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2015 Vol.1
Outlook for the Japanese Economy in 2015

Going beyond Abenomics, the Japanese economy will grow


The results of the December 2014 lower house elections are viewed as a public endorsement of Abenomics, which had been in place for more than two years at the time. However, the economy has started to contract despite the quantitative goals of Abenomics being achieved: yen depreciation, high stock prices, low interest rates, and rising prices. The mood of the country is worsening as it faces these troublesome facts. Concerns about the future success of Abenomics seem on the verge of outweighing confidence in the policy. In spite of this gloomy picture, the economy is expected to recover somewhat in 2015. The gradual growth of the global economy will continue, and export and production will rebound. Although rising prices resulting from yen depreciation decrease real income, falling crude oil prices have curbed increase in consumer prices and shored up real income. Consumer spending will resist downward pressure. If there is an increase in plant and equipment investment, which has been limited to now, we will be able to see a scenario for recovery more clearly. At the same time, post-deflation issues have been brought into sharper focus. While demand has continued to falter against a backdrop of slowing growth of the global economy, investment in facilities, equipment, and human resources has been reduced. These factors have resulted in diminished growth potential. That is, supply is restricted and demand is lacking. Such a situation definitely calls for a growth strategy, with the third `arrow’ of Abenomics playing this role. However, it is not Abenomics that will lead the economy away from the predicament of zero potential growth: it is the vitality of the private sector that will push the economy forward by creating new growth sectors. In 2015, the private sector must think more positively, discarding the fixed idea that only Abenomics can save the Japanese economy. The economy can truly see an end to deflation only when people shift away from deflation-inducing behavioral patterns.