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Japan's Big Spending 'Abenomics' Sparks Interest From Ailing Europe

Japan's Big Spending 'Abenomics' Sparks Interest From Ailing Europei
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June 22, 2013 2:41 AM
Not many politicians can claim to have had economic theories named after them - but the Japanese prime minister is now one. Shinzo Abe's program of big spending and loose fiscal policy has been dubbed 'Abenomics' - and with Japan recently showing what looks like strong growth, there have been calls for ailing European economies to adopt a similar strategy. Henry Ridgwell reports from London.

Japan's Big Spending 'Abenomics' Sparks Interest From Ailing Europe

Henry Ridgwell
— Not many politicians can claim to have had economic theories named after them, but the Japanese Prime Minister is now one. Shinzo Abe's program of big spending and loose fiscal policy has been dubbed 'Abenomics' - and with Japan recently showing economic growth, there have been calls for ailing European economies to adopt a similar strategy.

Laughing with his fellow leaders at the final photo opportunity in Lough Erne, Japanese Prime Minister Shinzo Abe appeared highly satisfied with the outcome of this week's G8 summit in Northern Ireland.  He spoke at a press conference Tuesday.

Abe said that in the global economic discussion as well as in the bilateral talks, a strong interest was shown in the Japanese fiscal and growth strategies.

Analysts say much of that interest has come from Europe - which is suffering from low or negative growth, much like Japan had for the last two decades.  

"The short term relief that these programs can bring is, of course, something that is very welcome, would be very welcome in large parts of the euro area," Tobias Blattner, European Economist at the Japanese firm Daiwa Capital Markets.

Shinzo Abe describes Abenomics as having three 'arrows': monetary policies, or keeping down the value of the yen currency; huge fiscal stimulus - essentially printing more money; and encouraging growth through deregulation and policies like getting more women into the workforce.
 
So far it appears to be having an effect.

The yen has tumbled by over 20 percent against the dollar since last year.  That helped Japanese exports soar at the fastest annual rate in May since 2010 - up 10 percent from the previous year.  In the first quarter of 2013, Japan's economy grew by an annualized rate of 4.1 percent.

So should Europe's ailing economies take a leaf out of the book of Abenomics?  Takuji Okubo, Chief Economist at Japan Macro Advisors urges caution.

"When you look into the contents of the growth, you do see that half of the growth is coming from public demand such as public works, government consumption and that is still concerning, and that says that Japan's economy is still not self-sustaining," Okubo said.

When French President Francois Hollande visited Tokyo earlier this month, some French and Japanese media suggested he was going there for a lesson in 'Abenomics.'  France's economy meanwhile fell back into recession last quarter.  Hollande had this response.

"We have very different situations.  France is in the eurozone, and together with our partners, working together. Japan has the sovereign right to decide on its monetary policy and conditions alone," he said.

Blattner says President Hollande is being realistic. "Implementing the kind of Abenomic policies would not even be possible in the current framework.  It would only be possible at an aggregate level and, of course, there we have the skepticism of the core member states, the northern European economies like Germany, the Netherlands," he said.
 
So while Shinzo Abe appears to be speeding Japan's economic recovery - it seems Abenomics might not be one of the country's many exports.

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by: Kitagawa keikoh from: Daikanyama, JPN
June 22, 2013 7:54 PM
Japan had experienced the WW II and atomic bombs, and after that we have been working very hard to become one of the world top economic countries.
That's why we are recovering from the economic crisis, not because such meaningless politic strategy as Abenomics.

In Response

by: Yoshi from: Sapporo
June 23, 2013 10:41 PM
I think EU couniries need not pay attention to Abenomics because it seems merely a tempolary economic recovery.
Actually yen is again getting weak to dollar and stock plices are also getting down recently only a few months after the first action of monetary loosing. Those who have enjoyed weak yen and high stock prices are limited in big exporting companies and stock players.

Economic investment of firms is not yet prompted because domestic demands are not increased as expected. Workers wages and employment rate are not improved in general. A raise of consumption tax is planned next spring.

In Response

by: Samurai from: Japan
June 23, 2013 8:15 AM
I don't think Abenomix is meaningless. Mr. Abe is now following the way USA took several years ago, i.e., a departure from deflation. Japan has been in the straits of deflation for more than two decades. The only way to depart from the deflation is to cause Japan's economy to inflate (in this case, "reflation").

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