Japan experienced two “lost decades” of deflation and financial distress after its stock market and property market bubble burst in 1990. The Nikkei Dow index experienced one of history’s longest, most savage bear market, falling from 39,000 in December 1989 to as low as 7,800 in 2012, the year the LDP’s Shinzo Abe won a general election with the promise of fiscal stimulus, yen debasement and structural reform (the three arrows of Abenomics). Despite several political, economic and corporate setbacks (the latest scandal is Kobe Steel!), Japan has emerged from deflation, even though the Bank of Japan has nowhere near achieved Governor Kuroda’s 2% inflation target. GDP growth, exports, industrial production and consumer confidence have all moved higher. This is the reason Prime Minister Shinzo Abe called a snap election the LDP and its coalition partner Komeito will win. Even the North Korean missile threat helps the prospects of Abe, a nationalist committed to increased defence spending.
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