The three 'arrows' of Japan’s Abenomics, a policy programme which was launched three years ago with great expectations, are moving in varying paces and, generally, too slowly, according to a noted Japan expert.
The monetary policy arrow of quantitative easing was implemented very well, in part because it was "easy to do”, said Asian Development Bank (ADB) institute dean and CEO, professor Naoyuki Yoshino, speaking to fDi Magazine at the annual meeting of the ADB held in Frankfurt in May 2016. The initial effects were positive, with the yen depreciating substantially, and the stock market booming. But with the government still struggling to defeat deflation, official interest rates have now been moved into negative territory, he noted.
"The Bank of Japan had wanted the banks to lend more money to business to stimulate the economy, but this has not happened", said Mr Yoshino. "The banks claim that there is no demand for extra finance from big companies, and that they cannot lend to small and medium-sized enterprises or start-ups because of stringent requirements on their capital holdings."
The fiscal policy arrow of Abenomics involves progressively increasing the consumption tax to put public debt on a sustainable path. Japan's gross public debt now stands at 230% of GDP, by far the highest of all advanced countries, according to the Organisation for Economic Co-operation and Development.
The consumption tax was increased from 5% to 8% in 2014, and is scheduled to increase again from 8% to 10% in 2017. "It is imperative to increase the consumption tax next year, and not postpone the increase again, despite any possible adverse short-term economic impact", stressed Mr Yoshino.
To deal with the effect of Japan's ageing population, he recommends encouraging seniors to continue working by replacing Japan's seniority-based wage system with one based on productivity.
Mr Yoshino said that increased female participation in the workforce could be facilitated by a more rapid expansion of childcare facilities, and by promoting teleworking from home. "It is also necessary to change Japan's group work ethic", he said. "Women should not be forced to stay late in the office, waiting for the boss to leave. They should be allowed to leave early to be with their families."