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BBC World Service

Will the arrows of ‘Abenomics’ hit their target in Japan?

Linda Yueh Dec 16, 2013
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BBC World Service

Will the arrows of ‘Abenomics’ hit their target in Japan?

Linda Yueh Dec 16, 2013
HTML EMBED:
COPY

Japanese Prime Minister Shinzo Abe came to power a year ago. His party’s policy of so-called “Abenomics” involves three “arrows” of economic reform: easy money from the central banks, government stimulus spending, and structural reforms aimed at boosting Japanese industry and competitiveness

So far, ‘Abenomics’ has worked by getting a lot of money into the Japanese economy. The Nikki stock index is up about 58 percent compared to last year. But the BBC’s Linda Yueh in Tokyo says there’s more to the story than that.

“While I certainly think the first two arrows — cheap money, which is the first arrow, and government spending to replace private spending, which is the second arrow — can have a very immediate short term effect, what I’m slightly unsure about is what’s going to happen when they finally fire the third arrow. So, I don’t know if you can hear around me, but I’m in Shibuya, which is a big shopping district, and it looks as if it’s really busy. Lots and lots of people going about. But the truth is, Japan is an aging economy with a shrinking population. There just aren’t enough people who have been buying as before. And that make ‘Abenomics’ — the third arrow — extremely difficult to achieve quickly.”

For more on the three arrows of Abenomics and how the Japanese economy is reacting, click the audio player above to listen to the story.

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