First Year For Abenomics: The End Of Deflation

by: Dean Popplewell

By Alfonso Esparza

The December economic report from the Japanese government will be missing a word that has been a staple for the past 15 years. Deflation will likely not appear in the report as the economic policies appear to be paying off for Shinzo Abe. The report is due December 24 and optimism around economic recovery will likely result in the "D" world not being used. The last time this was seen was in 2009, but the financial crisis aftermath started a decline in growth that Abe plans to reverse.

Prime Minister Shinzo Abe embodies Japan's economic comeback. Elected prime minister for a second time following a landslide victory for the Liberal Democratic Party (NYSE:LDP) in December, 2012, the 59-year-old conservative, center-right politician is keen to ensure his second tenure at the helm of the world's third-largest economy is far more remarkable than his previous term in office. In his first go-around as prime minister in 2006-07, Abe had the misfortune of succeeding one of Japan's most popular politicians, Junichiro Koizumi, the fifth longest-serving prime minister in Japanese history. Abe became the 90th Japanese prime minister - and the youngest since the Second World War - on September 26, 2006. But the LDP suffered mightily during his first tenure, and it was ousted from power for the first time in decades. Abe subsequently resigned from politics.

Five years later he returned to the LDP fold, wiser, inspired and focused. In a July 2013 interview with Foreign Affairs magazine, he admitted he failed to prioritize his agenda during his first reign in office and hard lessons were learned. This time, he would be bold, and he made bold promises to the Japanese people.

The USD/JPY has risen after the combined decision from the US Federal Reserve to start tapering the $85 billion a month in bond-buying stimulus by $10 billion and the Bank of Japan commitment to keep stimulating the economy. The USD/JPY hit five-year highs and trade in a 103/104 range.