Shinzo Abe came to power in December of 2012 with a strategy he called "the three arrows." Everyone else in the world has taken to calling it "Abe-nomics." Roughly approximated, you might call it: Inflate, stimulate, and deregulate.
How's it working? Depends who you ask.
Inflate: Fighting the deflationary monster
Deflation, or the threat of deflation, has stalked Japan for nearly 20 years. Deflation is poison for economic growth. Consumers put off today's spending because things will be cheaper tomorrow, wages don't rise, and both of those things reinforce future deflation.
Abe appointed a new Central Bank president, Haruhiko Kuroda, and they went to town on the money supply and interest rates. They proclaimed a goal of doubling the monetary base and achieving inflation of 2 percent within two years, says Georgetown University's Arthur Alexander: "It was like a 222 program, very easy to sell, bumper sticker type of policy."
Some results were immediate.
Longer term bond yields rose as people began to expect inflation and demand protection against it.
"The new approach was also reflected in the exchange rate," says Stanford University's Takeo Hoshi. "It depreciated between 20 and 30 percent in the last year and a half," again reflecting people's expectation that inflation would at some point make the Yen less attractive – a good sign if you are trying to break the back of deflation.
Finally, inflation as measured by consumer price indices eventually rose above 1 percent. Japan may not get to the 2 percent Abe would like, but it’s certainly better than a zero or negative number.
Abe has put forth a major stimulus package, but that, plus the ongoing expense of rebuilding after the Fukushima disaster, has resulted in a government debt of 227 percent of GDP. The country’s fiscal situation was problematic to begin with, and this has made some Japanese even more concerned.
"People are seriously divided," says Ulrika Schaeda, who teaches Japanese business at the University of California, San Diego. It's reminiscent of the debates over government spending here.
A value added tax was introduced on April 1, but opinion is mixed as to whether it is sufficient to stabilize Japan's fiscal situation.
Deregulate: structural reform and the Big Picture
"The verdict on Abenomics will depend on whether or not they do the structural reforms," says Anil Kashyup, professor of Finance at the University of Chicago's Booth School of Business. The structural reforms are the big picture problems.
"There's all kinds of frictions that make Japan an unappealing place to do business," says Kashyup. Starting a business, getting hired full time, even finding childcare is hard in Japan.
Some parts of Japan's economy are subsidized, protected, and unproductive says Kashyup.
"Rice in Japan is seven times the price on the world market," says Arthur Alexander, adjunct professor at Georgetown University. It appeared for a time that some headway was being made on opening Japan up to more international trade and a more vibrant retail sector, "but domestic politics seems to have reared its ugly head," Alexander says, referring to a cooling in negotiations between the U.S. and Japan over the Trans Pacific Partnership trade agreement.
This is the most difficult of Abe's arrows to guide, and it's what Japan watchers will be following closely. So in some ways Japan has changed a lot in a year.
The question is, will it keep changing?