Japan: Will "Abenomics" Drive Lasting Outperformance?

Newly appointed Prime Minister Shinzo Abe wooed voters by promising to end its decades-long economic and market malaise with the three arrows of Abenomics: fiscal stimulus, monetary easing and structural reform.  Abe quickly launched the first arrow by passing fiscal stimulus of roughly 2% of GDP.  The Bank of Japan subsequently fired the second arrow by announcing a 2% CPI inflation target and more quantitative easing.  This paper discusses why the authors believe the third and most important arrow - deep structural reform - will disappoint investors and drive Japanese equity underperformance.