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2013 Vol.3
The Japanese Economy Will Not Be Strengthened by Abenomics


There is increasing hope that, after a six-year absence, the economic policy of Prime Minister Abe, known as Abenomics, will bring an end to stagnation in the Japanese economy. A weaker yen and higher stock prices seem to have changed people’s minds significantly. Abenomics was announced when a trend of a strong yen had already taken a turn, with the shrinking of current account surpluses. After unveiling two of the”three arrows”─drastic monetary easing and a dynamic fiscal policy─accelerated depreciation of the yen and a rapid increase in stock prices ensued all at once.
However, a weaker yen and higher prices will not necessarily lead to revitalization of the Japanese economy. This is because the issues facing the Japanese economy, including population aging, a slowing world economy, increased competitiveness of emerging countries, and soaring prices of natural resources, have not gone away. It is also hard to assume that the growth potential of the Japanese economy will rise even if the third arrow─a growth strategy that stimulates private investment─is unleashed.
The Japanese economy will not gain strength if people breathe a sigh of relief after observing a weaker yen and higher stock prices.
Even with the weaker yen, competition remains fierce with emerging countries, which have narrowed gaps with advanced countries.
The Japanese economy will not grow unless the country takes on the challenge of venturing into new growth areas. Companies are operating in a tough environment, facing a shrinking population, uncertainties about energy supply, and strict environmental regulations among other issues. However, it is necessary to take the different point of view that business opportunities exist even in such adverse circumstances.
Venturing into new areas entails risks. However, unless this happens, companies will have no choice but to continue with narrowmargin,high-volume sales in existing markets. What the government should do is create an environment that is appropriate for private-sector companies to compete and grow. The Japanese economy will gain strength only when more and more companies start to actively take on various challenges.