Japan's early elections are all about the economy

"It's the economy, stupid" was the motto used by Bill Clinton's presidential campaign in 1992.

For Japan, economic woes are what has triggered snap elections just two years into Prime Minister Shinzo Abe's term.

Mr Abe is seeking a renewed mandate for his policies that aim to revitalise the world's third largest economy, which has been in the doldrums since a banking crash in the early 1990s.

A year ago this time, I was in Japan assessing the first anniversary of Abe's attempts to revive the economy, dubbed Abenomics.

At the time, the first of the three arrows - metaphorically speaking - which represent the major prongs of his policies had been "fired" and seemed to be working. Two years and a snap election later, Abenomics looks like it's missing the target.

I've returned to Japan to examine what's gone wrong.

The hardest of the three arrows was always the third - the so-called structural reforms that target the way that the economy is constituted and run.

For instance, can Japan raise productivity when its population - and labour force - are shrinking? Can firms be enticed to invest in a country where consumption demand is low since two decades of stagnation has taken a toll and people are concerned about taking on debt? These reforms, of course, take time and the economy minister Akira Amari had told me that it could take a decade for Abenomics to work.

But, that's only partly why Abenomics is now faltering.

The second arrow, which is fiscal policy, isn't quite hitting the mark either.

A decision to raise the consumption tax has squeezed spending and pushed the economy in the wrong direction. It helped with price rises as 15 years of deflation looked to be turning around. But, after the first increase in the sales tax in 17 years in April from 5% to 8%, the economy tipped back into recession as the next six months saw the economy contract.

In its immediate aftermath, GDP contracted at an annualised pace of 7.3% in the April-June quarter, the worst contraction since the economy plummeted 15% in the 2009 global financial crisis.

This happened in 1997 too. When Japan raised the sales tax then, the economy went into recession. One of the reasons is that consumers move up their purchases, but it also reveals an underlying weakness of demand.

Unsurprisingly, the second leg of the decision that would have raised the sales tax further from 8% to 10% in October 2015 is now delayed by 18 months.

It was always the case that any attempt to address Japan's staggering debt - which at over 230% of GDP is the highest in the world - would be an economic drag. But, the scale of it is a reminder of the fragility of the revival of the Japanese economy.

I mentioned that prices looked to be rising. Well, even that's turning in the wrong direction.

Inflation has slowed to 1%, which has led to the Bank of Japan to surprise markets by unleashing a new bout of cheap cash injections equal to over $700bn annually to meet their 2% inflation target. I wrote before about how it's the equivalent of creating a new Switzerland each year.

Aggressive expansion of the money supply is the first arrow that aims to end deflation, which looked as if it was working but also seems uncertain given the scale of the challenge.

Stock markets have hit multi-year highs but the real economy hasn't yet benefitted sufficiently. Higher market valuations haven't led firms to pass along wage increases, which are fundamental to sustaining price rises. Firms, for their part, are looking for more output per worker in order to justify higher pay. Average real wages are lower than in 2007, according to the International Labour Organisation.

So, the first arrow is still going strong, though its effectiveness can't be sustained without changes in the behaviour of firms and workers. The second arrow was always less straightforward, and the third arrow of structural reforms is mired in over 240 initiatives that will take time to implement.

All of this means that Mr Abe has decided to call early elections, just two years into his term.

With a weak opposition, he is gambling that his party, the LDP, and his coalition, will win a new mandate and support for his policies. By delaying the second rise of the consumption tax by 18 months, he hopes to gain some time to allow the most important arrows to work.

But, it's likely to take well beyond 2017 before the positive impact of any structural reforms can be felt.

Mr Abe is Japan's seventh prime minister in eight years. Time is seemingly a luxury for Japan's leaders, yet it's the very thing that they need to turn around an economy that's been struggling for two decades.