Well into the second year of Abenomics, doubts have risen about the effectiveness of Japanese Prime Minister Shinzo Abe’s approach of boosting economic growth and overcoming deflation via “three arrows” of monetary, fiscal, and structural policy. Yet another set of disappointing data recently released for July has reinforced these doubts. As several key turning points approach before year-end, whether Abenomics will succeed or stumble is at the forefront of most traders' minds (whether they understand that or not). In the interest of some context for just how far Japan has fallen, we present 145 years of growth and XX-flation for the Japanese economy... one might argue that 'lost decade' or two is generous...
As one former Japanese Economic Policy cabinet member noted,
"I am very concerned [about the widening trade deficit], not about the widening of the trade deficit in itself, but about the fact that this widening is a result of a rising energy import burden. This situation cannot continue forever; we must reform our energy policies.”
"Monetary policy is just a placebo – it has no effect on real economic activity and certainly no effect on the longer-term growth path of the Japanese economy."
Source: Goldman Sachs