Matthew C Klein, Columnist

How Can We Tell If 'Abenomics' Is Working?

Japan is in the midst of a grand experiment to revivify its economy through a three-pronged campaign of monetary easing, fiscal stimulus and structural reforms.Â

May 15, 2013 at 12:55 AM UTC

By Matthew C Klein

Matthew C. Klein writes for Bloomberg View about the economy and financial markets. He previously wrote for the Economist magazine and its economics blog, Free Exchange. Before that, Klein was a research associate at the Council on Foreign Relations, where he spent more than two years studying the history of the Federal Reserve and the intellectual history of monetary economics for an upcoming book by Sebastian Mallaby. He also worked at Bridgewater Associates, where he studied the economies of Central and Eastern Europe and advised institutional investors on asset-liability management. Klein has a bachelor's degree in history from Yale University. Originally from Chicago, he lives in New York.

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Japan is in the midst of a grand experiment to revivify its economy through a three-pronged campaign of monetary easing, fiscal stimulus and structural reforms. The markets have noticed: The Nikkei stock index has gained more than 70 percent while the yen has become more than 22 percent cheaper relative to the dollar and the euro since mid-November. At the same time, the difference in yields between 5-year Japanese government bonds and their inflation-indexed equivalents has widened by more than a percentage point.

All of this has led some observers to declare that Japanese expectations about inflation and growth have been transformed, thereby leading to a resurgence of domestic spending, hiring and investment. It's unclear, however, that this has actually happened.