Japan’s (relatively) new government led by Prime Minister Shinzo Abe has got a very ambitious economic and monetary policy agenda. Since Abe took office last December, he adopted a massive economic stimulus package while convincing Japan’s central bank (the Bank of Japan, BoJ) to support and help adopting his plans to achieve 2 per cent inflation through am enormous quantitative easing program. These policies have achieved results: the Nikkei Index has gained more than 40% over the last 4 months and economic growth will most probably be higher this year than previously anticipated. However, inflation and higher interest rates will increase Japan’s public debt and it remains yet to be seen whether Tokyo’s economic stimulus packages will result in sustainable as opposed to short-lived economic growth.
As regards Abe’s foreign and security policy agenda, a territorial dispute with China in the East China Sea will most probably in the months ahead reveal how able and willing Japan’s Prime Minister is to balance his assertiveness and nationalist and revisionist instincts with the need to maintain and extend commercial ties with its biggest trading partner.
Axel Berkofsky is ISPI Senior Associate Research Fellow and Gianni Mazzocchi Fellow at the University of Pavia
