What are the consequences of Abenomics in Japan?

Abenomics is the name given by economists and policymakers to the Japanese government’s economic and social policies under Prime Minister Shinzo Abe.

In the beginning, Abenomics aimed to overcome deflation through monetary policies, temporarily support the economy through fiscal expenditures, and simultaneously implement painful structural reforms to return the economy to a growth path.

Abenomics had an immediate impact on Japan’s financial markets. The Abenomics policy had resulted in a dramatic weakening of the Japanese yen and a 22% increase in the TOPIX stock market index by February 2013.

The yen fell about 25% against the US dollar in the second quarter of 2013 compared to the same period in 2012, as a highly loose monetary policy was implemented.

Abenomics increased the cost of imports, such as food, oil, and other natural resources on which Japan is heavily reliant.

The Abe administration, however, saw this as a temporary setback, as a weaker yen would eventually increase export volumes.