Japan, once lauded as an economic miracle, has spent much of the last two decades playing the world economy's poster child for policy gone wrong. But as austerity budgets bring no end to economic dormancy in Europe, the Japanese government's profligate ways are getting an unlikely second look.

Enter Shinzo Abe, Japan's intrepid new prime minister, who promises to blaze a trail even further away from deep cuts and lean economics.

He and his predecessors have been warned countless times by economists that Japan, saddled with a sky-high debt and rapidly graying population, must also focus on austerity to avoid financial ruin. But Mr. Abe, who has returned as prime minister after a short-lived stint in 2006-7, has decided to flout such advice.

Not yet a month back in office, he has essentially ordered the Bank of Japan to fire up its printing presses without limit and has promised to pump 12 trillion yen ($134 billion) into public works and other government projects. Mr. Abe has also assembled two panels of economists and executives to advise him on a path that might finally lead Japan out of its economic malaise.

"We are making a break with the shrinking economy of the past," Mr. Abe told the Japanese people as he announced the stimulus spending. "From now on, the government is spearheading the economics of growth."

With his newfound audacity, Mr. Abe has made Japan a living experiment in how long a country can defy the seemingly inevitable reckoning that accompanies living well beyond its means. And Mr. Abe has also implicitly demanded a whole new understanding of the causes of Japan's prolonged economic slump.

"Finally, we have a politician who understands what's been wrong with Japan's economy all along," said Koichi Hamada, an economist at Yale University who has long argued for an aggressive monetary solution to Japan's economic woes.

Like any country, Japan has its structural faults, but the main culprit behind its malaise has been the central bank, Mr. Hamada said.

The bank's failure to do enough to fight deflation, the across-the-board fall in prices, profits and wages that has sapped the strength from Japan's economy since the late 1990s, has trumped all other efforts by Japan to grow, he said.

David Fuller's view There are always tradeoffs. For instance, I assume that the yen retained more of its purchasing power over the last 20 years, at least until mid-November 2012, than most other currencies, although I do not have the data at hand to verify this.

However, I maintain that Shinzo Abe's policies are a lifeline for Japan's long beleaguered export industry. I believe that sector in particular is of potential interest to many subscribers. I will also give the Prime Minister's policies the benefit of the doubt while the stock market (weekly & daily) remains in form. It has paused but has not broken downwards.

We should also keep a close eye on the yen, not least as shown by USD/JPY (weekly & daily), as this is critical in terms of improving Japan's export competitiveness. It is testing the psychological ¥90 level once again and since at least half of this gain came after Japan's stock market closed, it is likely to boost it on Friday.