Abenomics weiter auf Erfolgskurs? : Japans Wirtschaft vor und nach der Anhebung der Konsumsteuer 2014

Abenomics as Success Story? Japan’s Economy before and after the Consumption Tax Increase

One and a half year has passed since Prime Minister Shinzō Abe launched his ambitious economic revival plan widely known as »Abenomics«, aimed at exiting deflation and putting Japan’s economy back on a sustainable growth path. It consists of three »arrows« – aggressive monetary easing, flexible fiscal policy and a long-run growth strategy. While the first two arrows have already been implemented, the third – possibly the most important – arrow is still on its way. Implementing all three mechanisms in a simultaneous way has proved difficult. However, in March 2014, Abenomics seemed to have realized its desired effects in terms of a stronger growth and a trend of rising consumer prices. But after the government finally decided to raise the consumption tax from 5 to eventually 10 per cent to spur fiscal consolidation in September 2013, concerns arose whether the measures envisioned by the »Japan Revitalization Strategy« would enable economic actors to resist the anticipated negative impact of the tax hike. A closer look at the key elements of economic growth reveals medium to long-term downside risks in private consumption as well as government consumption. With little possibility for the trade balance to improve in the short to medium term, decisive structural reform is needed to strengthen private investment. So far, the sharp drop of domestic demand following the first stage of the tax hike in April 2014 has confirmed pessimistic views. If the slowdown of the economy prolongs, resistance to deregulation might grow and a timely and comprehensive implementation of Abenomics’ third arrow seems to be unlikely.