n lation and     siness    le     7.29
     another recession—the GDP growth sliding                          of 2 per cent. This makes the Japanese
     back to negative after a quarter or two of positive               currency (Yen) to depreciate, too. Thus,
     growth. The causes for such a recession vary but                  this measure is intended to boost both
     often include a slowdown in the demand for                        domestic and external demands to propel
     goods and services because of layoffs and spending                the growth prospects of the economy.
     cutbacks done in the previous downturn. A                         This measure, while at one hand increase
     double-dip (which may be even ‘triple-dip’) is a                  the government expenditures, at the other
     worst-case scenario—fear/speculation of it moves                  it cuts the government’s tax revenue, too
     the economy into a deeper and longer recession                    – leading to higher fiscal deficit. This
     and recovery becomes too difficult. As the world                  measure revolves around the current
     saw in the case of the Euro Zone crisis—there was                 strength of the economy to ‘absorb’
     a fear of such a recession by first quarter of 2013.              higher levels of inflation (which plays a
     (For discussion on ‘Retrocession’ see Chapter 22).                major role in the growth process).
                                                                 (iii) Structural Reforms: Under this measure
        aBenomIcs                                                      the government has promised a variety
                                                                       of deregulations in the economy, mainly
     This new term has been in news for some time now.                 aimed at increasing ‘competitiveness’ of
     The term originates from the name of the Japanese                 the economy and attaining a sustained
     Prime Minister Shinzo Abe and indicates the ‘set                  growth path. This arrow still remains least
     of economic measures’ he took to rejuvenate the                   concrete. By now, the government has
     sluggish Japanese economy from the spells of                      set up a Group of Experts (mainly formed
     recession-like situation—after his December 2012                  of CEOs of large, medium and small
     re-election to the post he last held in 2007. This is             companies) that is supposed to propose
     also known as the ‘Three Arrows of Abenomics’ —                   suitable measures to the government in
     the three economic measures under it are:                         the next three years regarding required
          (i) Fiscal Stimulus: The government has                      set of ‘structural’ reforms needed by the
               initiated a massive fiscal stimulus to                  economy. This measure also includes
               encourage public and private investments                Japanese plan to ‘join’ TPP (Trans Pacific
               in the desired areas of the economy—                    Partnership) and to go for a new FTA
               investment in public works/infrastructure               (Free Trade Agreement) between the
               (which are by now 50 years old and need                 countries in the Asis-Pacific region aimed
               heavy investments), fiscal, concessions                 at increasing its export potential.
               to private sector companies which invest            The Three Arrows of Abenomics are a suite
               in research & development, create jobs,       of economic measures which any economy may
               increase salary, etc.                         try in situations of any of the bad stages in the
         (ii) Quantitative Easing: The Bank of Japan         ‘Economic Cycle’. Such economic measures were
               (its Central bank) has been maintaining       suggested by J. M. Keynes for the first time (in
               the official interest rate (like India’s Repo wake of the Great Depression of 1929). Today,
               Rate) near sub-zero to encourage lending      its most famous exponent is the Nobel Economist
               by the banks. The aim is to double the        Paul Krugman. Meanwhile, experts have mixed
               amount of money in circulation by 2014        opinions on the success possibilities of the
               and reach the annual inflation target         Abenomics.