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Global Issue 15

Global Insight G20 ‘The revival of the Japanese economy will lead to development of the global economy’ IntervIew In an exclusive interview with Global ahead of the G20 summit in St Petersburg, Japanese Prime Minister Shinzo Abe describes how his Abenomics policy could not only kickstart Japan, but help reboot the world economy Prime Minister, you have enjoyed a spectacular comeback in Japanese politics. Since you took office after the December election, the philosophy of ‘Abenomics’ has totally swept away any disappointment that arose during your first term as premier in 2006-07. A rapid series of political and economic manoeuvres aimed at lifting Japan out of its economic torpor has won you popularity at home and plaudits from abroad. You have launched dramatic initiatives towards Africa and attempted to repair long-neglected fences with ASEAN neighbours. Now, in the lead-up to the G20 summit in St Petersburg, there is revived interest in Japan’s role as the world’s number three economy, as well as in the global lessons to be learned from Abenomics and its associated policies. It is a remarkable success in a very short time. But it raises many questions about where a reinvigorated, resurgent Japan might be heading. Global: Abenomics is the new buzzword in international politics. You are seen as having kick-started not just the Japanese economy, but also world financial markets which, despite major wobbles, remain historically high. Can you explain the famous three ‘arrows’ of your overall policy? What are the political, economic and diplomatic drivers behind Abenomics? And what should we expect them to deliver? Prime Minister Shinzo Abe: Thank you very much. I am flattered by your remarks. To start with, I didn’t coin the term ‘Abenomics’, market participants did. The most pressing task for me has been to blow away in a single great breath the pessimism associated with the Japanese economy. The narrative was always like this: Japan is unable to change, deflation is firmly entrenched, and our ‘revolving door’ politics are only exacerbating our economic sluggishness. Incremental piecemeal, muddling-through sorts of remedial measures no longer amount to anything meaningful. Decisive policies in a different dimension than what has come before were needed to drastically alter the narrative and the economic landscape. At the end of the day, what matters to the financial markets is perception as much as reality. But you need to have a sizable amount of political capital to precipitate major moves in the market. I had anticipated that the Bank of Japan (BOJ) would be cautious. But I asserted that what the BOJ would do as our central bank was no different from what initially the Reserve Bank of New Zealand, followed by the Bank of England and other central banks, had done in co-ordination with their respective governments, namely to draw up a statement between the democratically-elected government and the monetary authority with a view to achieving policy goals. Previously the BOJ had no specific inflation target. Now it does. The Bank has committed to a joint statement issued together with the government, which clearly states that both sides will work to achieve a price stability target of two per cent. That is my ‘first arrow’ – specifically, bold monetary policy at a degree never seen before. It worked. If you think about it, which is better for global prosperity, a Japan mired in deflation moving in reverse, or a Japan that stimulates demand? The answer is selfevidently the latter. That is the motivation for my first arrow, and the BOJ is really working hard to achieve this now. Japan growing at an annual rate of 4.1 per cent for a year would be equivalent to an economy the size of Israel emerging. I should add that in Japan, legend has it that over 500 years ago, the samurai heading the clan that used to rule my home prefecture taught his three sons that while one arrow is easily bent, three arrows together are unbendable. The policy implication contained in this is that you should never tackle anything in bits and pieces. So at the same time, I launched my second arrow, which was 30 l www.global -br ief ing.org thi rd quar ter 2013 global


Global Issue 15
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