What is the issue?
- Japan’s economy is witnessing a healthy condition which was absent nearly for the last two decades.
- The success is mainly attributed to the economic agenda called Abenomics.
What is Abenomics?
- It refers to the multi-pronged economic program of the Japanese prime minister Shinzo Abe.
- It seeks to remedy the two decades of economic stagnation faced by Japan.
- The plan focussed primarily on money supply, government spending and industrial competitiveness.
- It went on for printing additional currency to make Japanese exports more attractive and generate modest inflation.
- Additionally, government embarked on spending programs to stimulate demand.
- There was also a range of regulations to make Japanese industries more competitive, including making it easier for companies to fire ineffective workers.
- The plan also aimed to restructure the utility and pharmaceutical industries and modernize the agricultural sector.
What were the results?
- Unemployment has significantly been addressed and the overall labour force participation was raised.
- Everyone in Japan who wanted a job now has a job.
- Notably, a majority of this is achieved by bringing women into the Japanese workforce in huge numbers.
- Also, growth is driven not just by big company profits but increasingly by small and midsize businesses.
- Considerably, this growth is not due to the external demand; as the Chinese growth slows and Europe and the U.S. remain sluggish.
- It is evidently, a result of the various domestic reforms and measures under Abenomics.
What challenges lie ahead?
- The rapid aging presents a huge challenge in terms of productivity.
- Also, population decline discourages companies from investing in the country.
- There is still a difference between good full-time jobs and dead-end part-time jobs.
- This makes the demand for making growth more inclusive, as wage growth has been inconsistent.
- Above all poverty still remains a problem.
What should be done?
- Japan needs to take measures to continue improving the productivity of Japanese businesses.
- To keep productivity rising, there is a need to reform the labour market.
- One important change is to do away with long, unproductive work hours and encourage companies to reward efficiency and results instead.
- Companies must be incentivized to put systems in place for the regular hiring of midcareer employees.
Source: BusinessLine