‘Abenomics’ too narrow in focus

In addition to the issues of constitutional revision, nuclear power and Japan’s entry into the Trans-Pacific Partnership free-trade scheme, voters should also carefully consider the Abe administration’s economic policy before casting their ballots in the upcoming Upper House election because it will also greatly affect their lives.

Although “Abenomics” has helped exported-oriented businesses through a cheaper yen and improved the performance of the construction industry through large expenditure for public-works projects, people need to carefully consider whether it will really improve their economic situations.

The cheaper yen, caused by the Bank of Japan’s massive monetary easing, is negatively impacting households in the form of higher prices for food, gas and electricity. The BOJ’s policy has already caused another side effect that is contrary to its expectations: the rise of long-term interest rates.

Despite the BOJ’s policy, businesses feel that banks are not relaxing their lending restrictions. This means that businesses have difficulty in securing loans even if they want to expand capital investment — an important engine of economic growth. If money is not used for productive activities, there is the danger it will be used for speculative purposes, causing an economic bubble.

The BOJ’s massive purchases of government bonds from financial institutions could create the impression that the BOJ is directly helping the government with its finances and destroy trust in Japan’s financial discipline, thus causing a steep fall in government bond prices. This could devastate the economy. It is impossible to indefinitely continue its current massive monetary easing. If the BOJ cannot draw up a successful exit strategy, inflation could spiral out of control. Voters should not rule out this possibility in assessing the Abe administration’s economic policy.

The Abe administration’s economic policy has a strong tinge of neoliberalism characterized by extensive deregulation. But deregulation in the labor market, such as creating a category of quasi-permanent employees who can be easily fired when they are no longer needed, will only weaken the position of workers. This in turn will negatively impact consumer spending and hamper the development of a sustainable economic recovery.

Mr. Abe calls for establishing “national strategy special zones” in megalopolises, probably in Tokyo, Osaka and Nagoya, where bold deregulation will be carried out. The big question is who will choose what kinds of economic activities for deregulation. The possibility cannot be ruled out that the government will choose certain areas of economic activities for deregulation with the aim of boosting certain vested interests.

The idea of national strategy special zones runs counter to the idea of strengthening local economies, which have been languishing for many years. The Abe administration’s economic policy is clearly oriented toward big businesses. It also calls for a large reduction in corporate taxes. But there is no guarantee that this policy will result in increased employment and wages.

Opposition parties must present convincing policies that will stimulate the economic activities of small and medium-size businesses and local economies, which form the backbone of the Japanese economy, and lead to better conditions for workers so they have the confidence to loosen their purse strings.