Japan's much-vaunted 'Abenomics' has encountered some obstacles recently. Firstly Shinzō Abe suggested that a rise in consumption tax would be deferred during a recent speech in Italy. Shortly afterwards, two important members of Abe's cabinet resigned as a result of scandals.

There are three shafts in the Abenomics quiver: bold monetary easing, flexible fiscal stimulus, and blurred structural reform, which used to be seen as "Japanese quantitative easing". As a gamble on short-term monetary easing, Abenomics did enjoy some initial success, but later found itself facing new dilemmas. As Japan's new economic policies began to take hold and the country struggled with the depreciation of yen, the shortcomings of Abenomics became increasingly apparent.

This is not the first time that Japan has tried a zero interest rate policy. This was tried in 1999 when Japan faced both domestic and international challenges, and now, with Abenomics, Japan is trying another dose of the same medicine. Firstly, Abe hopes to boost the stock market, helping companies to accrue more capital at less cost through injecting extra money into the system. Secondly, he hopes to stimulate rising prices and generate confidence and a will to invest in business. The issue of whether Abenomics can work sustainably is already being questioned. For example, the depreciation of the yen is putting great pressure on importers and ordinary people in Japan, while globally it has made the international monetary system even more vulnerable.

Generally speaking, as the short-term effects of Abenomics weaken, criticism over stagnant structural reform grows. Among the three "arrows" of Abenomics, structural reform has largely been window-dressing from the very begining, which is why the IMF has lowered its forecast on Japan's economic growth in 2014 from 1.7 percent to 1.4 percent. The key contradiction in Abenomics lies in its urgent need to speed up the economy contrasted with the reality of slow growth.

Japan needs to rethink the pace of its economic development. With the global economic and financial situation becoming more complicated, and national conflicts of interest becoming more acute, long-term extremism should be avoided in any country's economic policies, and middle-of-the-road management is likely to prove the wiser choice. 

This article is edited and translated from 《“安倍经济学”失败了吗？》，source: Beijing News, author: Yang Tao