"Abenomics" is now a buzzword at home and abroad. Even before taking office, Prime Minister Shinzo Abe had strongly demanded that the Bank of Japan take action to end deflation and set an inflation target that would drive the yen lower.
He had gone so far as to suggest that if the central bank refused to cooperate, he would be ready to revise the BOJ Law or replace the BOJ governor. After his Cabinet was inaugurated, his demand resulted in the signing Jan. 22 of an agreement between the government and the central bank that the central bank would aim for annual inflation of 2 percent, up from its previous loose goal of 1 percent.
The Japanese economy has long agonized under the impact of a strong yen and persistent deflation. The yen hit ¥75.85 against the dollar on Oct. 28, 2011 — the highest level since the 1985 Plaza Accord — and the rate hovered between ¥70 and ¥80 per dollar until November, all the while weakening Japanese industries' international competitiveness and adding to the nation's economic woes.