09/14 Free exchange: Parting shot

What can the world learn from Abenomics?

AS AN EXERCISE in political branding, Abenomics has been an unusual success. When Abe Shinzo returned to power as Japan’s prime minister in December 2012, he said he would revive the economy by loosing off three “arrows”. The first, expansive monetary policy, would banish deflation. The second, flexible fiscal policy, would restrain public debt without jeopardising the recovery. The third arrow, structural reform, would revive productivity and lift growth. The image stuck, even after the government tired of it.

Mr Abe’s archery excited keen interest elsewhere. Many other mature economies, after all, look a little Japan-ish. They combine greying populations, faltering growth, high public debt and stubbornly low inflation, despite miserly interest rates. “Yes, we are probably all Japanese now,” concluded Jacob Funk Kirkegaard of the Peterson Institute for International Economics, an American think-tank, last year, even before the covid-19 pandemic added to the debt, disinflation and despair. As Mr Abe departs after almost eight years in charge, what lessons can others draw?

The first lesson is that central banks are not as powerful as hoped. Before Abenomics, many economists felt Japan’s persistent deflationary tendencies stemmed from a reversible…