Once the dust settles tonight, the ruling Liberal Democratic Party/New Komeito coalition will be in control of both houses of the Diet, promising an end to political gridlock.
But with power comes responsibility, and now the pressure is on Prime Minister Shinzo Abe to deliver on the staggering number of promises and pledges he has made over the past several months. There is, however, a growing perception that Abenomics is welfare for the wealthy and threatens a hollowing out of the middle-class.
Until now, Abe’s growth strategy, the so-called third arrow of Abenomics, has not ventured beyond vapid sloganeering, but in order to foster sustainable growth he needs to come up with the goods.
Abe has picked the low-hanging fruit; quantitative easing on steroids has pumped up the stock market while the boost in public-works spending helps the construction companies that help the LDP.
The former represents an audacious equivalent to American football’s “Hail Mary” pass — fling it high and far and hope it works out; while the latter is standard issue from the LDP’s familiar playbook — a major reason why Japan’s public debt to GDP ratio stands at a humongous 240 percent.
If everything works out, the monetary and fiscal policies generate growth and inflation, stimulating consumption (as long as wages rise) and creating new opportunities. But these reflationary efforts will be wasted if Abe can’t push through deregulation and sweeping structural reforms that boost productivity; lower the cost of doing business; tap women’s potential; and increase household income.
Unlike monetary easing and fiscal stimulus, promoting structural reforms threatens powerful constituencies that have a lot to lose — and the LDP is their party.
So, although a bigger LDP does end legislative gridlock, it also means that the special interests with most to lose from deregulation and structural reforms are better defended.
It’s crunch time, and Abe needs to elevate his game above product pitchman and realize a sustainable growth model or else Abenomics will prove to be a colossal failure.
But now that the LDP has regained control of both houses in the Diet, the sense of urgency regarding reform may quickly abate.
Winning big carries with it the dangers of complacency and avoiding hard choices. Can Abe count on the party that oversaw more than two decades of economic stagnation and stalled reforms to back his structural-reform agenda?
Japan’s world-beating industry leaders are eager for liberalization, but that leaves a lot of companies, and their employees, dreading the consequences of market-opening initiatives and intensified competition.
Abe is backing the Trans-Pacific Partnership (TPP), and he managed to deftly outmaneuver party stalwarts in getting the LDP to endorse negotiations over trade liberalization. But with this weekend’s election result, the farm lobby has just become lots stronger.
Up until now, sensible proposals for realigning agricultural subsidies to promote consolidation of small plots and greater productivity have been sidelined due to electoral politics; geriatric part-timers working Lilliputian plots represent a formidable constituency that mostly backs the LDP.
Last autumn, when former Prime Minister Yoshihiko Noda (2011-12) raised the possibility of Japan joining the TPP, the farm lobby promptly delivered a counter-petition with 11 million signatures; that’s a lot of reasons to doubt the TPP will deliver on agricultural reform. The medical lobby has also painted Armageddon scenarios about the scuttling of national health care.
Can Abe take the heat?
Certainly, the prime minister emphasizes the national-security implications of the TPP, so sucking it up on trade liberalization is depicted as a strategy of clinging tight to the United States and isolating China — the major nonparticipant in the TPP.
Hence the TPP appeals to Abe because it pleases Washington and excludes China. But given how much Japan relies on trade and investments in China, it seems a Pyrrhic growth scenario.
In a recent submission to the Huffington Post, Abe notes that there is no alternative (TINA) to structural reforms — a broadbrush assertion reminiscent of Margaret Thatcher’s continual banging on about TINA.
But insisting that growth and deregulation is key is not the same as realizing it. For example, Abe says he backs comprehensive regulatory reform, and cites the example of the electricity market and the need for separating generation and transmission of power to foster competition and lower prices.
Maybe Abe is sincere, but the LDP didn’t try very hard when it had the opportunity in June to pass the relevant legislation. And, when the TBS television network aired a segment suggesting the LDP is to blame for the failure to break up the existing electricity monopoly, Team Abe bared its fangs and excommunicated the station’s reporters. Classy move! Which mustachioed martinet thought up that bit of petty thuggery?
But no big worries, as the other networks’ coverage ranges from supine to slavish boosterism.
Abe’s oversensitivity to criticism is jarring precisely because he has received such effusive, velvet-glove coverage — though one suspects he faces tougher scrutiny now that he controls the Diet.
If he can’t flesh out his growth strategy in a convincing manner, there is a strong possibility of market volatility and declining approval ratings. Seeing Abe’s tetchiness when everything is going well, one shudders to think what will happen when the going gets tough.
Abe recently wrote, “With our shrinking labor pool, activating our female workforce and re-engaging the elderly is also a case of TINA.”
Fine, but the gender wage gap is double the OECD average and women are grossly underrepresented in managerial ranks. So, how will Abe make it happen for women workers?
Again he seems to be recycling unkept promises. If he is so worried about working women, why doesn’t he start by restoring the cuts he made as premier in 2007 to programs that helped single mothers balance work and child-rearing?
And in these dog days of summer, who can resist speculating about whether the Real Abe will visit Yasukuni Shrine in mid-August around the anniversary of Japan’s 1945 surrender on the 15th of the month?
Michael Cucek, who writes the superb political blog Shisaku, predicts he will. Abe regrets not having visited during his first spell as premier, and with a big victory he will now want to make a grand jingoistic gesture. Fortifying the Senkaku islets is too risky, constitutional revision is out of reach — so Yasukuni is tempting precisely because it will provoke a furious reaction from China that will stoke anxieties about a hegemonic China and thereby boost Abe’s security agenda.
Dumb move if he goes.
Jeff Kingston is Director of Asian Studies, Temple University Japan.