Shinzo Abe’s imminent resignation as Japanese prime minister has local markets worried. What will become of his Abenomics monetary and fiscal policy? A more pointed question to ask is what it had done. Abenomics aimed to boost economic activity and end Japan’s deflationary period. There is evidence that during Mr Abe’s last time in office, the longest by any Japanese prime minister, Abenomics did have some positive effects. But it did not boost inflation.
Mr Abe was not the first to try. Korekiyo Takahashi, a former finance minister and prime minister, tackled deflation in the 1930s, years before John Maynard Keynes published his General Theory. Takahashi’s efforts worked. Evidence on Abenomics is at best mixed. Deflation in Japan, as measured by the consumer price index, did abate. From late 1999 until Mr Abe took over (for the second time) as leader in late 2012, prices had declined in most months from the year previous.
Mr Abe made a big show of inflation signalling, with speeches not just in Japan but around the world. He rang the bell at the New York Stock Exchange in 2013 with “Buy my Abenomics”. In the first year of his term, Mr Abe did encourage a massive monetary and fiscal push to its economy, notes Peter Tasker at Arcus Investment.
Yet after that, not enough…