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Death of Abenomics' father may allow Japan to curb stimulus

The death of Shinzo Abe, who gave Japan's "Abenomics" policy its name, could allow Prime Minister Fumio Kishida to phase out Abe's government

Death of Abenomics' father may allow Japan to curb stimulus
Yazar: Charles Porter

Yayınlanma: 11 Temmuz 2022 06:11

Güncellenme: 7 Kasım 2024 07:54

Death of Abenomics' father may allow Japan to curb stimulus

The death of Shinzo Abe, who gave Japan's "Abenomics" policy its name, could allow Prime Minister Fumio Kishida to phase out Abe's government spending and monetary stimulus, although any challenge to his legacy is highly unlikely.

Japan's longest-serving prime minister was shot dead, on Friday while campaigning for Sunday's parliamentary elections in which his party's coalition expanded its upper house majority, in a rare act of political violence that shocked the country. Analysts say Kishida is unlikely to do anything to anger lawmakers loyal to Abe, who lead the largest faction in Kishida's Liberal Democratic Party (LDP) after he resigned as prime minister in 2020. Ultimately, however, his absence and the LDP's victory in Sunday's election, aided by Abe-sympathy votes, could give Kishida the political capital to change his policy course. Kishida's conservative coalition led by the LDP was poised to increase its majority in the upper house in elections held two days after Abe's assassination. People close to Kishida said the prime minister and his aides want to move toward normalizing fiscal and monetary policies and gradually wind down the Abenomics experiment launched nearly a decade ago. "There won't be a quick reversal from Abenomics or an exit from ultra-loose monetary policy," said Koya Miyamae, senior economist at SMBC Nikko Securities. "But in the long run, the Bank of Japan should consider some kind of fine-tuning of monetary policy given issues such as the weak yen," Miyamae said. "This will mean that former or incumbent BOJ governors will continue to be strong candidates as the next central bank governor." Kishida, who belongs to a smaller LDP faction, has come under pressure from Abe and his supporters to maintain massive stimulus and choose a reflationary dove as the next Bank of Japan governor in April. Abe's absence could shift the balance of power within the party, reducing the influence of advocates of massive government spending and ultra-loose central bank policies. "Abe was leading a group of ruling party lawmakers with reflationary views who favored big spending, so his absence will have a big impact on the party's balance of power," said Daiju Aoki, chief Japan economist at UBS Sumi Trust Wealth Management.
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