The Launch of Abenomics and Its Effects on the Banking Business

Mitsuhiko Nakano
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Mitsuhiko Nakano: Momoyama Gakuin University (St. Andrew’s University)

Chapter 4 in Financial Crisis and Bank Management in Japan (1997 to 2016), 2016, pp 107-140 from Palgrave Macmillan

Abstract: Abstract Abenomics was announced suddenly with the inauguration of the Abe administration. Most people, including economists, were surprised at the backbone of the policy because it was a combination of monetary policy and fiscal policy. The Bank of Japan (BOJ) had already launched a comprehensive monetary policy using every policy tool imaginable. The cumulative debt of the government had reached about 200 per cent of nominal gross domestic product (GDP). However, Prime Minister Abe proposed a further monetary easing policy and a further expansionary national budget. This resembled a very risky policy of passing a point that, when crossed, permits no return. Abenomics actually compelled banks to rebalance their asset portfolios by buying long-term JGBs that the banks had held. The banks shifted their funds from JGBs not to lending but to reserves at the BOJ. It must be understood that this shift was the first stage of rebalancing the banks’ asset portfolio. However, it should also be understood that banks never shift their funds to lending unless the Japanese economy can be clearly shown to escape from deflation.

Keywords: Gross Domestic Product; Monetary Policy; Liberal Democratic Party; Japanese Economy; Great East Japan Earthquake (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-1-137-54118-5_4

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DOI: 10.1057/978-1-137-54118-5_4

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