Abenomics

12 Key excerpts on "Abenomics"

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  Financial Crisis and Bank Management in Japan (1997 to 2016)

  Building a Stable Banking System

  • Mitsuhiko Nakano(Author)
  • 2016(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  Shinzo Abe, the leader of the LDP, became the prime minister in January 2013. He needed to propose a bold macroeconomic policy during the election to clarify differences from the DPJ government and to break through the economic situation prevailing at that time. Abenomics was the term conjured up as a compound word describing the new policies: ‘Abe’ and ‘economics’. In January 2013, the Abe administration announced the economic plan, ‘Emergency Economic Measures for The Revitalization of the Japanese Economy’. At the beginning of the plan, the key concept was clearly stated as follows. ‘This was the first of a series of packages by adopting a three-prolonged strategies aimed at the “revitalization of the economy,” “post-quake reconstruction” and “crisis management” by adopting a three-pronged strategy consisting of bold monetary policy, flexible fiscal policy and a growth strategy that promotes private investment. The implementation of these measures is different from past measures in both its scope and its reach.’ 2 Abenomics included three strategies called ‘the three arrows’. 4.2.2 Three Arrows Monetary Policy The first arrow was bold monetary policy that included further monetary easing. The new governor of the BOJ Haruhiko Kuroda, 3 inaugurated in March 2013, announced his new monetary policy at the beginning of April. The new policy incorporated the following three targets, as shown in Table 4.1. The first was to realize a price stability target of a 2 per cent increase of the CPI Core, which is the Consumer Price Index (CPI) less fresh food, 4 within the next two years. To realize that goal, both the outstanding balance of the monetary base and that of long-term Japanese Government Bonds (JGBs) held by the BOJ would be doubled during the next two years. Simultaneously, the average duration of JGBs held by them would be extended: actually more than doubled

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  Peak Japan

  The End of Great Ambitions

  • Brad Glosserman(Author)
  • 2019(Publication Date)
  • Georgetown University Press

    (Publisher)

  Making the case for Abenomics, the government highlighted the need to change Japanese thinking. Surveying the two lost decades, the architects of the strategy concluded that “far graver than the economic losses, however, were the losses of confidence and future hopes among company managers as well as individuals.” 36 Addressing the country’s demographic challenges, the authors of the revitalization strategy two years later noted that the country was “under a sense of crisis” and “can afford no further delay to overcome the declining population issue.” 37 The Abe administration argued in the “Basic Concept of Revising Japan Revitalization Strategy” that “totally new ideas and . . . unconventional ideas” must be employed “to take a decisive step to part with the past successes, and to take a new step forward towards the unknown world.” 38 Hammering the point home, it insisted that “answers cannot be found in the ways of doing things as in the past or reliance on others.” Urgency is needed: “Japan has limited time.” 39 Nevertheless, Abenomics resembles in many ways—but not all—conventional economic policy. The first arrow, monetary expansion, is a radical shift for Japan. In an open-ended commitment to add liquidity to the market, by the end of 2015 the BOJ was purchasing assets of around ¥80 trillion ($660 billion) annually and was going to start buying ¥300 billion annually of exchange-traded funds that track the JPX-Nikkei Index 400, in addition to the ¥3 trillion in exchange-traded funds it has purchased annually since late 2014. 40 This move was a historical policy change, especially for a country that has prized monetary stability and harbored a profound aversion to even the risk of inflation and the instability it could generate. The second arrow, fiscal stimulus, has been a staple of LDP policy

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  Japan's Future and a New Meiji Transformation

  International Reflections

  • Ken Coates, Kimie Hara, Carin Holroyd, Marie Söderberg, Ken Coates, Kimie Hara, Carin Holroyd, Marie Söderberg(Authors)
  • 2019(Publication Date)
  • Routledge

    (Publisher)

  Part I

  Japan in a changing world

  Security, economics and politics

  Passage contains an image

  2 New Meiji’s economics and finance

  Is Abenomics successful and sustainable? Most probably not

  Axel Berkofsky

  The discussion about the Japanese need for reinvention rests largely on the dissatisfaction and concern about the country’s persistent economic stagnation. Prime Minister Shinzo Abe presented an aggressive “three arrow” economic strategy that he felt would reignite Japanese exports and prosperity. Axel Berkofsky examines the fate of “Abenomics” and argues that the new policies are not likely to be sufficient to overcome almost two decades of underperformance and set to rest concerns about the country’s long-term economic strength.

