Paper short abstract:

Abenomics is introduced as an instructive case study of overcoming the reluctance of elected politicians to introduce far-reaching (economic) policy changes. Political entrepreneurs can overcome such barriers through innovative ideas and persuasion, while the policy output may remain doubtful.

Paper long abstract:

It is a well-known lesson of the political economy of reform that in democracies elected politicians are reluctant to introduce far-reaching (economic) policy changes. As the first round of such changes will involve hardships for many affected voters, there are issues like time inconsistency and information deficits/asymmetry, a status quo bias, path dependence and the possibility of a war of attrition between interest groups. Recent scholarship has pointed out that amidst uncertainty in preferences, constraints and choices, political entrepreneurs can overcome the inefficiencies of the political process through innovative ideas, while protecting their power and rents. The goal is to create persuasion, which is based on a path-dependent process, related to widespread beliefs ("causal stories") and desires.

This analytical framework is applied to the introduction and progress of Abenomics, the economic policy program started in Japan in late 2012 by a newly elected government, with changes introduced in later years. The ingenuity is that it combined risky but - in the short-term - promising measures (monetary and fiscal stimuli) with a longer-term vision (reforms), at the same time supplying an excuse for a competitive devaluation, legitimising financial repression and involving potential scapegoats (like possibly uncooperative corporate wage policies). Evidence of the PR-inspired persuasion strategy and of the controversial "causal stories" involved are discussed in the presentation. As persuasion is so important, and not necessarily a compelling commitment, only the appearance of reform may occur.

In this context, it seems a somewhat understudied topic of the entrepreneurial solution to the dilemma of serious policy change, to discuss what happens after the early honeymoon-phase of an initially persuasive strategy of policy change, once disappointments start to appear. The Abe-led government is interesting in that respect as well, as it has already survived four years, actually strengthening its electoral basis, although several economic objectives have clearly been missed. It is argued that a number of external factors - both political and economic - were extremely helpful for this development.