Japan’s Abe is out. But his economic legacy will last for decades

Shinzo Abe announced plans on Friday to cut short his stint as Japan’s prime minister, citing ill health — but the legacy of his economic policies will endure for decades.

The backstory: Abe took office in 2012, promising to reinvigorate the world’s third largest economy through massive monetary stimulus, increased government spending and structural economic reforms.
The program has delivered mixed results. Falling prices were vanquished, but inflation has fallen short of the 2% target set by the Bank of Japan. The economy turned in several years of solid growth, but it wasn’t able to shift into high gear before the coronavirus struck.
Abe can’t pin his program’s shortcomings on Haruhiko Kuroda, who took control of the country’s central bank in 2013 and won another five-year term in 2018. Under Kuroda’s leadership, the Bank of Japan fired a “bazooka” that saw it push interest rates into negative territory, purchase waves of government bonds and gobble up exchange-traded funds.
Why it matters: The buy-everything strategy pushed the Bank of Japan into what some economists regarded as “unconventional” monetary policy. It now looks rather less so.
Major central banks around the world have responded to the economic crisis caused by the coronavirus pandemic by slashing interest rates to new lows, while launching huge quantitative easing programs that resemble those initiated under the banner of Abenomics.
In the United States, the Federal Reserve has cut interest rates to zero but is under pressure to do even more. It’s buying $700 billion worth of bonds, providing credit facilities to large companies, purchasing commercial mortgage-backed securities and even splashing out on exchange-traded funds like the Bank of Japan.
Abe’s policies are expected to remain in place for the foreseeable future. Analysts expect the prime minister to be replaced by another member of his party, and there’s little prospect of a shakeup at the Bank of Japan. The resignation means that Abenomics will end in “name only,” said Tom Learmouth of Capital Economics.

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