The revival is only months old, and its staying power remains very much up for debate. But already it has surpassed what many Japanese thought was possible for an aging country whose decline had started in recent years to feel inexorable.
The architect of this resurgence is Prime Minister Shinzo Abe, who took office in December pledging not only to recharge Japan’s economy but also to change the way Japan thinks about itself. “Japan is back,” he frequently tells audiences. And he has deployed the most radical economic policymaking plan of Japan’s 20-year post-bubble era to make it so.
His strategy, commonly dubbed “Abenomics,” calls for a combination of monetary easing, government spending, and economic reforms — “three arrows,” he says, in reference to a samurai teaching that three arrows bundled together won’t easily snap.
None of the arrows, by itself, is revolutionary, but they reflect a breadth of vision and coordination that no leader until Abe seemed interested in. His ambition for a more vibrant Japan fits with the zeitgeist. Regain lost might, many Japanese think, and they’ll be better equipped to contend with an increasingly boisterous China, which took Japan’s spot in 2010 as the world’s second-largest economy.
Abe’s chief goal is to end a 15-year period of deflation, the vicious cycle of falling profits, prices and wages that squelches consumer appetite and slows economic growth.
So far, only the first two of Abe’s arrows have been fired. In January, Abe signed off on a 10.3 trillion yen (roughly $100 billion) stimulus and, more significantly, pressured the central bank to overhaul its conservative monetary policy. The bank complied last month, announcing a 2 percent inflation target and saying it would nearly double the amount of money in circulation.
Dating back to their early 1990s, more than a dozen Japanese prime ministers have tried to grapple with the nation’s economic woes. But none until Abe convinced the central bank to pursue quantitative easing on such a mass scale. Economists now criticize the bank for its decades of excessive caution, failing to stir investors, and abetting what people here describe as two “lost decades.”
The early returns on Abe’s approach are promising. Since November — the point when investors began anticipating an election victory for Abe’s Liberal Democratic Party — Japan’s stock market has surged some 60 percent. Car sales are increasing at their steadiest rate since 1985. And in the first quarter of this year, the gross domestic product grew at an annualized rate of 3.5 percent.