Have Abenomics put Japan back on the growth trail?

Japanese Prime Minister Shinzo Abe and his controversial Abenomics may have achieved a first real step towards their ultimate goal: putting Japan back on the growth and inflation trail after two decades of unstoppable growth-killing deflation. Japan’s economy reported its first quarterly growth since the consumption tax rate was raised from 5 to 8 percent in April 2014, said newspaper The Asahi Shimbun about Abe’s Cabinet Office’s preliminary report on the country’s gross domestic product. Thanks to higher exports, the country’s GDP grew an annualized 2.2 percent in the last quarter of 2014, between October and December 2014 in real terms compared with the previous quarter.

“Consumer sentiment has significantly improved, offering good prospects for the future,” Japan’s Minister for Economic Recovery Akira Amari said at a news conference. “It is extremely important to increase wages in real terms,” Amari added. There is hope that Japan has found the solution to its longtime issue, as Europe is preparing for the worst against what has just been a short-term deflation so far. On the one hand, the gradual recovery of economies like Thailand’s is a positive sign on the Japan’s tough path towards growth. On the other hand, the external factors will be insufficient and Japan’s chances will mostly depend on the strength of domestic demand.