Has Abenomics Been Successful?

Posted: June 19th, 2016

By Randall Jones

Prior to joining the OECD, Randall Jones worked for five years in Washington; Staff Economist at the Council of Economic Advisers (1984-85), Vice President and Senior Economist at the Japan Economic Institute (1985-87), and International Economist, Planning and Economic Analysis Staff, US Department of State (1987-89). Since joining the OECD's Economics Department in 1989, Dr. Jones has worked on Ireland and the Slovak Republic, in addition to Korea and Japan. In 2002, he became head of the Japan/Korea Desk. Dr. Jones has written all 15 OECD Economic Surveys of Korea and 13 OECD Economic Surveys of Japan, in addition to other publications.

Over the past two decades, Japan’s economic growth has been sluggish. Per capita income fell from a level matching the top half of Organization for Economic Cooperation and Development (OECD) countries in the early 1990s to 14 percent below in 2013 (Figure 1). The collapse of the massive asset price bubble of the early 1990s was followed by an extended period of corporate restructuring and a banking crisis. Furthermore, weak growth has contributed to Japan’s serious fiscal problems by limiting the increase in government revenue. Rising spending, driven by an aging population and frequent fiscal stimulus packages, has been financed largely by borrowing, which has driven gross government debt to the highest levels ever recorded in the OECD. Persistent deflation has also been a headwind to growth and contributed to the run-up in the country’s debt to GDP ratio.

Figure 1. Japan’s income and productivity levels lag the leading OECD countries¹

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