Abenomics Case Study

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Introduction

Since the burst of the Japanese asset price bubble in the early 1990s, the GDP growth of Japan was slowed that leads to unemployment and different economic problems.. Japanese government also suffered the global economic recession that leads to a huge loss in GDP and export. Therefore, new economic policies was needed. Shinzo Abe was elected as Japanese prime minister in December 2012 general election. As he promised to revive growth immedately and fold up the deflation in the election, He announced plans to implement new economic reforms in just a few weeks after Shinzo Abe government taking office. The economic reforms approved by Abe which called Abenomics aimed at restoring strength in the world's third largest economy.
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Abenomics include "three arrows" of bold fiscal policy, rapid implementation of effective monetary policy and structural reform to support private investment.
In fiscal policy, there is a massive increase through government spending. The Abe government implemented expansionary fiscal policy along with efforts for a fiscal surplus. It includes public spending on infrastructure and renewable energy. For example, Abe introduced about 60 billion in public works spending in his 2013 budget for Japan. There is also tax cuts for companies for restructure. This is a short-term fiscal stimulus which aim at reviving economic growth in Japan immediately through increasing government spending and public works investment.
In monetary policy, Abe implemented quantitative easing which includes open-ended asset purchasing and buying long-dated bonds. For example, Abe got the Bank of Japan to double its inflation target to 2%. He has even suggested that the bank print "unlimited yen" to help achieve its inflation target. The aims of quantitative easing policy is to reduce real interest rates and this is a policy to end

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