NIKKEI ASIAN REVIEW
In power for nearly 2,886 days, he has not kick-started Japan’s economy
Shinzo Abe, center, is applauded by his party members after being elected as Prime Minister on Dec. 26, 2012: nearly seven years on, Japan is coming up short. © Gamma-Rapho/Getty Images
In December 2012, Shinzo Abe surprised Japan’s political establishment by surging back to power. The surprise rested in the widely held view that his earlier scandal-plagued 366 days as prime minister in 2006-07 had been a complete dud.
Yet return Abe did, and with two grand plans to change Japan’s role in a region tilting toward China. One, a bold economic reform regimen aimed at restoring Japan’s glory days of the 1980s. Two, amending the pacifist constitution to increase Tokyo’s footprint in global security circles.
As he becomes Japan’s longest-serving premier on November 20, surpassing the record of 2,886 days in office held by early 1900s leader Taro Katsura, how much has Abe achieved? Both promises remain elusive, if not beyond his Liberal Democratic Party’s reach.
Abe has certainly increased Tokyo’s geopolitical clout. “Japan appears to have found its feet as a regional and global actor,” says Cambridge university’s John Nilsson-Wright. He adds that Abe’s “willingness to travel the globe to establish Japan’s credentials as a proactive contributor to peace has given Japan an uncommon visibility.”
This explains the view overseas of Abe as the epochal reformer. Yet the economy’s vulnerability to U.S. President Donald Trump’s trade war tells a different story.
Abenomics pledged to fire three policy arrows at the deflationary mindset impeding growth and competitiveness: monetary easing, fiscal loosening and, most importantly, deregulation.
The first arrow came in the form of Haruhiko Kuroda. Abe’s hand-picked Bank of Japan governor pumped trillions of dollars into markets, cornered government bonds and hoarded stocks through exchange-traded funds. The yen’s 30% drop fueled record corporate profits and the longest expansion in three decades. The timing was lucky, too, coinciding with a rare synchronized global growth spurt.
The second arrow had a difficult time staying aloft thanks to self-inflicted policy errors. Construction ahead of the Tokyo 2020 Olympics helped juice growth, but two sales tax increases — one in 2014, the other last month — created new headwinds.
Arrow number three — structural reform — remains largely unfired. Moves to reduce bureaucracy, loosen labor markets, incentivize innovation and empower women proved less arrow and more… foam dart.
Abe wagered that the BOJ alone could catalyze a reflationary cycle of wage gains and consumption. Nearly seven years on, Japan is coming up short. Core inflation rose at a 0.3% annualized pace in September, a long way from the 2% target.
Granted, Abe’s arrows have landed not a million miles from the bull’s-eye. The number of foreign workers has more than doubled over the past five years, wooing talent to offset an aging workforce. Abe signed a giant trade pact with the EU and joined the Trans-Pacific Partnership, staying in even after the U.S. reneged on its own deal. Japan is experiencing a genuine tourism boom.
Moves to strengthen governance are making Japan Inc. more accountable and have boards paying record dividends. Yet as scandals at Japan Inc. icons like Nissan Motor show, even Abe’s top reforms are a work in progress, at best. Ditto for a broader economic revival push that remains more talk than action.
What of Abe’s dream of constitutional reform? It is a recurring one, actually. A key reason his 2006-07 premiership ended badly was his headlong push to alter the war-renouncing Article 9. So determined was Abe to edit the charter’s pacifism that he neglected the economy and cabinet ministers running amok.
On his return in 2012, he was as keen as ever to enable Japan to once again field a conventional offensive military. He bolstered Japan’s defense forces, increasing spending by 10%, as China went on its own military spree. In 2014, he secured a reinterpretation of the constitution which would allow, for the first time since 1945, Japanese troops to engage in military action overseas.
Donald Trump shakes hands with Shinzo Abe as they aboard Japan Maritime Self-Defense Force’s helicopter carrier Kaga in Yokosuka on May 28: Abe’s closeness to Trump may be a drawback for changing the war-renouncing Article 9. (Photo by Wataru Ito)
Changing Article 9 has proved elusive. Even North Korea’s provocations have not convinced a critical mass of Japanese to support constitutional revision. Here, Abe’s closeness to Trump may be a drawback. The sheer number of places Trump has threatened to attack — from Tehran to Damascus to Pyongyang — may work at cross-purposes with Abe’s desired outcome.
Though a bitter pill for nationalists to swallow, there is another way Abe could go: pivot back to structural upgrades. One thing Trump and China’s Xi Jinping share is a respect for strength.
Nothing impresses Trump more than success, and nothing would catch his attention faster than jacking the 0.2% annualized growth rate Japan recorded in the third quarter up to 4% or 5%. Or Japan could grow its stable of tech unicorns. Abe would be wise to deepen ties with China and South Korea, not let wartime controversies cloud North Asia’s economic future.
Abe has enjoyed that rarest of things: a clear blueprint for economic change, a public mandate and more time than any other Japanese leader to see it through. By convincing voters Japan is more turnaround story than cautionary tale, Abe might score approval ratings high enough even to alter the constitution — winning the place in posterity he so craves.
William Pesek is an award-winning Tokyo-based journalist and author of “Japanization: What the World Can Learn from Japan’s Lost Decades.”