When Prime Minister Shinzo Abe took the reins, he promised that his radical plan would get Japan’s economy growing again. Now, his aggressive mix of monetary and fiscal stimulus policies (often referred to informally as Abenomics), which has had its ups and downs, has produced a first-quarter real GDP growth of an annualized 2.4 percent, outpacing economists’ predictions.
“We thought it would be a matter of time before things turned upbeat, but my impression today was that things have turned brighter earlier than expected,” the chief economist at Nomura Securities Co. said. Household spending was up, and growth buoyed by the robust exports facilitated by a weakened yen—the result of the Bank of Japan’s easing policies. The only data point casting doubts on the sustainability of the recovery was a buildup of inventories, suggesting consumption may still be lagging.
The U.S. is rooting for the success of Abenomics as much as anyone, Japan being the most important counterweight to China’s ambitions among our allies in Asia. With fears of a rising China in mind, Abe is also easing restrictions on Japan’s military and boost its defense industry; just today, the government ruled to allow domestic defense firms to build submarines for Australia, in a sale that would be Japan’s first of lethal weapons since World War II. This recent economic uptick could mean more political capital for Abe (not to mention more real capital in general) as he keeps steering Japan off its pacifist course and into the path of the dreadnought Beijing.