Japan’s economic expansion ended in 2018 in a setback for the Abenomics

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TOKYO – Japan’s Cabinet Office will tentatively recognize that the country’s most recent phase of economic expansion, which began in December 2012, ended in October 2018, Nikkei has learned, in a setback for Prime Minister Shinzo Abe.

The Cabinet Office will officially approve the judgment following an opinion that will be expressed during a next study group of economists.

Identifying October 2018 as the peak of the economy’s performance, signaling the start of a phase of contraction, would mean that the expansion, which began in the month that Abe took office for his second term at the head of Japan, lasted 71 months.

This would mean that he failed to beat the duration of the so-called Izanami economic boom, a 73-month expansion that lasted until February 2008 and which is a record for Japan in the period that has followed World War II.

Abe came to power in late 2012 promising to revive the world’s third-largest economy with his signature “Abenomics” policy combining aggressive monetary easing, fiscal flexibility and major socio-economic reforms, racking up early successes.

But October 2018 coincides with the period when Japanese exports and industrial production stagnated sharply due to the impact of the US-China trade dispute.

Although Japan’s last economic expansion was the country’s second longest in the post-war period, the growth rate remained low.

A key indicator that assesses the state of the economy jumped 11.4 points during the recent expansion, while during Izanami’s boom, it jumped over 26 points. At 1.1%, the average annual growth rate was also lower than Izanami’s 1.6%.

The relative weakness of the latest expansion was largely due to difficulties in the household sector. Although companies became cash rich as profits rose, wages remained low.

Social security contributions and tax burdens also increased over the period. Many economists predict that the economy is on the road to recovery after hitting bottom between April and June, when Japan declared a state of emergency aimed at curbing the spread of the coronavirus.

However, the capital Tokyo is seeing an increase in new infections again, prompting authorities to call on people to refrain from non-essential travel. It will be a challenge for Japan to strike a balance between economic stimulus measures and virus control efforts.

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