Japan continues to be a major financial market story. Here is Nordea’s take on Abenomics, the new Japanese economic programme to end deflation and revitalise the economy.
• Abenomics is exactly the right medicine for Japan. If implemented as outlined, chances are good that the radical regime shift will end the protracted aversion to debt in Japanese households and businesses.
• Demand-side fundamentals imply a potential major boost to the economy.
• But without major improvements of the supply side the first two arrows of Abenomics only increase the risk of a severe debt crisis in Japan.
• Structural reform to increase potential growth is by far the most important arrow of Abenomics.
• A weaker JPY is expected to support Japanese exports the next few years, but in the longer run the JPY is likely to strengthen, if all three arrows of Abenomics hit the target.
• A generally domestically-driven recovery in Japan should reduce the risk of a currency war.
Click here to read the full report: Economic Research
Nordea