Has Abenomics Been Successful?

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