  Introduction

  “Abenomics” was supposed to provide a “big bang” for Japan’s sluggishly growing economy and return the country to sustainable economic growth rates, when Prime Minister Shinzo Abe announced in 2013 the adoption of his “three arrows” economic, fiscal and financial strategy: first, Abe promised central bank quantitative easing (QE); second, he would provide fiscal stimulus and third, structural reforms. As it has turned out, however, two of these three policies making up “Abenomics”—quantitative easing and fiscal stimulus—look increasingly unsustainable and too costly, possibly doing more harm than good to the Japanese economy in the long term (Matthews, 2015).

  Today and five years later, the only arrow of “Abenomics” that is arguably able to travel any further is structural reforms. However, many of the structural reforms that Abe promised Japan have yet to be adopted and other structural reforms have not even made it onto Tokyo’s policy agenda. In 2013, it was announced that the Bank of Japan’s (BoJ) monetary easing and the resulting weak yen would increase exports, private investments, and private consumption. This is turn would lead to sustainable inflation (2 percent was and still is the [seemingly unrealistic] target) and an increase in Japanese wages (The Economist

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  Gradual Institutional Change in Japan

  Kantei Leadership under the Abe Administration

  • Karol Zakowski(Author)
  • 2020(Publication Date)
  • Routledge

    (Publisher)

  LDP’s electoral victory and the formation of the Abe cabinet in December 2012 signified that Abenomics had become one of the crucial policies of the new government. In his policy speech to the Diet in January 2013, Abe stated that he considered “prolonged deflation and the appreciation of the yen to be shaking from their very base the foundations of trust in society that ‘those who work hard shall be rewarded’” (Prime Minister of Japan and His Cabinet 2013d). As stressed by the prime minister, “It will be impossible for us to break free of deflation and the appreciating yen by dealing with them in ways that are an extension of what we have done thus far” (Prime Minister of Japan and His Cabinet 2013d). For that reason, Abe declared his intention to “press forward with economic revival under the three prongs of bold monetary policy, flexible fiscal policy, and a growth strategy that encourages private sector investment” (Prime Minister of Japan and His Cabinet 2013d).

  Abenomics was a well-timed initiative. Although it can be perceived as a set of policies proposed by the METI, it fitted Abe’s convictions and was eagerly embraced by him in the electoral campaign. Having learned a bitter lesson under his first administration, Abe needed a policy agenda that would appeal to the voters. The popular support for the “three arrows” and the first signs of economic recovery fueled the decision-making process on implementation of the bold economic plans.

  Decision-making bodies on Abenomics

  The first decision-making bodies on Abenomics were established inside the LDP even before its victory in the parliamentary election. After returning to the post of LDP president, Abe created the LDP Headquarters for Japan’s Economic Revitalization, whose first meeting took place on October 24, 2012. It was chaired by Abe, with his close associates LDP Policy Research Council Chair Amari Akira as deputy chair and Motegi Toshimitsu as secretary-general. METI bureaucrats used this body to exert influence on LDP’s economic policy before the upcoming election. They particularly took advantage of their connection with Amari, who had served as the minister of economy, trade and industry from 2006 to 2008. However, it was Abe himself who put strong pressure on the Headquarters to include such bold policy goals as the 2% inflation target in its mid-term report from mid-November 2012 (Karube 2018: 10–41).

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  Unconventional Monetary Policy and Financial Stability

  The Case of Japan

  • Alexis Stenfors, Jan Toporowski, Alexis Stenfors, Jan Toporowski(Authors)
  • 2020(Publication Date)
  • Routledge

    (Publisher)

  Shinzo Abe was elected for a second time as prime minister in December 2012, after having stepped down in 2007 just a year after assuming office due to “illness, policy setbacks and a slew of scandals” (Nakamoto et al., 2012, para. 5).

  The primary aim of Abe, as with many of his predecessors, has been to end decades of stagnation and deflation, returning to sustainable economic growth. The policy package launched, dubbed ‘three arrows of Abenomics’, was composed of fiscal stimulus, massive monetary expansion and structural reforms in line with a growth strategy, which to a large extent aimed at promoting private investment. The combined aim of the three arrows was to achieve “a vibrant economy that will register over 2% labor productivity in the medium- to long-term, and around 3% nominal gross domestic product (GDP) growth and around 2% real GDP growth, on average, over the next ten years” (Prime Minister of Japan and His Cabinet – Kantei, 2013, p. 2).

