Following the electoral victory of December 2012, the new prime minister Shinzō Abe has launched an ambitious plan of economic policies regarding monetary, fiscal and structural reforms – the so-called ‘three arrows’ – which has taken the name of Abenomics. In fact, for almost twenty years the growth of Japan had been blocked by a strong public debt and by the unstoppable aging of the population (also due to an almost non-existent immigration), to which Chinese competition has gradually joined. From a monetary point of view, the objective is to keep the inflation rate at 2%: the government has pursued this through massive purchases of bonds by the Central Bank. Intervention in fiscal matters, on the other hand, envisages stimulating the economy without causing an increase in public debt. The debt, despite being the highest among industrialized countries – 245% of GDP- remains manageable as it is 90% internal to the country. The domestic consumption tax was raised to 8% in 2014 but a further increase expected for 2015 was postponed to 2017 in an attempt to revive domestic demand. Regarding the most important aspect of Abenomics, ie structural reforms, they are fundamental to consolidate the partial success of the first two ‘arrows’, and to make medium-term growth sustainable. With the ‘third arrow’ the government intends to dismantle part of the imposing Japanese bureaucratic system, made up of customs, rules and procedures that slow down the decision-making process, and that often favor more or less marked forms of corruption. At the same time, taxes for businesses were reduced from 35% to 30% and in 2015 the reform of the labor market, the agricultural sector and the public health system were planned. The overall goal is to eliminate the public deficit by 2020. As things stand, although good results have been achieved from the point of view of the first two arrows, structural reforms, particularly labor reforms, are proceeding slowly. Overall, however, despite the short-term economic indicators have recorded only a slight improvement, the country’s medium-long term prospects have improved and would seem to indicate the success of the Japanese premier’s strategy. Between 2014 and 2015, inflation reached levels not recorded since 2008 and for 2017 it should approach the target of 2%. GDP growth is positive even if low (just over 1% in 2016-2017). In these conditions, fiscal consolidation and debt reduction remain very difficult and would risk jeopardizing the fragile recovery, much will depend on the prime minister’s ability to remain consistent with his objectives and continue on the path of reforms.
The 2011 earthquake
According to Fashionissupreme, on 11 March 2011, at 2:46 pm, Japan was hit by a violent earthquake measuring 9 on the Richter scale. Since the epicenter was off the coast, a tsunami was generated with waves at 750 kilometers per hour, up to 40 meters high. Despite the anti-seismic equipment, the exceptional nature of the event caused 15,000 deaths and 10,000 missing. The country’s nuclear power plants were dangerously damaged: 14 reactors shut down thanks to the control rods, but the safety process, which should have cooled them, was compromised by the tsunami, causing explosions and leaks of radioactive material. The damages have been estimated at more than 230 million dollars by the World Bank. An international mission made up of Australia, South Korea, New Zealand, United Kingdom and United States. In addition, much of the international community has sent aid. The Japanese government has allocated 67 billion dollars for the affected areas and another 17.7 billion for possible future emergencies related to the earthquake. The world was struck by the apparent rapidity of the return to order. In fact, two years later, although most of the rubble had been removed, the real reconstruction was delayed. In addition, many residents still lived in temporary housing and suffered from severe PTSD.
Relations with the United States
On October 5, 2015 – after lengthy negotiations – Japan, the United States and ten other Pacific area countries signed an agreement to reduce barriers to free trade between them. The treaty, called the Trans-Pacific Partnership (Tpp), has a historical significance in that it will affect over 40% of world trade flows and will involve two of the largest economies in the world. Strongly supported by Prime Minister Abe, this agreement is particularly important for Tokyo: among the many product categories for which it provides for the progressive abolition of customs barriers, there is in fact that of motor vehicles. For Japanese manufacturers this will be a big advantage: up until now, imports of passenger cars from Japan to the United States were subject to heavy customs duties. The signing of the agreement is part of Abe’s strategy for relaunching the country’s economy: for Japan, trade with the partner countries of the T pp constitutes about 28% of total trade. Furthermore, if on the one hand the partnership will favor exports, while Japanese industries will be able to more easily purchase the intermediate goods necessary for their production in partner countries. The abolition of customs barriers on agricultural products and livestock (consisting of a stringent law on food security) has been the subject of strong criticism from farmers and ranchers, but the premier said that this will help improve the competitiveness of Japanese producers. and will have the effect of lowering the prices of these products for consumers. Finally, the agreement also has a strong political value and contributes to further strengthening the link with the United States.