The original goal of Abenomics was to expand nominal GDP through reflationary policies, as it perceived shrinking nominal GDP to be the largest problem facing the Japanese economy. This policy is leading Japan in the right direction given that nominal GDP is now expanding. For the Japanese economy to return to health it is essential that nominal GDP expands. 

Without the reflationary policies, the Japanese economy cannot revive. This is the lesson learnt after 20 years of deflation, in which the burden associated with reform became large. While the expansion of nominal GDP through reflationary policies is not enough in itself to revive the Japanese economy, it is a necessary pre-condition to a full recovery. In other words, progress can not be expected unless Japan starts to expand nominal GDP.

The expansion of nominal GDP puts upward pressure on inflation and thus promotes a complete exit from deflation, says Societe Generale. It also leads to an increase in household income. Consumer sentiment has remained weak since the consumption tax (CT) hike in April 2014.

As many economists who advocate reflationary policies are aware, the expansion of nominal GDP through reflationary policies is not enough on its own to revive the economy, but it is a necessary pre-condition, argues SocGen. Japan needs to ensure the policies are in place to push up nominal GDP and allow the Japanese economy to revive.