ESSA X Cainz DEBATE: “Has Abenomics been successful in Japan?”

September 12, 2020
Editor(s): Charlie Francis
Writer(s): Julia Hu, Anuk Kariyawasam, Ben Griffiths

*The speakers in this article are competitive debaters, and therefore the views expressed may not necessarily represent their beliefs or the beliefs of the organisation they belong to*


A dawn sets on the ‘Land of the Rising Sun’ as Prime Minister Shizo Abe resigns. Thus, we examine the effectiveness of the policies implemented over his term for Japan.

First Affirmative (Amber Lee)

Struggles of Japan’s economy, “The Great Stagnation”, is characterised by sluggish growth, burgeoning debt levels and long-term deflation. On surface, Abenomics appears inefficient to improving Japan’s dire stance with Japan’s average GDP standing at 4.9Trillion Yen today, where is sat in the 90s. Nonetheless, sanguine change through Abenomics has sprouted in areas which are just as pivotal. Longest serving Prime Minister of Japan, Shinzo Abe introduced his take on appropriate policy to rectify Japan of its problems. Importantly, we define Abenomics as the economic strategies and policies adopted by Shinzo Abe and the Liberal Democratic Party under his reign. This encompasses the three arrows. The three arrows were introduced as a strategy to re-strengthen Japan’s position from three angles: fiscal, structural reform and monetary policy. 

The third arrow, through the stimulus program was deemed successful in the domestic financial markets of Japan. This positively impacted an important field to investors, corporate governance and was accomplished through the adoption of a stewardship codex. The program aimed to boost corporate value with best practice, influencing the mindset of Japanese business leaders. This imposed removal pressures on company directors disregarding the shareholder’s value principle. Share buybacks in Japan to 2020 surged to a record high. From just April to December 2019, buyback quantities were approximated to be 6.3 trillion YEN (81.6 trillion AUD) and have been growing over the past 5 years. Moreover, dividend yields for TOPIX-listed companies have grown to about 2.5% less than 1% in 2006 according to Bloomberg-compiled data. These have surpassed record levels and the percentage of payout ratios of more than 30% has peaked to an all-time high of 73%, according to the same report. Implications of this, stem out to improved returns on equity and a bustling financial market with Japanese stocks up 92%. Importantly, stock market gains are an indication of economic growth. 

The election result that pushed the Democratic Party of Japan out of government reflected express voter disillusionment. The DPJ was notorious for going through many PMs. More critically concerning, was the tendency for DPJ MPs to tarnish international relationships. Whilst PM of DPJ, Yukio Hatoyama, increased tensions between the United States over basing arrangements, Abe strengthened ties with President Trump. Abe became the first foreign leader to meet president-elect Trump following his victory. Together, they constructed agreements like the “free and open Indo-Pacific” doctrine. Abe’s policies have been characterised by a strong focus on expanding Japan’s military and diplomatic profile. Through the amicable relationship with Trump, Abe was able to dissuade the removal of militants in South Korea, harnessing more defence to behove Japan’s national security. Having the “National Security Basic Law” enacted in 2016, Abe strengthened collective solidarity between Japanese and American Military forces.

Amid growing tensions between the US and China in recent years, works towards promoting Japan’s national security have been a great priority. Abenomics has had permeating impacts on reinvigorating financial markets and strengthening foreign ties.

First Negative (Ben Griffths)

Abenomics has been the grand plan of Shinzo Abe to reignite the Japanese economy and broader society from stagnation and recession, but it has been too insufficient, inconsistent, and unsustainable to truly be called a success. It is important to take a broad view of Abenomics that encompasses not only fiscal and monetary policy, but also the social sphere, structural reform, and the actions of Abe himself as these factors are both a part of and have an effect on the economy, therefore making them relevant. It is with this lens in mind that we take a view of Abenomics marred by ideological inconsistency, as Abe’s membership with the ultra-conservative “Nippon Kaigi” leads to destructive economic relations with crucial partner South Korea as well as placing excessive limitations on much needed structural reform.

