Does Abenomics Rescue Corporations and Revitalize the Industries of Japan?

The “Three Arrows” policies adopted by the current Abe administration are a combination of macroeconomic (monetary as well as fiscal) and microeconomic policies. Abe came up with the policy-mix in order to resolve two serious economic troubles that his administration faced when it assumed the top executive role in December 2012. First, since Japan’s asset bubble burst in 1990, the economy suffered from a nagging recession for more than twenty years, namely “Lost Decades” in which deflationary spiral became a serious concern for policy makers. Second, because of the prolonged recession, income, corporate as well as household, declined to lower tax revenue. As long as fiscal expenditure continued to rise thanks to social welfare costs especially for elderly care and medical purposes, the government had to rely on bond issue to finance the ever expanding social programs. Consequently, in a long run, the fiscal discipline was lost. In sum, the Japanese economy was facing two basic macroeconomic troubles that had not been effectively tackled upon by the previous conservative administrations of the Liberal Democratic Party.