As the sixth anniversary of Abenomics approaches, Japan investors can be excused for feeling buyer’s remorse.

It was around October 2012 when it was clear Shinzo Abe would get a second shot as prime minister. Even though he wouldn’t officially get the job for two more months, the yen plunged and stocks soared as markets began pricing in Abe’s much-advertised reflation campaign.

Over the next several months, Abe’s new Bank of Japan (BoJ) leader would embark on history’s greatest quantitative-easing journey, one that still lives on. The yen lost 30% of its value, pumping up exports and corporate profits. In 2013 alone, the Nikkei stock average jumped 57%.

But the results are decidedly mixed. Its three “arrows" were based on a samurai metaphor. Arrows fired separately at a target may succeed, but three in unison can’t lose. Yet Abe forgot to do just that.

The BoJ’s arrow was deployed early and powerfully. The fiscal policy shot—Tokyo 2020 Olympics construction—was diminished by a 2014 hike in consumption taxes. But structural reform, the third and most vital arrow, never really left the quiver.

Sure, Abe’s team strengthened corporate governance a touch, implementing a UK-like stewardship code. Tokyo urged companies to better utilize the female workforce as a shrinking population deadens innovation and productivity. Plans were rolled out to attract more foreign talent and offer more flexible work schedules.

Rather than a regulatory Big Bang, Abenomics delivered a series of modest pops. Though female labour participation rates are up, the gender-pay gap remains as wide as ever. Rather than pressuring underperforming CEOs, Japan still has a “shareholder inaction" problem, says Nicholas Smith of CLSA.

Inflation is barely halfway to Tokyo’s 2% target. Nor have inflation-adjusted real wages enjoyed the kind of gains Team Abe hoped by now. Rather than raise salaries, corporate Japan is opting for scattered bonuses. That is costing Japan the virtuous cycle of wage and consumption gains needed to hasten gross domestic product (GDP) gains.

The missing link: bold structural upgrades. Abe has yet to get serious about loosening labour markets, spurring innovation, catalyzing a start-up boom, cutting red tape or taking on institutionalized sexism. As such, chief executive officers lack confidence to fatten paychecks.

Another problem: Abenomics is fighting the wrong war. Rather than 2% inflation, Tokyo should be gunning for 2% wage gains or a two-percentage-point bump in GDP growth. Instead, Abe is left with a paradox. The Trans-Pacific Partnership and Abe’s free-trade deal with Europe will, in theory, reduce consumer prices. Deregulation often lowers prices, too.

Consider the awkwardness of BoJ officials frowning at the government pushing mobile phone carriers to lower inordinate service fees by 40%. What’s good for consumers, it follows, isn’t necessarily good for the BoJ’s reflation efforts.

What’s more, a 20 September election within Abe’s Liberal Democratic Party won’t necessarily be a plus for the economy. Should Abe win a third term, he plans to focus more on revising Japan’s pacifist constitution than deregulation. Abe is determined to extricate Tokyo from post-war curbs on fielding a conventional military.

A wiser course would be to fire the third arrow decisively and ensure it stays aloft. Donald Trump’s escalating trade war is a full-frontal assault on Japan’s all-important export engine. The US President is raising the stakes with plans to target $200 billion of Chinese goods on the way to as much as $500 billion.

Trump’s threatened 25% tax on imports of cars and auto parts would devastate Asian supply chains. It makes it even less likely Japan Inc. will raise wages.

Abe’s entire modus operandi is to make Japan strong again. There is no better way than contributing more to global growth than Tokyo’s deflation subtracts. What better way than Japan regaining its once fabled innovative mojo? In the age of globalization, strength is about market share, not the number of aircraft carriers. Abe can restore Japan to greatness, if only he’d tend to modernizing an economic model past its prime.

On a personal note: This is my last regular column for MintAsia. It has been my distinct pleasure writing for, and interacting with, such an engaging and informed readership. And working with MintAsia’s wise and talented editors. Hereafter, you can follow me at @williampesek.

William Pesek, based in Tokyo, is a former columnist for Barron’s and Bloomberg and author of Japanization: What the World Can Learn from Japan’s Lost Decades.

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