Aggregate Demand and Employment
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Aggregate Demand and Employment

International Perspectives

Edited by Brian K. MacLean, Hassan Bougrine and Louis-Philippe Rochon

With an emphasis on developments during and after the Great Recession, and paying due attention to the impacts of austerity policies, the chapters assembled for this book explain that high growth of aggregate demand is as essential as ever for achieving full employment and rising living standards. Written by distinguished Keynesian and Post-Keynesian economists from diverse national backgrounds, the book tackles critical theoretical and empirical issues to illuminate the economic experiences both of large geographic regions such as Europe, Latin America, and Africa, as well as specific national economies including the USA, Japan, India, and Canada.
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Chapter 9: Abenomics and the Japanese labour market

Brian K. MacLean

Abstract

This chapter provides background on the adoption of Abenomics by Japan at the end of 2012, and examines the output and labour market impacts of specific policy measures. Japanese economic performance in the previous two decades had not been as dismal as had often been portrayed, but it was characterized by deflation and stagnation that had left Japan’s nominal GDP in 2012 at a level 8 per cent lower than in 1997. Real GDP in 2012 was still below its 2007 peak and employment had declined each year since 2009 despite the quantitative easing of the Bank of Japan and government budget deficits that had taken the gross government debt-to-GDP ratio to almost 230 per cent of GDP. There was widespread support among intellectuals that Japan should just accept stagnation as the natural result of population decline and ageing. Yet Shinzo Abe, advised by ‘old Keynesian’ economists, managed to get elected as prime minister with the promise that more expansionary macroeconomic policies would raise output, employment and living standards. The chapter provides evidence for the conclusion that Abenomics has been, on balance, expansionary, and has been successful in overcoming deflation, stimulating growth of output and employment, and producing the tightest labour market in decades.

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