  The monetary arrow

  By far the most pronounced measures have been those taken on the monetary front. In this pursuit, Prime Minister Abe needed a strong ally in the key position of the central bank’s governor, which he found when Kuroda assumed his current office in March 2013.

  Soon after, in April 2013 the Bank of Japan introduced Quantitative and Qualitative Monetary Easing (QQE): the monetary base became the main operating target instead of the uncollateralised overnight call rate, an inflation target of 2% was introduced and large-scale asset purchases at a rate of ¥60–70 trillion per year was initiated (Bank of Japan, 2013).

  Governor Kuroda summarised the main channels through which he expected the stimulus to be transmitted in a speech to the Yomiuri International Economic Society in Tokyo in April 2013. First, he argued the purchase of Japanese government bonds (JGBs), exchange-traded funds (ETFs) and Japanese real estate investment trusts (J-REITs) would create downward pressure on long-term rates and decrease risk premia, stimulating demand for credit. Second, the continuation of asset purchases from investors and private institutions would eventually lead them into switching their portfolios to holding riskier assets and stimulating lending activity. The last transmission channel he mentioned was the impact that the commitment to generate inflation would have on the expectations of markets and economic entities.

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  Japanese Political Economy Revisited

  Abenomics and Institutional Change

  • David Chiavacci, Sébastien Lechevalier, David Chiavacci, Sébastien Lechevalier(Authors)
  • 2020(Publication Date)
  • Routledge

    (Publisher)

  There are, therefore, two contrasting views amongst supporters of Abenomics. On the one hand, we see those who are positive about Abenomics on the grounds that it seeks to promote consumption, investment and growth. On the other hand, there are those who believe Abenomics will be successful, provided that it includes a strong commitment to the furthering the liberalisation of Japan. What each of these interpretations misses, however, is that the liberalising elements of Abenomics also act to create insecurity for Japanese workers, whilst at the same time relying upon an expectation that there will be increased consumption – presumably from the very same workers who are experiencing heightened income insecurity. In the absence of sufficient provisions to improve the economic security of Japan's workers/consumers, therefore, it is difficult to see how a renewed social compromise (required to underpin a return to growth) can be constructed. Indeed, such a social compromise would include a set of policies and socio-economic institutions that have the potential to contain social tension and popular discontent (especially that of Japan's growing share of non-regular workers) and generate temporary economic growth. Long-term economic growth cannot be realised without both carrying out wide-ranging reforms (Patrick 2016, p. 8) and addressing declining wages and growing precarity. Non-regular workers, in particular, are vulnerable to declining income and (given that they are a growing proportion of the workforce) therefore represent a significant obstacle to attempts to stimulate consumption. In this sense, Abenomics lacks a plan through which to create a much-needed socio-economic compromise that could re-introduce some of the mechanisms of cooperation that underpinned the preceding (more successful) 'classic' model of Japanese capitalism. Without re-establishing such a compromise, moreover, firms will continue to be under pressure to reduce costs in order to be able to compete within increasingly globalising markets; weaker firms (especially SMEs) and industries (especially the agricultural industry), in particular, will be likely to become unsustainable under a heightening level of competition. As we can see, therefore, policies implemented as part of Abenomics contain a number of contradictions that might not have been fully addressed.

  In addition to these underlying contradictions, Abenomics also represents (to an extent that has often gone unnoticed) a continuation of policies that have already been adopted by preceding governments, but which have thus far failed to achieve a return to growth within the Japanese economy. On these grounds, therefore, we might be less optimistic that Abenomics is able to restore growth to Japan. In particular, the third arrow of structural reforms in Abenomics shares similarities with policies implemented by the preceding governments of Nakasone, Hashimoto and Koizumi. For instance, former PM Nakasone (1982-1987) sought to increase the internationalisation of the Japanese economy, including through trade liberalisation (including that of agricultural trade), alongside attempts to achieve a fiexibilisation of labour markets, and deregulation of finance (Tiberghien 2014, p.

