What Does the Future Hold for Abenomics?

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Fresh from his landslide electoral victory yesterday, Japan’s Prime Minster Shinzo Abe will be pushing harder than ever to further escalate the adoption of Abenomics. The prime minister’s eponymous policy is once again a hot topic of debate in the global financial markets.

An unprecedented, historical strategy advocated by the Prime Minster, Abenomics consists of a three-pronged approach to aggressively minimizing Japan’s decades-long struggle with deflation.

Credorax’s Japanese Country Manager, Jonathan Epstein, was chosen by GT News, a global financial publication, to weigh in on the future of Abenomics. We have selected a key excerpt from his analysis below where the author elucidates the particular challenges facing Japan at this moment:

The Japanese government faces a herculean balancing act. Should Abe’s reforms raise inflation at the cost of a further deterioration in the government’s finances, it could make paying for the state’s huge debt burden substantially more difficult.

On the other hand, should the reforms fail Japan will still be left with the problem of how to pay for an aging society without economic growth to help support its rising welfare bills – a challenge that Europe and the U.S. also face, but to a lesser degree.

These struggles could also cause investors to doubt the government’s fiscal sustainability and increase its borrowing costs. While the threat is mitigated to the extent that Japan’s government debt is primarily held domestically, the country’s rising energy costs since the March 2011 Fukushima disaster – financed with a falling yen (JPY) – could increase the need for foreign purchases of government debt.

Either way, many policymakers and economic experts are saying that the success of Abenomics is far from certain. Having recently established payment processing operations in the Japanese market, Credorax supports the structural reform ‘arrow’ of Abe’s plans and is playing its part towards improving the efficiency and integration of Japan’s financial system by enabling single integration, global smart acquiring.

Will Abenomics finally be able to tug Japan out of its economic doldrums? There are so many variables affecting the outcome, it’s impossible to answer this question right now. We do hope that our newly awarded payment processing license will stimulate further growth in e-commerce and other areas of Japan’s economy.

Click here to read Jonathan Epstein’s full analysis.

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