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When he assumed office in December 2012 Japanese Prime Minister Shinzo Abe pledged a radical course of action to deal with Japan’s economic downturn. Since 1990 the world’s third-largest economy has been plagued by deflation and sagging consumer confidence creating what Japanese policymakers call the “Lost Two Decades.” Abe’s program, dubbed “Abenomics,” called for a combination of expansionary monetary and fiscal policy and structural reform. Throughout 2013 the Japanese economy showed signs of recovery and inflation was moving upwards, but Abe’s decision to increase the country’s consumption tax from 5% to 8% in April has produced the country’s fourth recession since 2008. In response to disappointing economic numbers, Abe announced last week that he is postponing a future increase in the consumption tax until 2017 and he called for new parliamentary elections next month. He justified his call for new elections by saying that he needed a mandate from voters to continue his economic program and pledged to resign if his Liberal Democratic Party (LDP) coalition did not win. Although the LDP is expected to triumph in next month’s vote, analysts question whether Abe has the stomach to continue major economic reforms in light of Japan’s recent recession and some criticize the upcoming election as a useless exercise.
This topic brief will discuss some of Japan’s economic programs and the progress of Abenomics, analyze the circumstances that led up to the recent parliamentary election, and prognosticate how the election could affect the implementation of Abe’s economic agenda.
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