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  Issues in Global Business

  Selections from SAGE Business Researcher

  • SAGE Publishing(Author)
  • 2021(Publication Date)
  • SAGE Publications, Inc

    (Publisher)

  7

  Abe, who briefly served as Japan’s prime minister in 2006–2007, was elected again in 2012. The ambitious economic program he calls Abenomics seeks to correct the nation’s trade imbalance and end two decades of deflation, as well as address serious demographic issues. The plan’s three prongs, or “arrows,” include monetary easing, fiscal expansion and structural reform.

  Abe’s first arrow is loose monetary policy. Because Japan’s benchmark interest rate has been at zero for years, that involves what is known as quantitative easing. Japan’s central bank, the Bank of Japan, is buying government securities to pump more money into the economy and thus raise consumer spending and bring about inflation—years of deflation battered the Japanese economy. The bank has gone through two rounds of bond buying, but it has been unable to raise inflation to 2 percent.8

  Description

  Japan’s Decades of Weak Growth

  Note: Figures for 2015–17 are projections.

  Sources: Data for 1985–2014 downloaded from the World Bank, http://tinyurl.com/o3z46zw ; estimates for 2015–17 downloaded from the World Bank, http://tinyurl.com/nvbuzwo .

  The second arrow, expansive fiscal policy, involved $116 billion worth of government spending, including for infrastructure projects designed to repair damage from the catastrophic Great East Japan earthquake of 2011.9 Other government spending goals included expanding foreign trade, investing in renewable energy, promoting research and development, supporting small businesses, improving access to health care and expanding tourism.10

  Description

  Map: Major Earthquakes in Japan

  Note: Points on maps are approximations based on U.S. Geological Survey mapping data.

  Sources: “Japan’s Biggest Earthquakes,” Live Science, Apr. 8, 2011, http://tinyurl.com/oxcgu5z ; “Earthquake Archives” map tool, U.S. Geological Survey, accessed Sep. 25, 2015, http://tinyurl.com/m4ksz7h

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  Japan’s Long Stagnation, Deflation, and Abenomics

  Mechanisms and Lessons

  • Kenji Aramaki(Author)
  • 2019(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  seen in the preceding chapters, the corporate sector, which is the central player in the Japanese economy, assumed a very defensive attitude during the long stagnation and deflation. Such a defensive attitude started in the early 1990s under pressure from the persistence of unprofitable excess assets after the burst of the bubble, and it was drastically strengthened and structuralized in the shock of the financial crisis in the late 1990s. Such structuralized defensiveness has a self-reinforcing nature, whether due to an excessively defensive mindset or to rational choice. Restraint on investment tends to lower growth rate, and therefore, further restraint on investment may be justified. Restraint on labor costs tends to lower consumption, and therefore, resultant stagnation in sales and profits may well justify further restraint on wages. Furthermore, restraint on investment and labor costs could lead to deflation, rewarding risk avoidance (cash holding brings return). Repeated use of fiscal stimuli to support weak growth resulting from the defensive attitude of companies aggravated fiscal position, and may have raised anxiety for the future of households, thus strengthening defensive behavior of households. Expectation of population decline exists as an additional source of concern for both companies and households. Through all these channels, the Japanese economy has been led to an equilibrium governed by low-growth expectation and wariness about the future.

  In late 2012, the Liberal Democratic Party (LDP) came back to the power, and Mr. Shinzo Abe, President of the LDP, started his second premiership. He initiated a comprehensive package of economic policies, which was soon dubbed “Abenomics.” Initial responses in the markets were quite significant.

  We will see in this chapter, first, what the Abenomics is; second, what impacts it has brought about; and, third, whether the core problem of the Japanese economy has been addressed and improved.

  1 Abenomics

  Start of Abenomics

  On November 14, 2012, then Prime Minister (PM) Noda of the Democratic Party (DP) declared in the Parliamentary discussion with Mr. Abe, president of the LDP, that he would dissolve the House of Representatives in two days, that is, on November 16. In the election on December 16, the LDP had won a landslide victory, gaining 294 seats from the pre-election level of 119, out of the total 480 seats, while the DP suffered a crushing defeat of reducing its seats by three-fourths from 230 to 57.

  On December 26, 2012, the second Abe administration started and adopted its “Basic Policy” in the first cabinet meeting, in which it was stated about the economy:

  A strong economy is the source of Japan’s strength. Without its revival, there is no restoration of fiscal soundness nor Japan’s future.