The Bank of Japan has undergone aggressive expansionary policy to stimulate the economy, but this has failed to reach the 2% inflation target with numbers significantly below the OECD average. This also leaves little room for further monetary policy during the critical COVID-19 pandemic and the resulting recession. Inconsistent and contradictory fiscal policy exacerbates this failed stimulus, where government spending is incoherently paired with tax hikes, which caused the economy to shrink by 7.4% in 2014, with a further consumption tax increase to 10% threatening to further derail a vulnerable COVID-19 economy. This negates the potential to either stimulate growth or handle Japan’s ballooning debt and the challenges of an ageing population.

Societal structures are the bedrock of the economy, serving as the enabling conditions for growth and prosperity. For the reforms it has made, Abenomics has been insufficient, and for the reforms it has not made, vulnerable people have been left behind and key problems have been left unaddressed. When it comes to the much lauded “Womenomics” reforms, Japan lags behind significantly despite increased labour force participation, ranking 114th in WEF’s 2017 gender pay gap ranking, which is worse than their position in 2007. Corporate and work culture reform has caused company profits to increase, but this has come at the expense of an increasingly unequal income distribution, with rural communities in particular left to stagnate while an increasingly privileged subset prosper. Abenomics has also failed to address climate change, with Japan continuing to be a leading funder of coal with US$5.2 billion dollars spent, thus increasing the likelihood of climate induced economic catastrophe. Abenomics has also failed to address the poverty crisis amongst elderly – with 50% of elderly women projected to experience poverty – while Abe has scaled back much-needed benefits and proposed raising the retirement age.

Above all, Abenomics has failed to change a stagnant mindset, with consumer confidence at an average of 29.3%, which places a firm limit on the effectiveness of reforms and stimulus. This coupled with Abe’s ideological disposition creating disruptive spats with South Korea and an unwillingness to undertake necessary social reform renders Abenomics insufficient, inconsistent, unsustainable, and ultimately unsuccessful.

Second Affirmative (Jeremy Mann)

Despite the recent announcement that Japanese Prime Minister Shinzō Abe has decided to resign due to health concerns, the undeniable impacts of his economic policies will continue to leave a lasting legacy for years to come. Since taking office in 2012, Abe has sought to implement several measures aimed at increasing the nation’s money supply, bolstering government spending and increasing business competitiveness.

Given the stagnant nature of the economy that his government inherited, following a period of stagnation unable to be resolved through excessive quantitative easing, Abenomics aimed at addressing much-needed adjustments in both monetary and fiscal policy. In particular, these reforms entailed the introduction of government stimulus designed to increase domestic demand and consumption in the hope of stimulating short-term growth.

The pivotal underlying factor of Abenomics is to compensate for the ‘Lost Decade’ period ten years of deflation and low growth rates caused by a burst in the Japanese real estate market. Combined stimulus spending worth an estimated $USD 2.2 trillion over the past 8 years saw Japan’s real GDP levels reach over $5 trillion before the widespread economic destruction of COVID-19 in Japan, minimising the damage of the oncoming recession to a great extent.

In addition, the adoption of unconventional monetary policy such as negative interest rates and a rampant asset purchasing program by the Bank of Japan has helped to improve export demand by allowing for a more attractive exchange rate. Private investment has also improved significantly, recording $USD 820 trillion total after the introduction of the Japan-U.S. Trade Agreement in January this year.

Structural reforms focused on promoting higher labour force participation amongst women and seniors have coincided with a 27-year low in unemployment, standing at just 2.2 per cent at the end of last year. The ‘womenomics’ program has seen the number of women in the workforce jump by a record 3.3 million, as well as continuing to smash goals by promoting the importance of women in setting Japan’s economic and political agenda.

At the end of the day, Abenomics has been successful in achieving its core goal of reviving the Japanese economy and increasing profitability for the private sector. Undeniably, the COVID-19 pandemic has acted as a significant hurdle for governments across the world in the goal of securing long-term economic prosperity. In the face of a devastating recession, the legacy of Japanese Prime Minister Shinzō Abe through his forward-thinking policies have provided a vast array of significant benefits for Japan’s economy into the future.

Second Negative (Anuk Kariyawasam)

In this debate, the affirmative team has repeatedly failed to rebut facts about Shinzo Abe’s incompetence, weaving saviour narrative of Abe bringing Japan back from its slump into a prosperous, forward thinking economy. This is simply untrue.

