Prime Minister Shinzo Abe’s economic stimulus policies have put GDP growth numbers far higher than forecasts predicted.
In an era of dogmatic economic austerity, when elected officials in Europe and the U.S. are purging jobs and slashing public sector spending, Japan is trying a different approach to remedy economic recession by increasing spending on social programs to help the public and put people back to work.
And unlike austerity, It’s actually working — prompting economists to praise Prime Minister Shizo Abe’s government for implementing a ¥10.3 trillion ($127 billion) emergency economic stimulus in January that has helped trigger strong economic growth during the first quarter of 2013.
“The Japanese government approved emergency stimulus spending of ¥10.3 trillion Friday, part of an aggressive push by Prime Minister Shinzo Abe to kick-start growth in a long-moribund economy,” wrote Nobel Prize-winning economist and New York Times columnist Paul Krugman in January. “The policy appears to be working.”
It may not be the coming of another Japanese economic miracle like the one seen after World War II, but the approach has been heralded by some economists, Krugman among them, as a viable alternative to the austerity cuts that have led to a lower standard of living for millions of workers across Europe and the U.S.
“We will put an end to this shrinking and aim to build a stronger economy where earnings and incomes can grow,” Abe said in a recent statement. “For that, the government must first take the initiative to create demand and boost the entire economy.”
It’s the exact opposite approach pursued by the U.S. Congress, who allowed for $85 billion in sequestration cuts to take place earlier this year. The sequestration led to major reductions in government spending on programs that helped millions of middle class and poor families.
Across the U.S., funding for mental health programs, unemployment benefits, rental assistance, homeless shelters and headstart programs has been sharply reduced or eliminated altogether.
During the first quarter of 2013, Japan’s Gross Domestic Product (GDP) grew 3.5 percent, far exceeding previous estimates. The U.S. lagged behind, with 2.5 percent GDP growth over the same period. Meanwhile, many of Europe’s austerity-battered countries continue to see their GDPs shrink. The reports have given a boost to Prime Minister Abe’s reforms efforts, now dubbed “Abenomics.” Japanese exporters including Toyota and Sony have also reported a rebound in profits through the first quarter of 2013.
Japan’s Cabinet Office reported Thursday that consumers increased their spending and exports to the U.S. have picked up. In addition to the spending increases, Abe urged the Japanese central bank in January to make a firmer commitment to stopping deflation by pumping more money into the economy. The prime minister has said this is crucial to getting businesses to invest and consumers to spend.
“It is a sign that the Abe administration’s economic policies are starting to show results,” said economics minister, Akira Amari.