In the first half of this year, the Japanese economy has shown signs of robust recovery under current Japanese Prime Minister Shinzo Abe's economic policy dubbed the "Abenomics." Meanwhile, the side effect of the economic policies has begun to show, and people doubt about the sustainability of the Abenomics.

In recent campaign of the coming upper house election, Abe highlighted the "Abenomics," aiming to stimulate strong economic recovery and help the country to escape a decade-long deflation, as his major achievements since he returned to power last December.

The three arrows of "Abenomics" include an expansionary monetary policy including the Bank of Japan's quantitative easing, negative real interest rates, and an inflation target of 2 percent; an expansionary fiscal policy which includes higher government spending financed by borrowing; and some supply side policies called the "new growth measures."

So far, Abe has fired all three arrows of his Abenomics.

Promising figures

The positive effects of Abenomics were shown soon.

On June 10, Japan upgraded its Q1 GDP growth to annual 4.1 pct, higher than the government's earlier projection of 3.5 percent.

Japan's industrial production advanced 2 percent in May from the previous month for the fourth consecutive monthly rise, supported by increased domestic demand for power generation equipment ahead of the summer.

Japanese retail sales rose 0.8 percent in May from a year earlier, after four straight months of year-on-year falls.

Japanese manufacturers' sentiment turned positive in the three months to June for the first time in nearly two years, a closely- watched central bank survey showed.

The Bank of Japan also upgraded its assessment Thursday for eight of the country's nine regional economies compared with three months earlier, citing increased resilience in domestic demand on the back of improving consumer and corporate sentiment as well as a pickup in overseas economies.

The cons

Along with the pros, the side effect of Abe's economic policies has emerged.

After Shinzo Abe unveiled his three-point policy mixture, Japan's stock market soared by 80 percent in six month. Then, at the end of May, Japanese share market began to enter the so-called bear territory. We see a significant ups and downs of the price of share and bond, said Du Jin, Professor of International Development at the Takushoku University, in an interview with Xinhua.

"External shocks certainly have played a role. The possible withdraw from the QE of the US Federal Reserve, and the slowdown of the Chinese economy, all have impacts on investor's perception about the future of the capital market and the world economy as a whole. But the rising long term interest rate, which is thought to be side effect of the QE, contributed to the market fluctuation. In this sense, the government policy has something to do to the dynamics of the stock market," Du told Xinhua.

Meanwhile, a retired teacher who identified herself only with Asami told Xinhua that Abe's economic policies only benefits the business tycoons and their bosses, rather than bringing tangible interests to small plants and the majority of Japanese people.

"It is true that the third arrow of reforms has fallen well short of people's expectation. New policy measures released on June 5 included some useful things, but it did not include those measures many people would think as much needed to the revival of the Japanese economy.

"I think that a critical problem is that quantitative easing and fiscal stimulation are not magic tools, they cannot change the mindset and behavior of the enterprises and households," said Du.

The real problem?

Japan has experienced the so-called Lost decades, 20 years of economic stagnation. Policy debates and discussions have been conducted in searching for the causes and consequences of the Japan problem.

"One thing for sure, is that deflation is not the only challenge that Japan is facing now," Du said.

Most Japan watchers tend to think Japan's problem is multi- dimentional.

"On the Macroeconomic side, population aging is one of the hot topics. It affects labor supply, saving, hence the supply side of the economy, and lead to a shrinking demand. Furthermore, social security expenditure on pension and medical care, adding huge burden on government expenditure. Reforms on tax and fiscal system and social security system have faced tremendous challenges," Du said, adding that corporate governance reforms, labor market reforms, are also critical.

Regarding the sustainability of Abenomics, Du said, "In my view, Abenomics will last for a couple of years. If everything goes well according to the original plan."

"But there is still great uncertainty. Shinzo Abe intended to stay longer in power, but the political reality is that during the last eight years, the average life of the Japanese cabinet, and its prime ministers is about one year. What will happen to Abe in his second term, we will have to wait and see."