European economy and Japanese economy: An analysis of Draghinomics v/s Abenomics

Abstract

The economy of Japan had been staggered for almost two decades since early 1990s after the burst of Japanese asset price bubble. The slipping GDP during the 90’s and the nominal interest rates stuck at zero, led to further problems. The real GDP growth between 1993 and 2012 averaged just 0.8% . Additionally, Japan’s economy was further impacted by the 2008 recession and by the devastating earthquake and tsunami in 2011. On 26th December 2012, Shinzo Abe became the Prime Minister and introduced an economic program called “Abenomics” consisting of three components, also referred as “three arrows”. The three arrows of Abenomics consists of 1) bold monetary policy, 2) flexible fiscal policy and 3) growth strategy to promote private investment. Abenomics was able to raise 2013 output to 1.8%. However the long term effect of Abenomics is yet to be determined.