Possible Impact Of The Abe-Kuro Monetary Expansion On The Indonesian Economy

Penulis: Pusat Kebijakan Ekonomi Makro

I. INTRODUCTION
Recently, the so called “Abenomics”, named after Mr. Shinzo Abe, the current Prime Minister of Japan, has been changed by the Japan’s media into “Abe-Kuro”, referring to Mr. Haruhiko Kuroda, the Governor of Bank of Japan. This “Abe-Kuro” refers to the economic policies, meant to resolve Japan’s low economic growth and deflation. It consists of monetary policy, fiscal policy, and growth package. This include among others, monetary policy expansion to achieve 2% annual rate of inflation targeting rate and to correct yen appreciation to boost export. From fiscal points of view, the government introduce fiscal stimulus package, and consolidate the government budget by reducing the primary deficit and reform the tax system. The government also introduce package to encourage private investment.

This very short paper is focusing on the impact of Bank of Japan’s quantitative easing on the Indonesian economy in the short-run. In the next section, this paper is trying to trace the qualitative impact of the Bank of Japan’s policy on the Indonesian current account, foreign direct investment, and short term portfolio. This monetary expansion policy has just been started and the period under observation is less than 2 years that is between 2012 and the second quarter of 2013. Since it is quite difficult to run any econometric analysis using those very short periods, the analysis used in this paper thereby is more on the qualitative approach. The hypothesis is that even though the exchange rate of Rupiah will be appreciated, the impact is more on the short-term portfolio rather than the trade balance. This paper is divided into 3 sections, that is, introduction, content, and conclusion.

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