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8 - Abenomics, the Exchange Rate, and Markup Dynamics in Japanese Industries

from Part III - Macroeconomic Policy

Published online by Cambridge University Press:  05 February 2021

By
Kyoji Fukao  and
Shuichiro Nishioka
Edited by
Takeo Hoshi  and
Phillip Y. Lipscy
Takeo Hoshi
Affiliation:
University of Tokyo
Phillip Y. Lipscy
Affiliation:
University of Toronto
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Summary

This chapter examines how industry-level markups evolved over the period of Abenomics. Prior to Abenomics during the global financial crisis, the aggregate markups in the manufacturing sector declined by 3.6 percent from 2006 to 2009 and bounced back by 3.2 percent from 2009 to 2012. The fall and rise of productivities contributed the most to the U-shape recovery of manufacturing markups. Over the Abenomics period (2012–2015), markups increased more in the manufacturing sector than in the service sector, and the rise in output prices was responsible for this trend. We discuss some suggestive implications why the first arrow of Abenomics – aggressive monetary policy – effectively improved manufacturing industries’ markups. In a global economic environment where Japanese firms compete with foreign firms, depreciation of the yen eases global price competition and improves their profitability in terms of the yen.

Keywords

Abenomicsmarkupsexchange ratecompetition
Type
Chapter
Information
The Political Economy of the Abe Government and Abenomics Reforms , pp. 200 - 238
Publisher: Cambridge University Press
Print publication year: 2021

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