Can Abenomics revive the Japanese economy?

Abenomics refers to economic policies advocated by Shinzō Abe, the Prime Minister of Japan. It involves:

– fiscal stimulus through government spending on mega projects
– monetary easing through unconventional central bank policies
– structural reforms by reducing corporate taxes, increasing company profits and finally higher wages.

Is Abenomics Working?

It showed some positive signs in the early stages, however as a result of Abenomics, Japan’s Government Debt to GDP ratio has reached a new hike at 227.2 percent, and about 15.6 percent of tax revenue goes to cover debt interest every year.

 

japan-government-debt-to-gdp

The tax dilemma – Japan would have to increase tax revenue again to put their debt on a sustainable path. If a tax increase is put off, social welfare costs will become an issue with Japan’s aging population. However, if higher consumption tax rates derail the economic recovery, all efforts will sink.

Abenomics_Infographic

Reference: www.tradingeconomics.com, uk.saxomarkets.com