Of all the things Prime Minister Shinzo Abe thought might be wrecking Japan’s 2020, a surging yen probably wasn’t among them.
Not that a deadly, growth-killing pandemic seemed on the cards either, but the sudden about-face in exchange rates will make Japan’s recession that much worse. It also is very likely the death knell of Abe’s legacy as an economic change agent.
Abe helped power Japan’s longest expansion since the 1980s with a sharp yen depreciation. Starting in late 2012, he prodded the Bank of Japan and Ministry of Finance to drive the yen down by as much as 30%.
The hope was that giant exporters would share profits with workers, kicking off a consumption boom. Former US President Barack Obama went along, figuring a more vibrant Japan was a plus for global peace and prosperity.
Then came along Donald Trump. Since 2017, the US leader pulled his own Abenomics maneuver: prodding the Federal Reserve to print dollars aggressively. He loosened fiscal policy with an enthusiasm not seen in decades and has threatened to play fast and loose with global exchange rate norms and repaying Washington’s IOUs.