bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

urlAlias

moreOnThisArticles

sponsorType

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

SCMP Editorial

The latest stimulus package for the Japanese economy exceeds expectations. It remains to be seen whether it achieves Prime Minister Shinzo Abe’s goal of increasing what he calls the country’s “escape velocity” from the drag of deflation. The total of 28 trillion yen (HK$2 trillion), compared with initial estimates of 20 trillion yen, is nearly 6 per cent the size of Japan’s economy, the world’s third largest.


Abe reshuffles Cabinet, picks controversial hawkish Inada as defence minister

Apart from fiscal measures such as government spending of 13 trillion yen, much of it on infrastructure, it is boosted by initiatives to encourage corporate spending like loan guarantees which take longer to achieve the aim of increasing demand and inflationary expectations.

After growing at an annualised pace of 4.5 per cent in the first quarter according to revised figures, Japan’s economy shrank by 1.6 per cent in the second quarter, due to weaker exports to China and the US and poor consumer spending influenced by bad weather. This shows how easily an economy with an ageing, shrinking workforce and low growth expectations is easily pushed off course.

Japanese Prime Minister Shinzo Abe presents economic stimulus package worth more than US$266 billion

Abe’s political stocks remain healthy after recent election successes, but Abenomics, as his economic policies are called, have had limited impact on incomes, spending and investment, key drivers of growth. It is doubtful the latest package will do much to reverse a deflationary spiral because, in the absence of productive investment opportunities, economists expect much of the money will be saved.
It is clear the success of Abenomics depends on the government firing all its ammunition. The key remains the so-called “third arrow” – structural reforms such as freeing up an inflexible labour market, dismantling over regulation of business and continuing to raise female participation in the workforce. Without the political courage to undertake such reforms, no amount of stimulus and monetary easing may snap fundamental restraints on Japan’s economy.


Japan’s massive stimulus package will fail without structural reform

Abe has said the cabinet reshuffle comes from his desire for the continued promotion of his economic policies, adding that 'Our biggest priority is the economy, we will implement all sorts of policies to pull Japan out of deflation as swiftly as possible'. Photo: EPA

epa05087299 A man (C) holds a 1000-yen bank note for offering before praying on the first business day of the new year at Kanda Myojin Shrine in Tokyo, Japan, 04 January 2016. Many Japanese business people visit the shrine on their first business day of the year to pray for wealth and business success. EPA/KIYOSHI OTA

Opinion

The key is Shnizo Abe’s so-called “third arrow” – freeing up an inflexible labour market, dismantling over regulation of business and raising female participation in the workforce
