The Bank of Japan’s (BoJ) unveiling of its new monetary policy earlier today marked the first real test of “Abenomics,” as the world now calls prime minister Shinzo Abe’s bundle of policies aimed at escaping 20-plus years of deflation.
And it passed the test—markets responded positively. There will be many more tests, though, for the BoJ’s monetary policy, as well as for the other two prongs of Abenomics: fiscal stimulus and, much more amorphously, structural reform. Inspired by this chart from Nomura, we’ve taken our own stab at showing how Abenomics involves a knotty interplay of factors that will be needed to spring Japan free of its deflationary spiral. (If you’re having trouble reading the text on your device, click or tap on it for a larger, zoomable version):