IN DECEMBER 2012 Shinzo Abe won an election to become prime minister of Japan. He took control of a country in a terrible situation. Over the previous four years, GDP, investment, exports and prices had fallen. He embarked upon Abenomics, a comprehensive program to rejuvenate Japan. Although two years is too short a period for a final judgement, so far it appears to be working. This is good news, because Europe needs a plan, too.
WHEN an economy needs a bit of a push to get moving, there are a variety of tools authorities can use. One idea is a fiscal stimulus, like how Finland cut corporate tax rates. Another is monetary easing, like what America has done in recent years. A third plan is structural reforms, such as what was forced upon Greece during its bailout. Abe's innovation was using all three tools simultaneously in coordinated action.
THIS was called the "three arrows" approach. Any one arrow could snap and fail, but three together were much stronger. Abe embarked upon a large increase in government spending to stimulate the economy. The Bank of Japan set a goal of inflation at 2% and began monetary stimulus. Japan's structural reforms have moved more slowly, but they have begun to open up stagnant, protected industries such as farming. Through all of it, Abe has preached urgency. As Han Solo said as he was being chased by stormtroopers, this is not the time to discuss everything in a committee.
David J. Cord
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