Bloomberg has a long article on the economic policies of Shinzo Abe. Basically, the Japanese economy stopped growing after the 1990s economic crisis. Not just low growth, but no growth in GDP for about a decade followed by a sharp contraction during the 2000s financial crisis. Deflation or declining prices were a symptom of this. At the same time, Japan had very low unemployment throughout. Part of the story is that the economy is starved for workers due to an aging economy, political resistance to immigration, and low participation in the work force by women. Some “Abenomics” was basically a policy of massive government borrowing and spending aimed at shocking the system back into a growth mode. It sort of worked, but it seems to be reverting to the mean now.

I think there are a few lessons. This helps me understand why central banks want to have a low but positive inflation rate. You don’t want to money supply to constrain growth. You want to have rational immigration and guest worker policies that allow in the workers with the skills your economy needs that your native population is unable or unwilling to fulfill. This can be politically difficult, obviously, and you want to do it humanely for the people involved. Governments can borrow and spend with reckless abandon in times of crisis, and then they need to be able to ratchet back quickly when the economy picks up and the private sector is able to pick up the slack. Also politically very difficult. Rational child care and health care policies to remove barriers to working women would help.

But finally, it does not seem like life in Japan is all that bad. So another lesson might be that there is a path to a low-growth economy where life is not that bad, people have meaningful work and their basic needs are met.