Joshua K. Hausman and Johannes F. Wieland: Abenomics: Preliminary Analysis and Outlook
In early 2013, Japan enacted a monetary regime change. The Bank of Japan set a two percent inflation target and specified concrete actions to achieve this goal by 2015. Shinzo Abe’s government is supporting this change with fiscal policy and structural reforms. We show that Abenomics ended deflation in 2013 and raised long-run inflation expectations. Our estimates suggest that Abenomics also raised 2013 output growth by 0.9 to 1.7 percentage points. Monetary policy alone accounted for up to a percentage point of growth, largely through positive effects on consumption. In the medium and long-run, Abenomics will likely continue to be stimulative. But the size of this effect, while highly uncertain, thus far appears likely to fall short of Japan’s large output gap. In part this is because the Bank of Japan’s two percent inflation target is not yet fully credible. We conclude by outlining how to interpret future data releases in light of our results.
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