In 2013, Japan’s new prime minister Shinzo Abe delivered his first policy address, vowing to revive economic growth and end two decades of on-and-off deflation. He planned to achieve this with the “three arrows” of Abenomics: bold monetary easing, flexible fiscal policy and a reform strategy to revive private investment.
Seven years on, he has little to show for it. Following October’s rise in value added tax, Japan revealed on Monday that gross domestic product shrunk at an annualised rate of 6.3 per cent in the final quarter of 2019. With the economy suffering a fresh shock from the outbreak of coronavirus, most analysts think a technical recession— defined as two consecutive quarters of declining output — is probable.
The big questions are whether a technical recession could turn into a deeper downturn; whether there is anything the government and the Bank of Japan can do about it; and where this leaves Mr Abe’s ambition to revive Japan’s economy as the prime minister’s own time in office draws to a close.