Can Japan's Policy Work?

05/30/2013 8:30 am EST

Focus: GLOBAL

Jim Jubak

Founder and Editor, JubakPicks.com

The aggressive economic and somewhat nationalistic program of Japan's Prime Minister Abe reminds MoneyShow's Jim Jubak of a pivotal period in US history.

There have been a lot of questions about whether Abenomics, the economic policies put into place by Prime Minister Shinzo Abe in Japan after he won election, whether this indeed can revive Japan.

The questions about, well, he's going to weaken the weak yen—we've already gone to 103 yen to the dollar, headed to 105 and probably 110, maybe 120—so will that revive Japanese exports? Will that get Japanese consumers spending again? What do you do about the country's big debt? All of these are serious economic questions.

I think this overlooks the kind of whole Abe package. What this government is about really reminds me a lot of Ronald Reagan and the United States in the early 80s. Reagan's slogan was "It's sunrise in America again."

I mean, Abe's platform isn't purely economic. It also appeals to nationalism. It appeals to the sense that Japan has lost its place in the world to China, and now needs to reassert itself.

There are a lot of slogans from the late-19th century industrialization of Japan that talk about the need for economic strength as a way to increase military strength. Some of this is kind of ugly, given Japan's history in the region, but I don't think you downplay the appeal to tradition in Japan, the appeal to emotion, the appeal to the Japanese sense of future and that it's not all a grim slide back into complete irrelevance.

This is what I think Abe is trying to tap into. I think the emotional core here is actually probably more important than the pure economics. I think if you can get some sense of there is a future, some sense of hope, some sense of moving forward, some sense that we have solutions, some sense that we trust government again to do these things—or that we trust Abe to do these things—I think it becomes a very different country than it was a year or two ago.

I think the analogy to remember is with Reagan, who really was a figure that embodied hope for a lot of people, it really led to an economic revival in the United States that wasn't purely based on economic policy. I think that's the possibility for Japan, and I think it's something we need to keep in mind when we try to figure out on purely a numerical basis whether the world's most deeply indebted country in terms of debt to GDP can actually manage to pull itself out.

I think the question really is, can Japanese people believe that they can pull themselves out? Because that's the first step.

Related Reading:

Abenomics Seems to Be Paying Off

Has the Next Crisis Begun?

Japan Needs More Than QE

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