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.
