This case uses Japan’s low-growth episodes since the 1990s to analyze economic policy in an environment featuring excess capacity, low growth, and low inflation. The case discusses the rationale behind “Abenomics”—Prime Minister Shinzō Abe’s three-pronged approach to stimulating Japan’s economy. In the case, Haruhiko Kuroda, the governor of the Bank of Japan (BOJ), is tasked with making the case to stick with Abenomics after five years under the policy. Were the three prongs of policy changes on course, or was one or more of the prongs failing to reenergize growth? The answer would be especially topical during the upcoming general election, which many viewed as a referendum on Abe’s economic policies.
Examine the determinants of economic growth, including production factors (technology, labor, capital) and aggregate demand factors. Evaluate the effects of Abenomics—fiscal policy, monetary policy, and structural reforms—on Japan’s recovery from the Great Recession. Illustrate the challenges faced by monetary authorities in a low-interest-rate environment (optional). Illustrate the challenges faced by fiscal authorities in the face of high public debt levels.