A lot of ink has been spilt about the late former Japanese Prime Minister Abe Shinzo’s legacy, whose state funeral just took place.

In the much-fraught area of economic policy, assessments of Abe’s economic legacy or Japan’s economic prospects in general amid serious global macro headwinds have ranged from the very optimistic to the fairly pessimistic.

However, as the saying goes, the truth often lies between two extremes.

The hallmark of the Second Abe Administration (September 2012 to December 2020) was of course the Abenomics platform, with its famous “three arrows” — the first arrow being monetary easing with a 2% inflation target, the second fiscal stimulus and the third structural reforms.

In terms of the first arrow, the 2% inflation was never achieved during Abe’s tenure despite the massive purchases of stocks and bonds by the Bank of Japan that has effectively rendered it the largest stock owner in Japan with equity assets worth more than $400 billion. That is, until the recent global inflationary environment that was caused by global supply chain shocks due to the war in Ukraine, the U.S.-China decoupling and climate change, among others, and had little to do with Japan itself.

The legacy of massive quantitative easing persists despite the steep and rapid depreciation of the yen to the dollar, which is now at a 24-year low and has touched ¥145 to the dollar, which some would say is an albatross around Japan’s neck. Economists even think that the U.S. Federal Reserve Bank has far more influence on yen rates now compared to the BOJ, which is factually accurate; the main driver of the depreciation of the Japanese currency is policy divergence — the difference between rapidly increasing interest rates in the U.S. and the near-zero interest rates in Japan.

Still, despite a consumer price index of close to 3% now, which is historically very high in a deflationary Japan, the core core CPI, where mostly imported energy and food are removed, is less than 2%. That indicates that domestic demand still has not improved in tandem with heightened inflation — and this is the major reason the BOJ has been resisting monetary tightening despite the policy divergence, because monetary tightening at this stage would involve high costs to Japan but without clear benefits.

But has the first arrow been a failure? Not quite.

The BOJ’s historically massive quantitative easing has brought about a steep increase in portfolio investments in the nation’s stock exchange, and many companies have seen their stock prices and market capitalization increase multiple folds during Abe’s tenure. This has in turn led to a vicarious cycle with increased market confidence, increased investments and revenues. Japanese companies, which had before then focused on repairing their balance sheets as a legacy of the collapse of the bubble economy in the early 1990s, could finally focus on business growth.

The problem is the maldistribution of corporate profits. Abenomics has created a boom time for large corporations, but the expectation that they would increase wages whose growth has been stagnant for decades has not come to fruition despite Japanese government cajoling and pressuring.

The reality is that as long as domestic demand does not increase and domestic labor mobility is moribund — a result of the lingering lifetime employment and seniority-based labor system — businesses would have little incentive to increase salaries. The Japanese government will have to use sticks like regulatory tools to enforce the distribution of corporate profits with the workers. Prime Minister Kishida Fumio’s “New Capitalism” platform, which champions a better distribution of wealth, has made wage growth and increased purchasing power one of its core policy planks.

Next, the second arrow. Generally, economists believe that this has not been successful, because despite greater fiscal spending by the government, Abe decided to allow the increase of the consumption tax rate from 5% to 8% in April 2014 and then to 10% in October 2019.

This tax increase is an effective fiscal austerity that had a deleterious effect on real economic gains that were unleashed by the initial first-arrow quantitative easing and second-arrow fiscal expansion policies. In classical economic theory, austerity policies will always negate economic growth, and it could be disastrous during low-growth or worse, recessionary periods as we have seen in Europe in the aftermath of the Global Financial Crisis.

Lastly, the third arrow of structural reforms, which many think has not been totally successful as well. The most prominent reform under this arrow has been the reorganization of the rules surrounding listing in Japan, making listing requirements more stringent. Listing on the stock exchange in Japan has been relatively easy compared with other major economies; this has had a secondary effect on the early listing of startups, which in turn has led to a relative lack of unicorns, i.e. unlisted companies with a valuation of more than $1 billion, though this does not indicate a lack of dynamism and growth in the startup space.

However, early listing and relatively lax listing requirements have had a more serious consequence, namely the existence of many mismanaged and even “zombie” companies on the stock market. The government has been trying to increase the quality of listed companies in Japan and encourage the private markets through this listing reform, but experts have said it does not go far enough.

There are many other structural issues like diversity and female participation in the economy where government reforms have not gone far enough either. While female participation in the economy has increased over the years, there remains serious underemployment in Japan, i.e., nearly 40% of jobs are low-paying and unstable contract jobs rather than the better-paid and stable permanent jobs with pension and other benefits, which belies the nearly full employment situation in the country.

Still, there are signs that not only is Japan’s general purchasing power growing, the purchasing power of females and younger people is actually increasing compared to men. That is due in part to a greater diversity of employment options such as tech startups and multinational corporations in Japan. Men on the other hand, especially those who have followed the old lifelong employment system in Japanese corporations, are seeing their aggregate income decline due to lack of structural productivity growth, among others.

A cursory glance would reveal that Abenomics, which is fundamentally a political platform rather than coherent economic policy, has had a mixed bag of outcomes. It is difficult to unequivocally term it a failure or a success, just as we cannot just follow the optimist or the pessimist school of thought on the Japanese economy.

More importantly, Abe’s economic legacy goes beyond Abenomics. Abe has provided unprecedented economic, political and policy stability to postwar Japan, and his government has strongly encouraged digitalization and innovation, corporate governance reforms, renewable and clean energy and greater economic ties with Southeast Asia, China, Africa and other regions and nations, among others.

Abe’s economic legacy may be patchy, but few can deny his role as a catalyst in pushing Japan to re-imagine itself in the new global economy.

Raymond Woo is a value creation professional at a Singapore-based investment company. He was previously in management and public sector consulting and was affiliated with the United Nations and the Rajaratnam School of International Studies of Nanyang Technological University in Singapore