A Time Fixed-Effects Analysis on Japanese Inflation under Abenomics

Abstract

Ever since taking office in 2012, Japanese Prime Minister Shinzo Abe has enacted various policy and structural changes that have come to be known as “Abenomics”. The Japanese economy has stayed in relative stagnancy for the past two decades, and Abenomics has come be deemed as the sole “rescuer” of the economy. This paper aims to quantify the explanatory significance of different variables under Abenomics in terms of their effects on Inflation, which is one way to measure economic growth. Results from time fixed effects OLS regressions show that the most important variables are Central Bank Assets, Wage Levels, and Female Workforce Participation. There are many important political implications that can be deduced from these results, the most urgent ones being the continuation of the Quantitative Easing buyback programs initiated in the early 2000s, and the support of improving workplace environments, with particular emphasis on female workers.