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  Growth, Crisis, Democracy

  The Political Economy of Social Coalitions and Policy Regime Change

  • Hideko Magara, Bruno Amable, Hideko Magara, Bruno Amable(Authors)
  • 2017(Publication Date)
  • Routledge

    (Publisher)

  3    Abenomics and Japanese politics Masanobu Ido Introduction

  In its beginning, the twenty-first century was believed to be the century of a revived America and global finance capitalism. Although the global economic crisis of 2008 appeared to put this rosy picture into question, we are clearly still living in a world of global finance capitalism. In this “brave new world,” the rise and fall of a national economy are mainly determined by foreign investors (in particular, hedge and pension funds), rating agencies, and international organizations, such as the International Monetary Fund. In today’s globalized world economy, the autonomy of national economic policy is seriously curtailed. Political leaders of all the countries are under the constant pressure of the neoliberal doctrine “Implement neoliberal economic reforms and maintain fiscal discipline, otherwise you cannot survive the global economic competition.” Yet, even if we accept the validity of the neoliberal mantra, can we expect that democratic political leaders, who are accountable to the population, can replace the post-war Keynesian policy regime, which closely linked them to their political supporters, with a neoliberal policy regime? In this study, this question is investigated by examining Abe’s economic revival plan, the so-called “Abenomics.”

  In the wake of the 2008 global economic crisis, the Democratic Party of Japan (DPJ) took power from the Liberal Democratic Party (LDP) by arguing for a shift in economic policy. However, it ultimately lost public support with its bungled handling of the relocation of the US military base in Okinawa; this led to the strain in US-Japanese relations, its failure in crisis management relating to the Fukushima nuclear disaster after the Great Eastern Japan Earthquake on March 11, 2011, and finally, its internal conflicts and ultimate breakup. In the 2012 general election, with its slogan “Reclaiming Japan,” Abe’s LDP came into power for the first time in three years and nine months. The Abe cabinet quickly put its economic revival program, Abenomics, into practice to rescue Japan from its 20-year economic stagnation, the so-called “Lost Two Decades.” With his Abenomics, is Abe replacing post-war Japan’s Keynesian policy regime – more precisely, its conservative version under the long LDP rule – with a new neoliberal policy regime, or is Abenomics merely a cosmetic upgrade of the old policy regime? The question is whether Abe, a leader of the LDP (comprising the old institution that is strongly linked to Japan’s post-war growth), can realize a neoliberal economic reform that will sacrifice the LDP’s old clients such as the farmers and the construction industry?

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  Japan Decides 2014

  The Japanese General Election

  • Robert J. Pekkanen, Ethan Scheiner, Steven R. Reed, Robert J. Pekkanen, Ethan Scheiner, Steven R. Reed(Authors)
  • 2016(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  Part IV

  Governance and Policy

  Passage contains an image 13 Abenomics in the 2014 Election: Showing the Money (Supply) and Little Else

  Gregory W. Noble

  Prime Minister Shinzo Abe’s electoral platform in the December 2014 House of Representatives election cast continuation of “the three arrows of Abenomics” – monetary easing in the form of expanded purchases of bonds and other assets by the Bank of Japan (BOJ), “nimble” fiscal policy, and structural reforms to improve the flexibility and productivity of the economy – as the only way forward for Japan. This claim cleverly highlighted the lack of distinctive and convincing alternatives from the opposition. The opposition parties blamed Abenomics for falling incomes and increasing inequality, but they failed to put forth compelling alternatives. Two minor exceptions involved a symbolic conflict over opposition proposals to cut the number and remuneration of Diet members and bureaucrats, and the LDP’s insistence on prompt restarts of shuttered nuclear generating plants. The 2014 election thus became a performance contest pitting the shaky status of the economy under the LDP–Komeito coalition government against the voters’ complete lack of trust in the competence of the opposition parties. Many voters abstained, but enough showed up at the polls to give the LDP an overwhelming victory.

  This chapter begins with a review of the economic context surrounding the election. Though Japan faces severe economic and demographic pressures, short-to-medium term prospects were more positive than generally recognized, making Abenomics more plausible and the alternatives less compelling. A brief overview of the previous stances of major parties, especially agreement to increase the consumption tax, is followed by an equally brief look at the LDP’s framing of Abenomics as the centerpiece of the coalition’s electoral appeal. The chapter then provides a more detailed look at the stances of the parties on taxes, spending and structural reform as seen in manifestos and slogans, candidate surveys, and campaign activities. An examination of the initial, quite limited, impact on policymaking gives way to a final evaluation of “Abenomics” as an electoral issue and implications for future elections.

