How Inclusive Is Abenomics?
IMF Working Papers, March 13, 2015
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Bibliographic details
- Authors: Chie Aoyagi, Giovanni Ganelli, Kentaro Murayama
- Published: March 13, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498327312.001
Summary and main findings
- The paper assesses the ongoing reform efforts in Japan in terms of inclusive growth.
- Uses prefectural level panel data to regress a measure of inclusive growth, which incorporates both average income growth and income inequality, on macroeconomic and policy variables.
- Achieving the Bank of Japan’s 2 percent inflation target has a positive effect on average income growth, but an adverse effect on income equality.
- The package of structural reforms planned under Abenomics is found to be effective in increasing both average income growth and income equality.
- The main policy implication: full implementation of structural reforms– especially labor market reforms–is necessary to both foster growth and increase equality.
Methodology
- Data: prefectural level panel data.
- Empirical approach: regress a measure of inclusive growth (incorporating average income growth and income inequality) on macroeconomic and policy variables.
Policy recommendations and implications
- Full implementation of structural reforms under Abenomics is necessary.
- Emphasis on labor market reforms as particularly important to foster growth and increase equality.
- Recognition of a trade-off: policies (such as achieving a 2 percent inflation target) can raise average income growth while adversely affecting income equality, suggesting complementary reforms are needed.