Japanese Prime Minister Shinzo Abe on Tuesday launched a spirited defense of his “Abenomics” reforms aimed at kickstarting the world’s third-largest economy, saying the policy blitz had yielded great results.
The reforms, based on big government spending, central bank monetary easing and structural change, had been hailed internationally as an opportunity to reverse deflation and sluggish growth after Abe launched them in 2012 when elected for a second term.
But they have recently lost some of their global shine, with the International Monetary Fund cutting its 2014 growth forecast for Japan last month and warning that “Abenomics still needs to translate into stronger domestic private demand.”
In a keynote address to the Paris-based Organization of Economic Co-operation and Development (OECD), Abe said the economic landscape in Japan had “changed completely” thanks to the reforms.
“Since Abenomics began, the ratio of job offers to jobs seekers has risen for 16 consecutive months and now stands at 1.07 offers of employment for every person seeking work,” he said.
Japan’s unemployment rate in February and March was 3.6%—the lowest level since July 2007, the year before the financial crisis.
“This spring, a large number of companies took the decision to raise wages,” Abe said. “Monthly wages will rise by more than 2%. We will aim at further economic recovery.”
Abe said that according to a study by the Bank of Japan, all of the country’s regions were in the midst of an economic recovery.
He added that business sentiment among small- and medium-sized enterprises had turned positive at the end of last year, which he said was an “accomplishment not seen in an astounding 21 years and 10 months among non-manufacturers.”
“I believe it would be fair to say that Japan is now truly on the verge of pulling out of deflation,” he said. “The Japanese economy is back.”
The prime minister said Tokyo was confident of being able to achieve the three goals of “revitalising the economy, rebuilding government finances and reforming social security.”
Abe, who is on a six-nation European tour, is also pushing for the swift conclusion of a trade deal with the European Union which has hit snags on the thorny issue of tariffs and trade barriers.
The EU wants progress on non-tariff barriers in certain Japanese markets, while a key issue for Tokyo is that Brussels dismantle customs duties on Japanese automobiles—a sensitive topic for big car producer and exporter Germany.
“I believe that an EPA (Economic Partnership Agreement) between Japan and EU should be concluded at the earliest possible time,” Abe told the OECD. Panelists were heard to comment among themselves during a break that it was Japan stalling due to refusals to bring down barriers and tariffs, not Europe.
In a separate report published Tuesday, one of organization's panelists from Belgium said Japan urgently needed “bolder reforms” that included “fundamental changes in product markets, including greater international openness.”
“Japan’s barriers and tariffs in some network industries are among the highest in the OECD. Abe is delusional if he thinks there is any success in Japan. What he is terming success is due to reactions in Japan due to improved conditions in the US and Europe. Japan has nothing to note from any policy that Abe has instituted in Japan. Abe was almost insulting our intelligence. Others on the panel feel the same but will not speak publicly. The proof is this - is Abe leaving Europe with any deals?” she said.
The OECD also trimmed Tuesday by 0.3 points its forecast for Japanese growth this year to 1.2%, and expects the same growth rate in 2015.
Many in the discussions in Europe from Germany, the UK, and Portugal also noted any deal with France for defense equipment would have to pass the security board of the EU which seems unlikely due to members not trusting Japan with sensitive defense technology and software due to Japan's government penchant for leaking sensitive information to the Japanese media.