Japan's Abe: "Only Halfway to the Exit from Deflation"

Japan's battle with deflation started about a quarter century ago, and the battle is far from over.

Japanese Prime Minister Shinzo Abe just said, "We are only halfway to the exit from deflation."

After his December 2012 re-election, Abe initiated an unprecedented program of fiscal stimulus, monetary easing and structural reforms to jumpstart Japan's economy. But Katsuya Okada, the leader of Japan's main opposition party, has been critical of "Abenomics" (Financial Times, May 1):

'At this point you can't say [negative interest rates] are getting results,' Mr Okada said. … 'Further expansion of monetary policy, deeper negative interest rates — I think we should avoid them. …

'It's been three years and six months since the start of the Abe administration and I think people are getting tired of waiting,' Mr Okada said. 'Abenomics isn't producing results, life isn't getting better.'

Even so, in a meeting with former Federal Reserve Chairman Ben Bernanke, Abe indicated that he plans to employ more stimulus.

Read this excerpt from a July 12 Bloomberg article:

Japanese Prime Minister Shinzo Abe told former Federal Reserve Chairman Ben S. Bernanke at a meeting in Tokyo he wants to speed up the nation's exit from deflation, underscoring his commitment to implementing fresh economic stimulus.

'We want to be steadfast in accelerating our breakaway from deflation,' [Abe said on July 12].

Abe's remarks at the meeting, also attended by the Ministry of Finance's top currency official Masatsugu Asakawa and adviser Koichi Hamada, came before he ordered Economy Minister Nobuteru Ishihara to compile stimulus measures this month.

Speaking later, Ishihara didn't hint at the size of the package, saying it may be funded through the issuance of construction bonds rather than deficit bonds. The government indicated it wants to make full use of the low interest rate environment.

Hamada told reporters after the meeting that Bernanke asked Abe to carry on with his economic policies dubbed Abenomics by supplementing monetary policy with fiscal policy. Bernanke told Abe that the Bank of Japan still had the instruments to further ease monetary policy, said Yoshihide Suga, Japan's top government spokesman.

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