The Abenomics Difference: Three Arrows of Roosevelt Resolve in Japan

Abstract

This study investigates Japanese Prime Minister Shinzo Abe’s economic policy package, known as “Abenomics.” Abenomics is intended to end two decades of deflation in Japan, based on a Three Arrow approach (monetary policy, fiscal stimulus, and structural reform). This study examines how it is different from past policies and actions, its initial results, and the outlook concerning future results. In 1990, Japan’s asset bubble burst and the country became mired in two decades of deflation and low GDP growth. This study examines existing analysis and compare past policies to the present. It concludes that although the First Arrow (monetary policy) and Second Arrow (fiscal stimulus) have been able to achieve initial success, Abenomics may struggle to succeed without a firmly executed Third Arrow (structural reform). All three arrows are needed. However, many difficult barriers pose an obstacle for reform. American President Roosevelt also pursued aggressive measures in the 1930’s to take the United States out of the Great Depression. Roosevelt’s resolve was instrumental in his succeed. Japan will need seamless and simultaneous execution of the Three Arrows, along with aggressive Roosevelt Resolve to ensure success in its domain.