economy), real GDP growth averaged just 0.9 percent, according to an analysis by economist Kaya Keiichi.
Abe’s ambitious target of raising nominal GDP to 600 trillion yen by 2020 has never materialized and remains unmet to this day.
In addition, inflation and wage growth lagged behind expectations, dampening economic gains.
“While government policies can to some extent create a climate for reform and innovation by market participants, to actually increase labor productivity and increase investment in innovative technologies by companies, more efforts for self-reliance of households and companies are also essential.” That is what Min Joo Kang, senior economist for South Korea and Japan at ING, told Al Jazeera.
“In that respect, the improvement in the real economy was limited. However, I think it was a semi-success because it protected the Japanese economy from a sharp downturn.”
While Abe’s immediate successor and ally Yoshihide Suga promised to continue Abenomics, current Prime Minister Fumio Kishida has tried to move away from the strategy and instead tout a “new capitalism” more attuned to the gap between poor and Empire.
Last month, Abe labeled an economic policy paper drafted by politicians in his Liberal Democratic Party “idiotic” after the former leader viewed the proposals as critical of his signature economic policies, the Asahi Shimbun reported.
Jeffrey Halley, senior market analyst for Asia Pacific at OANDA, said Abenomics had produced “mixed results.”
“The lack of will to push through the third arrow of economic and trade reforms as Japan fell back into entrenched ways meant that the other arrows didn’t really manage to keep the lights on until the 2010s,” Halley told Al Jazeera. .
“There is still no inflation, the national debt is much higher and Japan’s trade barriers and corporate governance remain unmanageable as ever. The lack of progress was not due to Abe being strategically wrong, rather it was his failure to overcome entrenched domestic interests and government inertia to fully embrace and execute all the arrows.