Poll: What Effect Will Japan’s New Fiscal and Monetary Policies Have?
In a poll conducted earlier this week in the CFA Institute Financial NewsBrief, we asked readers whether they thought the fiscal- and monetary-policy initiatives being undertaken by Japan’s new government will lead the country out of the deflationary and slow-growth environment that has persisted for the past two decades.
Are the fiscal- and monetary-policy initiatives being undertaken by Japan’s new government likely to lead the country out of the deflationary and slow-growth environment that has persisted for the past two decades?
“Abenomics” (「アベノミクス」) and the new economic policies of Japanese Prime Minister Shinzō Abe, which feature fiscal and monetary expansion with an explicit 2% inflation target, are hailed by many to be the key to how Japan can show the rest of the world how to get out of prolonged deflationary economic stagnation.
Nobel laureate Paul Krugman, known for his support of Keynesian economics, is in the front line of the cheering squad, whereas many others doubt that these policies will change the situation that has persisted for the past two decades. As for readers of the global edition of the CFA Institute Financial NewsBrief, a majority of the 782 respondents (62%) do not believe that Abenomics can change Japan’s economic stagnation; only 38% sided with Krugman. The readers of the Asia Pacific NewsBrief appear slightly more optimistic, with 41% siding with Krugman.
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I would pose this question to anyone who thinks this plan by Abe will work. The comments I read on the subject speak of this kind of economics like it is a fairly simple equation. Devalue, export more, GDP growth follows, tax revenues go up, debt is repaid, and we all live happily ever after. Ok Paul Krugman fans, show me one example in history where this plan worked. You can’t because it does not exist. The world is at a crossroads. We have seen the largest peacetime accumulation of debt in history. The dividend from that debt is a slow growth environment which is here to stay.