THERE are four kinds of countries in the world, the Nobel-prize-winning economist Simon Kuznets supposedly said: developed, undeveloped, Argentina and Japan. Yet much of the rich world now looks remarkably Japanese, with chronically low interest rates and inflation, and eye-watering levels of sovereign debt. Many governments are therefore watching keenly as Shinzo Abe, the prime minister elected in 2012 on a platform of economic rejuvenation, takes on Japan’s economic mess. His task is harder than many appreciate. What is needed is not simply growth, but growth fast enough to allow Japan to come to grips with its massive public debt.
Mr Abe promised three expansion-boosting “arrows”—fiscal, monetary and structural—to deliver a much more powerful stimulus than the half-measures taken by previous governments. In September of this year he gave a clearer sense of the end-goal: a 20% rise in Japan’s nominal GDP (NGDP), to ¥600 trillion ($5 trillion) from the current ¥500 trillion, where it has stood for the past 20 years, more or less.
Mr Abe’s archery has moved the economy in the right direction. NGDP, which measures...Continue reading
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