Abenomics and Crypto
Recent years have seen Japan’s economy travel a new path. Not only has the Asian nation actively embraced cryptocurrency and blockchain, but also sought to supercharge its growth via the three-pronged economic growth policy of fiscal stimulus, reforms, and monetary easing, commonly known as Abenomics.
Spearheaded by Japanese prime minister, Shinzo Abe, the policy aims to finally do away with the stagnation and setbacks that have plagued Japan throughout the ‘lost years’ ever since its economic bubble burst in the late 1980’s. The plan intends to deliver new, modernized and sustainable, economic momentum.
While Abenomics sought to address long-term issues, the rapid growth of Japan’s cryptocurrency industry has been a mix of craft and chance. Japan has pursued a progressive policy towards cryptocurrency overall but also been the beneficiary of external events. Of note, China’s effectual ban of Bitcoin in September saw many Chinese traders and exchanges shift out from under the restrictive rule of China’s policies to the freedom of Japan.
While the ambitions of Abenomics has been exceptional, so too has the tenure of its namesake. Compared to previous Japanese prime ministers, Abe has already had a long run.
Ultimately, only history will be able to tell us whether his tenure is owed exclusively to his unique leadership or a result of the ‘professionalisation’ of Japanese politics that will see successive leaders hold longer periods of office, but now in his 5th year of office (while also serving from 2006-2007), the momentum for Abenomics will remain interwoven with Abe’s political fortunes.
Similarly, while Abenomics certainly represented a shift in gears — and showed some promise early on — ultimately recent scandals in the Japanese government not only did to Abe’s ambitions to see through his signature policy long-term but also on the market’s confidence.
Abenomics has had some success, but the risk of a truly bold policy is any failure within it will also appear sizeable. In this regard Abenomics has not (yet at least) fully delivered on its promise. Given it’s been in motion for years, it also becomes a matter of if not now, when?
As with any national economy, many factors and personnel make it a success or a failure. Even if Abe goes, some form of Abenomics is likely to sustain. Alongside a future government which needs to continue the Abenomics agenda if it seeks to yield the same results, so too are the foundational challenges in the Japanese economy that make the pursuit of alternatives a confronting consideration.
Right now Japan is dealing with the issues of a shrinking population. The nation’s current population of 127 million is predicted to decline by up to one third within just 50 years. An aging population will also see their tax bill decrease. This is good news for someone who winces whenever their accountant contacts them, but bad news for a government relying on tax.
For many Japanese not only keen on personal growth and innovation but on driving a new era of ‘Brand Japan’, cryptocurrency represents a vehicle. The end of Abenomics would not spell an end to Japan’s cryptocurrency growth but could take the guardrails off it. Measures that not only keep Japan’s cryptocurrency industry humming along but also regulated in a reasonable way.
Like riding a bike downhill, an end to Abenomics this could accelerate growth, or see a crash as a more conservative economic policy comes to the fore. For Japan, such an approach would arguably not work. Though, in an era of high global trade tensions, there may be little choice. Abenomics must now break new ground to meet 2018’s emerging economic challenges.