Abstract
Abenomics was announced suddenly with the inauguration of the Abe administration. Most people, including economists, were surprised at the backbone of the policy because it was a combination of monetary policy and fiscal policy. The Bank of Japan (BOJ) had already launched a comprehensive monetary policy using every policy tool imaginable. The cumulative debt of the government had reached about 200 per cent of nominal gross domestic product (GDP). However, Prime Minister Abe proposed a further monetary easing policy and a further expansionary national budget. This resembled a very risky policy of passing a point that, when crossed, permits no return. Abenomics actually compelled banks to rebalance their asset portfolios by buying long-term JGBs that the banks had held. The banks shifted their funds from JGBs not to lending but to reserves at the BOJ. It must be understood that this shift was the first stage of rebalancing the banks’ asset portfolio. However, it should also be understood that banks never shift their funds to lending unless the Japanese economy can be clearly shown to escape from deflation.
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Notes
- 1.
There had been only one time after 1955 that a non-LDP party had formed a government. That period was from August 1993 to June 1994. That coalition government consisted of eight political parties without the LDP and the Japanese Communist Party.
- 2.
The Cabinet Office ‘Emergency Economic Measures for The Revitalization of the Japanese Economy’ (11 January 2013, p. 1).
- 3.
Governor Kuroda used to be the Vice Minister of Finance for International Affairs in the MOF during 1999–2003 and the Governor of the Asian Development Bank from 2005 to 2013.
- 4.
The BOJ defined ‘CPI Core’ as an index of CPI excluding only perishables.
- 5.
The total amount was about 101 trillion yen, of which 75 trillion was used for purchasing financial products and 26 trillion for lending.
- 6.
The monetization policy had been adopted during World War II in Japan. It was criticized as a means of providing limitless money to the government for execution of the War. Then the Finance Act generally prohibited the BOJ to hold long-term JGBs. However, at this time, the BOJ rejected this concern because it did not buy the bonds directly from the government but from the banks.
- 7.
The Cabinet Office ‘Emergency Economic Measures for The Revitalization of the Japanese Economy’ (11 January 2013, p. 2).
- 8.
In April 2009 the Aso Cabinet adopted the largest emergency economic package in history. Its size was 56.8 trillion yen with government expenditures of 15.4 trillion.
- 9.
The Cabinet Office, ibid.
- 10.
Hattori (2014, p. iv).
- 11.
The Cabinet Office, ibid.
- 12.
Typical reflationary scholars explain the total framework of Abenomics theoretically in Kikuo Iwata et al. (2013).
- 13.
Kikuo Iwata (2013, pp. 155–156).
- 14.
Sakakibara and Wakatabe (2013, p. 15).
- 15.
Ono (Ono and Kayano 2013, pp. 158–169) stated that Japan became matured and people’s desire shifted from goods and services to money itself.
- 16.
- 17.
Actually in September 2015, Standard & Poor’s cut Japan’s long-term credit rating one level from AA− to A+ because there seemed to be little chance of success for the Abe administration’s strategy to improve the poor outlook for economic growth and inflation over the next few years.
- 18.
Obata (2013, pp. 114–120) alarmed that depreciation of the yen-dollar exchange rate would trigger off a sharp drop of JGB price.
- 19.
Shinjiro Koizumi, a MP of the LDP and a son of a former prime minister Koizumi, criticized the election in that no real necessity could be found for it.
- 20.
The duration of the LDP governorship was 3 years for one term, with no more than two consecutive terms.
- 21.
MUFG acquired the preferred stock of 9 billion dollars of Morgan Stanley in September 2008 right after the Lehman Shock and established some joint subsidiaries like Mitsubishi UFJ Morgan Stanley Securities Co. Ltd.
- 22.
The original name was Vietnam Export Import Commercial Joint-Stock Bank.
- 23.
Figures are based on data of the contractual cash earnings for all industries in the ‘Monthly Labour Survey’ of the Ministry of Health, Labour and Welfare.
- 24.
The basic corporate tax rate was reduced from 30 per cent to 25.5 per cent from January 2012 and to 23.9 per cent from January 2015.
- 25.
This special income tax was intended to raise funds for reconstruction of areas damaged by the Great East Japan Earthquake and tsunami. This special tax is assessed on individuals and firms during the 25 years from 2013 through 2037.
- 26.
Shirakawa, the former governor of the BOJ, referred to the limitation of monetary policy under the further monetary easing situation in his lecture at a conference sponsored by the Federal Reserve Board and the International Journal of Central Banking in March 2012.
- 27.
TPP was a free trade zone without a custom tax. The 12 nations surrounding the Pacific Ocean reached agreement in principle in October 2015.
- 28.
The objective of the measure in non-euro nations was to devalue their currencies against the euro; this was in the further monetary easing policy set by the ECB.
- 29.
In the meeting held on 19 February 2016.
- 30.
The rate was quite a bit lower than VAT in the European nations, but the appropriateness of the level of a sales tax rate should be examined considering both payment of taxes and receipt of total benefits as a taxpayer.
- 31.
Nikkei newspaper (2 February 2016).
- 32.
The General Headquarters administration of Japan (GHQ), mainly governed by Douglas MacArthur, General of the US Army, was in operation after World War II. The LDP which Prime Minister Abe belongs has argued that Japan had been compelled to adopt the current Constitution by the GHQ.
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Nakano, M. (2016). The Launch of Abenomics and Its Effects on the Banking Business. In: Financial Crisis and Bank Management in Japan (1997 to 2016). Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-54118-5_4
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DOI: https://doi.org/10.1057/978-1-137-54118-5_4
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