Episode 9: Trials and Comebacks! The Great East Japan Earthquake and Abenomics (2010s) 🇯🇵🏹
Last time, we discussed the "Lehman Shock" in 2008, which dealt a heavy blow to both the global economy and Japan's Nikkei Stock Average. The world seemed to have been plunged into a deep abyss.
This time, we'll look at another major trial that struck Japan while the wounds of the Lehman Shock were still fresh: the "Great East Japan Earthquake." Following that, we'll explore "Abenomics," a large-scale economic policy initiative aimed at rebuilding the Japanese economy, and its impact on stock prices and exchange rates.
The Scars of Lehman and an Unprecedented Disaster (2010-2011)
After the Lehman Shock, global economic recovery was slow, and Japan struggled to regain its vitality. The Nikkei Stock Average, having fallen near 7,000 yen, hovered around the 10,000 yen mark in a state of instability.
Amidst this, on March 11, 2011, at 2:46 PM, the "Great East Japan Earthquake," a magnitude 9.0 quake (the largest in Japan's recorded history), struck. A massive earthquake and subsequent tsunami devastated the Tohoku region, resulting in an immense loss of precious lives and catastrophic damage to cities and industries. The accident at the Fukushima Daiichi Nuclear Power Plant also occurred, shocking not only Japan but the entire world.
This disaster caused many factories to halt operations, disrupted supply chains, and led to severe power shortages due to planned outages. The entire Japanese economy suffered enormous damage.
The Nikkei Stock Average plummeted upon news of the earthquake. The closing price on March 11, 2011, was 10,254 yen, but by March 15, it had temporarily dropped to 8,227 yen. It was a period of deep sorrow and anxiety throughout Japan.
A Strong Will for Economic Revival! "Abenomics" Launched (Late 2012~)
While working on recovery from the Great East Japan Earthquake, the Japanese economy struggled to escape prolonged deflation and a sense of stagnation.
To break through this situation, Shinzo Abe, who became Prime Minister again in December 2012, launched a powerful set of economic policies: "Abenomics"! It carried a strong message of "escaping deflation and achieving robust economic growth."
What are the "Three Arrows" of Abenomics? 🏹🏹🏹
Abenomics was based on three main policy pillars, famously called the "Three Arrows," like an ancient general's battle strategy:
First Arrow: Bold Monetary Policy
The Bank of Japan (BOJ) implemented "unprecedented monetary easing" to vastly increase the money supply. It aimed to overcome deflation by setting a 2% inflation target. This was sometimes nicknamed the "Kuroda Bazooka."
Second Arrow: Flexible Fiscal Policy
The government significantly increased spending on public works (roads, bridges, construction) and implemented tax cuts to directly stimulate the economy.
Third Arrow: Growth Strategy
This aimed to enhance Japan's long-term growth potential by reforming various regulations (deregulation) and creating new systems to foster new industries and improve corporate competitiveness.
Stocks Soar! Yen Weakens! The Advent of the Abenomics Market 📈💴
The stock market reacted significantly to the expectation that Abenomics might change the Japanese economy.
- Nikkei Stock Average Soars!: Around late 2012, the Nikkei was around 10,000 yen. After Abenomics began, it started to climb rapidly, temporarily exceeding 15,000 yen in May 2013. It continued to rise, recovering the 20,000 yen mark in 2015 and reaching further highs thereafter.
- Yen Weakens Significantly!: The exchange rate also shifted dramatically. The USD/JPY rate, which had been around 80 yen per dollar, depreciated significantly, at one point exceeding 120 yen per dollar. A weaker yen provided a tailwind for Japanese export companies, making their products cheaper overseas.
The Bright and Dark Sides of Abenomics ✨😟
Abenomics brought significant changes to the Japanese economy, but it wasn't all positive. Let's look at both the "bright" and "dark" sides.
- ✨ The Bright Side ✨
- Stock prices rose significantly, and corporate profits improved (especially for export-related companies).
- Employment improved, with a better jobs-to-applicants ratio. The labor participation rate for women and seniors reportedly increased.
- A surge in inbound tourists revitalized tourist destinations.
- A state of "not being in deflation" was achieved.
- 😟 The Dark Side 😟
- The 2% inflation target proved elusive, and a full escape from deflation was not quite achieved.
- Real wages did not rise затруднительно.
- There were criticisms of widening inequality.
- Concerns remained about potential side effects of the BOJ's massive monetary easing ("unprecedented easing"), such as future problems.
- The national debt (fiscal deficit) did not significantly decrease.
Abenomics had a major impact on Japan's economy and stock prices, and its evaluation remains a subject of debate among experts even today.
Now, after the continuation of this Abenomics market, the world would face a new major trial in the form of a pandemic. Next time, we'll look at the "Corona Shock," which is still fresh in our memories, and the subsequent economic and stock market movements!