Abe’s policy agenda (Abenomics), which involves a three-pronged approach of aggressive monetary stimulus, fiscal spending and structural reforms for the ailing Japanese economy, has so far powered the country’s main stock exchange around 55 percent higher since he first started talking up his agenda in mid-November.

Abenomics – So Far What Has Happened in Different Elements

According to Morgan Stanley (NYSE:MS), much progress has been made, comparing the situation on April 4 (see figure below) with that today. However, progress has been skewed toward certain areas. Monetary policy has been hugely successful, but little has been done to address long term fiscal issues. In structural policies, much has been accomplished in agriculture, medical, energy, and education. Other sectors have lagged.

Abenomics Third arrow

Abenomics : Japanese Momentum is Improving

Morgan Stanley (NYSE:MS) noted that since the publication of the growth strategy in mid-June, the news on Second and Third Arrow reforms has been positive. There have been four important developments (see figure below). News flow has improved since the June 14 release of the growth strategy. Fiscal debate is focusing on arithmetic. Tokyo election results – and recent polls – suggest a solid win for PM Abe in the July 21 Upper House election.


Abenomics : Policy Timeline Shows Six Important Events

The policy timeline shows six important events. The first, the June growth reports, has already occurred, but five remain. In July, the Upper House election is the key event. Prior to the election, the statements of PM Abe and others in the LDP on economic policy will bear close watching. In August, the report of the social security commission will be most important, because it will give the post-election LDP’s first vision for the social security system. Also important will be the fiscal outlook report from the Ministry of Finance, which will have numbers on the fiscal outlook for at least the next few years.