Japan’s Own Worst Enemy?

Shinzo Abe is at the height of his popularity. But is he too much of a right-wing nut to save the country's economy?


Unceremoniously forced to resign as Japan’s prime minister in 2007 after only a year in office, Shinzo Abe spent five years in the political wilderness. Few expected that he would return to lead the Liberal Democratic Party (LDP), one of Japan’s two major political parties, let alone the country. But in September 2012, the party reinstated him as its leader, and three months later, so did Japan’s voters. "Japan is back," Abe declared in a February speech in Washington; he could have been talking about himself as well.

His government enjoys public approval numbers as high as 72 percent, a level not seen this far into a Japanese prime minister’s term for more than a decade. His economic program — dubbed "Abenomics" — is winning plaudits at home and abroad as a bold attempt to tackle Japan’s "lost two decades" of sluggish growth, stagnant wages, and persistent deflation, while voters are tolerating his attempts to deliver on cherished conservative goals like revising the constitution and strengthening Japan’s military. As Japan’s benchmark index the Nikkei reached a five-year high, and the Japanese economy grew at an annualized 3.5 percent rate in the first quarter, it’s tempting to call Abe a success. The Economist did — in their May 18 issue, the editors put Abe on the cover, dressed as Superman.

Although the Nikkei’s 7.3 percent drop on Thursday may remove some of the shine, the fact remains that Abe is perhaps in the strongest position of any Japanese prime minister since  the economic bubble burst in the early 1990s. With opposition parties in disarray and a comfortable LDP majority in the Diet, Japan’s parliament, Abe could institute the economic reforms that Japan needs — if he doesn’t get distracted by right-wing obsessions.

That’s what happened in 2006, when he took power as the anointed heir of his immensely popular predecessor Junichiro Koizumi. During his five years in office, Koizumi focused on economic reform, cleaning up the balance sheets of Japan’s banks, privatizing inefficient public corporations, and limiting the growth of government deficits. Many hoped Abe would continue fixing the economy, but he instead expended his political capital on changing the country’s education law to emphasize patriotic education, elevating the defense agency to a full ministry, and laying the groundwork for revising Japan’s pacifist constitution. Instead of practicing multilateral diplomacy with unstable North Korea, Abe’s government obsessed over resolving the issue of Japanese citizens abducted by North Korea in the 1970s and 1980s.

In his Dec. 2012 campaign, Abe promised to overcome deflation and restore economic growth. Since entering office, he has proposed a "three arrows" economic policy: raising the Bank of Japan’s inflation target and instituting a $1.4 trillion bond-buying program; unveiling a $116 billion fiscal stimulus package; and developing an economic growth strategy emphasizing, among other things, more resources for medical technology and opportunities for women in the workforce.

Reforms are indeed necessary — Japan’s economy is in bad shape. Despite faster-than-expected GDP growth, business investment continued to fall in the first quarter. Moreover, Japanese salaries and bonuses have stagnated for more than a decade, while employers have become increasingly dependent on low-wage temporary workers, who now make up more than a third of the workforce. Indeed, some economists wonder whether Japan’s aging population, nearly a quarter of which is over 65, will ever be able to make up the demand shortfall that has produced prolonged deflation, or whether the Japanese economy will be able to achieve increases in productivity sufficient to offset the shrinking workforce.

It is hard to say how much credit Abe deserves even for the positive figures. The government’s stimulus package is still making its way into the hands of households and businesses, the Bank of Japan’s asset purchases are still too small, and the third arrow growth strategies are at the moment still aspirational. The danger remains that Abe will redirect his attention to the right-wing issues close to his heart. "Many people know that the real interest of Prime Minister Abe is not in economics," Taro Aso, Abe’s finance minister, told the Wall Street Journal in April. "When he is equipped with full power and authority, he would rather work harder for his pet interests such as education and constitutional amendments."

In advance of this summer’s elections for the upper house of the Diet, Abe had indicated that his government’s plan to revise Article 96 of the Japanese constitution, which dictates amendment procedures, would be the centerpiece of his party’s campaign. If this succeeds, it would make it easier to pass more substantive revisions, like changing Article 9, which prohibits Japan from waging war.

Abe has drawn criticism from across Asia for remarks he made in the Diet in late April questioning whether it is proper to say that Japan "invaded" its neighbors — not unlike during his first term when he questioned whether sex slaves used by the Japanese military during the war had been coerced. And in early May, he sent an envoy to Pyongyang to explore the possibility of resolving the abductions issue, even though it could undermine U.S. and South Korean efforts to contain the North Korean regime.

But his victory in December and still-lofty approval numbers do not signify that the Japanese public is also moving to the right. A mid-May poll by the major daily newspaper Asahi Shimbun suggests that the basis for the cabinet’s support is the government’s economic policies, and not support for Abe or his party. Multiple polls show that the public is deeply divided over whether and how to revise Japan’s constitution. While discussing constitution revision is no longer the taboo it once was, it is by no means a priority for most Japanese.

If there is one enduring fact about Japanese politics over the past decade, it is the public’s willingness to support any leader who promises to improve the economy, and then follows through on his promises. Abe’s approval numbers should not be viewed as an endorsement of anything other than his economic program — and the belief that he is actually capable of following through on them.

Fixing Japan’s economy won
‘t be easy, as Thursday’s sharp decline in the Nikkei shows. Ensuring that the three arrows hit their marks will require unremitting focus on the part of the archer, something that Abe may not be able to provide.

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