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‘Abenomics’ will either make or break Japan’s economy

by Michael Hoffman

Special To The Japan Times

This story is concerned with money, vast sums of it, amounts quite beyond most people’s imagination. The operative word is chō (兆, trillion).

Niju ten ni chō en (20.2兆円, ¥20.2 trillion) — that’s the size of the kinkyū keizai taisaku (緊急経済対策, emergency economic stimulus package) approved by Prime Minister Shinzo Abe’s Cabinet last month.

The central government’s share of that is to be jū ten san chō en (10.3兆円, ¥10.3 trillion), with jichitai (自治体, prefectural and municipal governments) shouldering most of the rest. Jū-san ten ichi chō en (13.1兆円, ¥13.1 trillion) is what the hosei yosan-an (補正予算案, supplementary budget proposal) approved by the Abe naikaku (安倍内閣, Abe cabinet) amounts to. If, as expected, it passes the Diet this month, it will be Japan’s second biggest 補正予算 ever, the largest having been issued under former Prime Minister Taro Aso following the 2008 Lehman Shock.

Aso is now Abe’s finance minister. The hope is that the strategy will roku-jū man nin no koyō wo tsukuru (六十万人の雇用を作る, create 600,000 jobs) and kokunai soseisan wo ni pāsento hodo oshiageru (国内総生産を二パーセントほど押し上げる, raise Japan’s gross domestic product by 2 percent).

The Japanese government has always been a relatively big spender among the capitalist democracies, especially under Jimintō (自民党, Liberal Democratic Party, LDP) rule through most of the 54 years prior to 2009. That year the opposition Minshutō (民主党, Democratic Party of Japan, DPJ) was elected on a platform that included curbs on “wasteful” government spending. The DPJ-led administration stumbled to an inglorious end in December, convicted among other sins of failing to revive the economy. The LDP’s triumphant return generated a new buzzword: アベノミクス (Abenomics). New word, old concept — massive government spending, much of it on kōkyō jigyō (公共事業, public works projects).

Among the dangers cautious economists point to is Japan’s already daunting shakkin (借金, debt), totaling approximately sen-chō en (千兆円, ¥1,000 trillion, or ¥1 quadrillion). Abenomics means swelling fiscal 2012′s 借金 to ¥52 trillion — again, not a record but a runner-up, this time to 2011′s ¥54 trillion debt, bloated by the fukkō yosan (復興予算, recovery budget) following the Great East Japan Earthquake.

Expert opinion seems split down the middle, with some pundits frankly alarmed at the rising tide of akaji (赤字, red ink), others unruffled and approving. The Asahi Shimbun newspaper, in an editorial last month, criticized the spending package as “ichiji ni shigeki suru seisaku”「一時に刺激する政策」”a temporary stimulus”) when what is really needed, in its view, is “kokunai no samazama no kisei, seido no kaikaku” (「国内のさまざまの規制、制度の改革」”systemic reform of various domestic regulations”).

The weekly Shukan Gendai, on the other hand, quoted economist Toshihiro Nagahama of the Dai-Ichi Seimei Economic Research Center as saying, “Kinyū seisaku ni kanshite ieba, moro te wo agete sansei shi masu” (「金融政策に関していえば、もろ手を上げて賛成します」”Regarding” [Abe's] financial policy, I’m all for it”).

Where is the money to come from? For the most part, where 公共事業 money has always come from: kensetsu kokusai (建設国債, construction bonds) to the tune, roughly, of go chō en (五兆円, ¥5 trillion). In addition there’s the pressure Abe has been exerting on the Nihon Ginko (日本銀行, Bank of Japan) to kane no ryō wo fuyasu (金の量を増やす, increase the money supply). The technical term is kinyū kanwa (金融緩和, monetary easing). The pressure has been seen as a threat to the central bank’s independence, but Nagahama is having none of that. He told Shukan Gendai that the Abe administration’s monetary-easing policy amounts to no more than abiding by global standards as reflected in what the United States and Britain have been doing.

Will Abenomics lead to recovery or disaster? One or the other or neither, is all that can safely be said at this stage. But the prime minister enjoys two solid advantages. One is a public sick to death of stagnation and ready to cheer any policy that can be sold as bold. The second is the desolate failure of his DPJ predecessors. In Abe’s words, Minshutō seiken wa byōdō ni bunpai shite iku koto kara haitta. Sono mae ni pai wo ōkiku shinai to, hitoshiku binbō ni naru dake” (「民主党政権は平等に分配していくことから入った。その前にパイを大きくしないと、等しく貧乏になるだけ」 “The DPJ began with the premise of equal distribution. If you don’t enlarge the economic pie first, all you get is equality in poverty”).