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.
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.