Voodoo Abenomics

Japan's Failed Comeback Plan

A supposed plan to revive the economy was what allowed Shinzo Abe to ascend to the Prime Minister’s post in December 2012. The plan—nicknamed Abenomics—failed. That’s mainly because it was never implemented. I should say it failed economically. Politically, it was a triumph that made Abe the longest-serving Prime Minister in Japanese history.

At the heart of the plan was a set of “three arrows”: 1) monetary stimulus; 2) fiscal stimulus (later changed to bold and flexible fiscal policy; and 3) structural reforms.

The concept was fine. The problem was that none of the three arrows works without the other two and the only one Abe was serious about was the first: monetary stimulus as a magic bullet. Somehow, reversing deflation and getting inflation back to 2% in two years would revive investment, hiring, consumer spending, etc. It never worked, and not just because Japan never came closer to the 2% infation goal.

The long essay in Foreign Affairs—published early in his tenure when confidence in his plan was still high—explains Abe’s thinking and why “Abenomics” failed so badly that, in an October 2021 poll, 70% of the public said the government should drop Abenomics.