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Age of Abe
Japan Hits a Growth Streak

After four years of lofty promises and limited returns, could Abenomics finally be working? Japan’s latest economic data certainly gives reason to think so. FT:

Japan has recorded its longest run of sustained growth in more than a decade as stimulative policy and a healthier global economy lead to a period of robust progress.

Growth for the first quarter of 2017 came in at an annualised 2.2 per cent, according to the Cabinet Office, marking five quarters of continuous expansion in gross domestic product.

The figure beat the consensus analyst forecast of 1.7 per cent and is far above Japan’s long-run growth potential of roughly 0.7 per cent. That suggests the economy is using up spare capacity and unemployment will keep on falling.

Some of Japan’s growth is being driven by factors beyond Prime Minister Abe’s control: since Trump’s election in November, for example, a weakening yen has helped make Japanese exports more competitive.

Regardless, the data is good news for Abe, who came to office promising that his cocktail of monetary easing, fiscal stimulus and structural reforms could reverse decades of stagnation and deflation. Tokyo is still struggling with inflation; prices and wages are rising slower than expected. Still, the real growth figures are trending in the right direction, and an uptick in Japan’s perennially low consumer spending is a promising vote of confidence in the economy.

Domestically, the rosy forecast could strengthen Abe’s mandate to pursue his economic agenda more aggressively. Recent signals from the Bank of Japan suggest that Abe’s easy monetary policies and ultra-low interest rates are here to stay, and the Prime Minister has lately turned his eyes to reforming Japan’s rigid labor laws. If Japan can sustain its positive growth and see prices and wages respond in kind, Abe’s political capital for pursuing such reforms will only increase—and he could redeem a policy that many have prematurely written off.

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  • Unelected Leader

    While not closed as much as China, the Japanese market is largely closed insofar as the top 30 export industries are concerned, and that’s because Japan protects them. Add to that a 35% devaluation of the Yen since the fourth quarter of 2011, and you see exports exceed imports by nearly 3:1.

    Japan, Korea, and other Asian states have engaged in currency manipulation not simply because it’s what China spent years doing, but because it is smart. Protectionist policies work. Americans, in the aggregate, are some of the biggest dupes on the planet. We are told protection/protectionism is great for life, liberty, property, financial protection like home, auto, life insurance, and protection for intercourse, but it is bad to protect American jobs and wages.

    • Suzy Dixon

      You’ll never be a politician. You’re too smart. Too honest. And you’ll never get funding from the multinationals

  • seattleoutcast

    Japan has had growth spurts since 1990. There is no continuous growth. Keynesian economics do not work. If they did, Japan would have recovered by 1994. I remember all of the roads to nowhere built in the 1990s. Roads that did nothing but take money away from the elderly.

    • tellourstory

      Japan also has a humongous debt problem. The last debt to GDP ratio I’ve seen has Japan at 229%. Japan is notorious for its high tax rates and much of that revenue goes to paying down the debt.

      The truth is Japan’s economy has been a coma patient on life support for sometime. The government has been using stimulus packages to give the body an electric shock every now and again to give it some semblance of life. Japan’s economy will only really begin to recover when they finally admit that the patient is dead and have to address the real problems.

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