Abe has been excessively reliant on expansionary fiscal and monetary policy. There are a number of reasons that this initiative has fallen short of its goals. The affirmative team claims that Japan’s pre-COVID stock market growth is evidence of the prosperity brought by his corporate policy. This is misleading and ignores the rampant inequality that plagues Japan, meaning that a majority of its population do not benefit from these gains. Furthermore, the period leading up-to 2020  was a massive global bull run, leading to questions about the true credit that Abenomics can take for these gains.

The $USD2.2 trillion spending being hailed as a success is also highly deceptive. While real GDP may have risen over $5 trillion, the annual growth rate in this same period has been abysmal, rarely going over 2%. Furthermore, this excessive spending has resulted in astronomical debt comprising 236% of 2019 GDP. As previously established, this debt won’t be easy to manage, demonstrated by the massive 7.4% shrinkage in the economy caused by the 2014 increased consumption tax. Abe has created a structurally flawed economy propped up by rampant spending and critically vulnerable to cuts in spending or external shocks. This is further proven by the epidemic of “zombie companies” in Japan, largely due to government stimulus holding up inefficient companies and preventing market-led reform. The Bank of Japan is currently one of the largest listed shareholders  in Japan but doesn’t exercise voting rights, delaying corporate restructuring, hurting labour productivity, and creating significant adverse economic impacts.

The affirmative team has unduly praised Abe’s dependence on the US with its free trade initiatives while ignoring the adverse impacts of his failure to connect with South Korea. Abe’s nationalistic politics has been damaging to Japan’s relations with its closest neighbours and should-be economic partners, instead trying to maintainan unreliable and protectionist Trump as a trading partner.

Womenomics is a perfect example of Abe’s failure to give Japan much needed social reform and it is stunning that the affirmative team attempts to paint this positively. Here are a few problems gender equality faces in Japan.

•           For single elderly women, the poverty rate could reach 50%

•           Japanese women are expected to run out of money 20 years before they die

•           Women in Japan only make 73% as much as men

•           Women only represent 10% of Japan’s lower house, ranking 161st in the world for female political representation

It is impossible to argue that Japan did well given the circumstances since Japan has worsened its gender equality ranking since 2007.

In conclusion, Abenomics cannot be selectively praised for its small victories while ignoring its glaring failures. Japan is a G7 nation with great potential and Shinzo Abe failed to deliver the necessary reform to realise it.

Third Affirmative (Lawrence Huynh)

There has been a severe lack of attempt from the negative team to delve beneath superficial, surface-level assumptions and figures. Further, no investigation into the roots of Japan’s innate, socioeconomic issues that cannot be exclusively pinned on Abenomics have been made.

Firstly, in response to the ‘astronomical debt’, is debt in Japan legitimately a concern? See my article here.

In response to the ‘excessive reliance’ on debt and the three-arrow strategy, know this: the aforementioned asset price bubble burst in the 1990s and the Lost Decade called for inevitable fiscal recovery methods. To scrutinise Abenomics for fairly achieving what several prime ministers failed to solve is equivalent to scrutinising any nation’s attempts to solve monetary issues following a financial crisis; as my colleagues mentioned, Abenomics rejuvenated Japan and tapered off some of its most prevalent issues. If policies could solve everything, there would be no socioeconomic problems anywhere; it is an unfortunate truth, analogous to Pareto optimality.

Secondly, the negative team argued that Womenomics has failed because gender inequality has not been solved… did the negative team actually research the initial KPIs in Prime Minister Abe’s Davos Promise in 2014?