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  The Political Economy of the Abe Government and Abenomics Reforms

  • Takeo Hoshi, Phillip Y. Lipscy(Authors)
  • 2021(Publication Date)
  • Cambridge University Press

    (Publisher)

  In one vision, employees would have a choice between higher wages with more obligations or lower wages with fewer obligations. Abenomics took a further turn with the 2015 announcement of three new arrows. Politically, the new arrows were meant to assure voters that Abenomics had not lost momentum and to demonstrate that the government was occupied with issues of public concern. They also indicated a shift in economic strategy toward policies that would support a higher birthrate; increase the workforce, espe- cially among women and the elderly; make workers feel more secure; and raise wages to increase disposable income. The three new arrows would be: a strong economy that gives hope; a childcare system that fosters dreams; and a social security regime that provides reassurance (Prime Minister’s Office 2015). Unlike the first three arrows, these came with specific targets, albeit without deadlines: the largest nom- inal GDP in postwar history of 600 trillion yen, a birthrate of 1.8 Abe’s Slight Left Turn 285 children per woman, and no one having to quit a job to care for family members. The Abe administration’s slight left turn in labor policy reflected a classic LDP strategy that had served it well for decades: preempting the opposition. The LDP embraced environmental protection and social welfare policies in the early 1970s, when the opposition was threatening the party’s dominance by advocating those policies. Prime Minister Koizumi (2001–2006) stole the thunder from the opposition by advo- cating structural economic reforms, and he then went one step further by embracing the opposition’s critique of the LDP as clientelistic and cor- rupt, proclaiming that he would clean it up. The opposition parties and the labor unions had been advocating more generous family policies and equality in the workplace for decades – and here was Abe suddenly saying the same thing. “The LDP leaders are clever,” laments Rengo’s Yoko Murakami.

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  Japan's Great Stagnation and Abenomics

  Lessons for the World

  • Masazumi Wakatabe(Author)
  • 2015(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  Figure 2-1 ). Structural reform ideology may have worked as a “bad” idea in the previous period since it diverted public attention from macroeconomic issues to the “structural factors.” But when reflation is under way, market-oriented reforms are sorely needed. The biggest irony is that the intellectual appeal of structural reform is weakened when we need it most.

  V. Conclusion

  Immediately after the launch of Abenomics, Christina Romer called it a “policy regime shift” (Romer 2013). This is true and explains why the first arrow matters most. First, the first arrow is the real innovation in Japanese macroeconomic policy, which breaks away from the exiting policy idea trap. Some commentator said that Abenomics is a rehash of old policy, just on large scale: “For all the buzz about status-quo-shaking reforms, bold ideas, and a revolution in competitiveness, Abenomics sure looks a lot like what Japan has been doing for 20 years now—just on a bigger scale and with a splashier marketing campaign” (Pesek 2014, 186). This is correct for the other two arrows, but it is not so for the first arrow since the first arrow has never been implemented in the past. The BOJ had engaged in a large-scale, QE-type expansionary monetary policy but had not committed to any specific price target, and the BOJ terminated the policy prematurely in 2006. Second, there is a saying in macroeconomics that “it takes a heap of Harberger Triangles to fill an Okun gap” (Tobin 1977, 468), which means that any summation of microeconomic gains (Harberger’s triangle) cannot beat macroeconomic gains in terms of the magnitude (Okun’s Law). If Japan achieves a 2 percent inflation rate, the unemployment rate must fall, and the growth rate must increase. The exact amount is uncertain, yet this effect is more certain than the third arrow. Third, one can expect positive spillover effects to other areas such as reforms and redistribution. The reduction in the real interest rate induced by the first arrow would lead to increased investment, which is a major source of productivity-enhancing innovation. Also, with the tightened labor market, firms would look for labor-saving inventions, and the government is under pressure to change institutions. It is telling that Japanese policymakers have now begun discussing the use of female workers and a foreign workforce earnestly, although it would still take some time for the Japanese to agree on this front. As for redistribution, reflation is at least decreasing the unemployment rate, and thus the poverty rate.

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