The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.

Shinzo Abe faces up to his toughest battle

Prime minister Shinzo Abe’s radical policies have lifted Japan from its slumber. His supporters say he’s slain the deflation dragon. But what tools can he find to win the next fight – a looming fiscal crisis?

For his debut at Jackson Hole, the new governor of the Bank of Japan chose not to mimic his prime minister by boldly proclaiming "Japan is back!" Perhaps it would have sounded too unseemly for an annual meeting of central bankers and economists. Instead, Haruhiko Kuroda said on August 24: "The Bank’s quantitative and qualitative easing has already started to gradually exert effects."

Shinzo Abe’s punchline would have served much better. There is nothing understated or stumbling about the recovery in Japanese markets since the Abe government took power last December with a pledge to lift the country out of a prolonged slump. The overvalued yen has plummeted, giving a massive boost to beleaguered Japanese exporters, while the Tokyo stock market has gone from global backwater to top performer.

Since mid-November, when investors scented an Abe victory and a new central bank regime that would pursue aggressive monetary easing, the yen has shed about a quarter of its value against the dollar. Indeed, according to Ryutaro Kono, Japan economist at BNP Paribas and a former member of the Bank of Japan’s policy board, the yen’s real effective exchange rate is now the lowest since the 1985 Plaza Accord.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree