Prime Minister Shinzo Abe will ride into the sunset as the longest reigning prime minister of Japan. His single biggest achievement arguably is Abenomics, the economic policy stance adopted by him since being elected as the premier of Japan in December 2012. The incoming prime minister will most likely ensure the continuity of Abenomics but faces a different set of challenges in this new era of “Japanification”.
After close to eight years in office, Japanese Prime Minister Shinzo Abe has announced his intention to resign from his premiership due to health issues. His tenure was characterized by political stability as well as the important reforms that he passed, which have had major economic and market implications. In the near term, any of Mr. Abe’s potential successors is expected to follow his policy mix of aggressive government spending and monetary easing. Although this should soften any adverse effects on markets for the time being, possible policy changes in or after 2021 are risks that need to be considered.
Mr. Abe’s Accomplishments Since Assuming Office
The incumbent prime minister’s economic reforms include the appointment of Haruhiko Kuroda as the governor of the Bank of Japan (BoJ), which resulted in the launch of aggressive monetary policies; corporate tax rate reduction to support Japanese businesses and equity market; consumption tax hikes; increase in labor force participation (especially of women); trade liberalization; and a move to increase inbound tourism and immigration, among others. We think that these changes have had a meaningful impact on Japan’s economy (Figure 1). The current pandemic crisis should ensure that this policy mix remains unchanged at least in the near term.