Challenges confronting Abenomics and Japanese public finance ?Fiscal consolidation must start by squarely facing reality?

The LDP-New Komeito coalition government is currently promoting, under Prime Minister Abe, economic policies often dubbed gAbenomicsh which combines gthree policy arrows,h including gaggressive monetary relaxation,h gflexible fiscal policy,h and ggrowth strategy that encourages private sector investment.h Of the three arrows, the current government is devoting its fullest effort to the first arrow: aggressive monetary relaxation. As a result of these initiatives, there has been a continued trend of a weaker yen and higher stock prices up to the present, led by market expectations for Abenomics. Although this market behavior is actually providing a political boost to the current administration, Japanese public finance faces a host of challenges including fiscal and social security reform. First, we analyze the ultimate percentage of consumption tax rate to achieve fiscal stability in Japan, and whether fiscal consolidation dependent solely on economic growth without tax increase or cuts in expenditures would be successful. In addition, we perform a simple analysis of the total asset (percentage of GDP) of the Bank of Japan in the future, if the BOJ continues to promote gNew Phase of Monetary Easingh (both in terms of quantity and quality).