  • 77% female labour participation rate between ages 25-44 by 2020
  • Normalising the percentage of women returning to work after their firstborn to 55% by 2020
  • Targeting 30% female representation in leadership positions by 2020
  • Expanding childcare capacity by 2017
  • Lifting paternity leave figures to 13% by 2020
  • Augmenting parental leave policies
  • Enforcing company data releases on gender diversity
  • Reforms to work-style

Kathy Matsui, the woman who idealised Womenomics herself 20 years ago, conveyed in the 2019 Goldman Sachs Womenomics 5.0 report that half of these targets have been successfully completed, three are proceeding, and only one – female leadership representation – is sluggish. Resultingly, Japan’s female labour participation rates are well above the World Bank averages. Parental leave benefits are among the most generous in the world. In December 2017, 99.7% of companies submitted mandatory gender diversity action plans. A remarkable 815 companies as of April 2019 were awarded ERUBOSHI certification, recognising firms that have standout initiatives to promote female participation, retention and promotion. Holistically, indeed, more progress needs to be made, but Abenomics has set the sailing ship for addressing deep-rooted sociocultural problems in a nation that has been systemically conservative, inherent in Asian culture for centuries.

The negative team has made assumptions that Abenomics has failed based on data that has never been Abenomics’ direct focus in the first place. Perhaps consider learning what Japanese people really think about the gender gap themselves, remembering that Abenomics has never sworn to solve gender inequality in its entirety, but to incentivise women work-life balance and stabilise the shrinking workforce. As such, for exactly what Abenomics set out to achieve, the progress that has been made in a country that firmly held to traditional social structures has been a phenomenal achievement and a step in the right direction.

Third Negative (Julia Hu)

By selectively focusing on the short-term impacts of Abenomics, the affirmative team has neglected how it has failed to achieve its goal of long-term economic change. Indeed, even though policies cannot solve everything, this is no excuse for implementing harmful, short-sighted policies that fail to create sustainable economic, structural, and social change.

Firstly, the affirmative team would have you believe that Abe’s flippant use of fiscal and monetary policy, coupled with Japan’s looming debt are not areas of legitimate concern. However, the current domestic savings that have fuelled bond purchases and financed debt will only fall as the elderly population continues to grow. As more people earn and save less, Japan’s current account surplus will inevitably head into deficit, such that the marginal debt holder will be foreign, rather than Japanese. This chain of events threatens the invincibility of Japan’s public debt model, and Abe’s inability to significantly decrease debt levels means that he has left a far more difficult economic situation for the future of Japan. Abe’s continued reliance on expansionary fiscal policy has exacerbated debt levels, which has not only placed Japan’s future in a more precarious position but generated unremarkable short-term performance.

Secondly, the affirmative team has not addressed Abenomics’ inability to create real structural change. While they have attempted to demonstrate the success of Womenomics, they have failed to delve deeper into the surface-level figures and the concerns raised by women in the linked video on gender discrimination. While female labour participation rates may have reached the desired numbers, poverty rates for women will still reach 50%. This demonstrates that most women are still working in places that provide low income and support, leading to eventual unemployment, and thus revealing the unsustainability of Abe’s Womenomics. Hence, the real issue here is not whether Abe has managed to achieve his KPIs, but rather if they were appropriate and effective in achieving the desired structural reform.

Thirdly, the affirmative team has neglected to consider any of the key societal issues that we have brought up. As our previous speakers have highlighted, societal structures are the foundations for the economy. However, the worsening income distribution and poverty levels in Japan means that the government faces stagnant economic growth in the future. Likewise, by failing to address climate change, Abe places Japan in the trajectory of unsustainable economic growth and development. Rather than consolidating a prudent economic strategy, Abenomics has relied on inconsistent fiscal policies. The continual change between increasing taxes versus delivering fiscal stimulus packages has damaged the economic prospects of rural areas while widening the unequal distribution of wealth. This in turn has runoff impacts in lowering the birth rate, and thus decreasing Japan’s future economic output.

It becomes clear that like Abe, the affirmative team has failed to take a closer look at the long-term impacts of Abenomics. While Abe has made significant changes compared to his predecessors, it is apparent that Abenomics has not been successful in creating the sustainable, long-term economic change that Japan needs.

The CAINZ Digest is published by CAINZ, a student society affiliated with the Faculty of Business at the University of Melbourne. Opinions published are not necessarily those of the publishers, printers or editors. CAINZ and the University of Melbourne do not accept any responsibility for the accuracy of information contained in the publication.

Meet our authors:

Charlie Francis

Charlie is a Bachelor of Commerce student majoring in Economics and Finance. He is interested in macroeconomics, politics and current affairs.

Julia Hu
Anuk Kariyawasam
Ben Griffiths