Abenomics: an update

Michael Roberts Blog

Back in 2012 when Japanese PM Abe came to power, he launched a new economic policy that was supposed to get Japan out of its seemingly permanent deflationary stagnation.  The ‘three arrows’ of this policy were 1) to print money and take interest rates down to zero and beyond to stimulate consumer spending – so-called ‘unconventional monetary policy’; 2) to increase government spending and run sizeable budget deficits to ‘pump-prime’ the economy in traditional Keynesian-style; and 3) to introduce ‘structural reforms’ i.e. labour and market deregulation in the neo-liberal approach. Warning – graph alert!

Former Fed chair Ben Bernanke, the architect of unconventional monetary policy, was flown to Abe’s Cabinet meetings to advise on the first arrow.

Japan monetary base

Paul Krugman, the great guru of Keynesian stimulus policies, was also flown in to advise on the second arrow; while Abe himself tried to implement the third arrow with sharp cuts in corporate…

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