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Abe might be the world’s best leader

by Noah Smith

Bloomberg

I was a Shinzo Abe skeptic. That’s putting it mildly. After all, I was still living in Japan when Abe’s disastrous first term in office put a halt to the reform process begun by Junichiro Koizumi, and ushered in a return to the bad old days of prime minister musical chairs that paralyzed Japan in the 1990s.

When Abe swept back into power in 2012, I thought he was just going to try to talk down the yen and give a little boost to stocks, increasing his public support just long enough to ram through a revision of Japan’s pacifist constitution.

I thought he was going to ignore Japan’s moribund economy and long-festering social problems in order to throw red meat to his right-wing backers.

Boy, was I wrong. I was wrong, wrong, wrong.

Let me be blunt: Abe is the most effective national leader in the world right now. I never thought I’d say this, but he’s an example that the rest of the world should be following.

This time around, Abe didn’t ignore the economy. Backed by economic adviser Koichi Hamada and Bank of Japan Governor Haruhiko Kuroda, Abe first implemented the biggest monetarist push in world history. He went the opposite direction of Europe, and — unlike the United States — he gave every indication that the shift toward monetarism was permanent. The result: Japan has escaped deflation. The stock market is up, growth is way up and even wages are finally starting to rise.

In other words, unlike everyone else in the world, Abe listened to Milton Friedman, and the results are looking good. As the Fed contemplates not whether to taper its quantitative easing but rather how fast, it might want to look at what’s happening in Japan.

But monetary policy was just the beginning of Hurricane Abe.

Japan’s top social problem is the role of women. The sexism of corporate Japan is legendary, and many millions of Japanese women are underemployed and out of the labor force; yet instead of pushing women back to traditional child-rearing roles, this has mainly just lowered the fertility rate to sub-European levels. But since taking office, Abe — whose party is famous for sexist gaffes — has become the most feminist leader I’ve ever seen.

He constantly talks about the need to make women more equal in the workplace — no small thing in a country where corporations have a reputation for following the government’s wishes. Abe’s detractors dismiss this as empty talk, but talk is never empty, especially when you say things that no one has said before. And Abe is putting his money where his mouth is, with a raft of measures to improve working women’s access to affordable day care.

Already I can sense a shift. When I lived in Japan 10 years ago, people said that women’s situation would never change, and treated women’s second-class status as an immutable fact of Japanese culture. Nowadays, when I go back, everyone is talking about women’s changing role, and everyone agrees that Abe is the prime mover.

But that’s just the beginning. Abe is moving to cut Japan’s corporate tax rate, which along with the U.S.’ is the world’s highest. The country’s government-run pension fund will probably invest more of its money in risky but high-yielding assets (in an echo of U.S. President George W. Bush’s failed plan for Social Security).

Abe has launched a large number of deregulation efforts, and has pushed — so far unsuccessfully — for Japan to join the Trans-Pacific Partnership, which would lower trade barriers. He is beginning to curb the powers of Japan’s entrenched bureaucracy. He has even suggested bringing in 200,000 immigrants a year to supplement Japan’s shrinking labor force.

On the foreign policy front, Abe has surprised me as well. Yes, he angered China and South Korea by visiting the Yasukuni Shrine (where more than 1,000 war criminals are enshrined), appointing some right-wing historical revisionists, and generally being a nationalist. But recently he has turned his nationalism into something that looks like liberal internationalism, standing up for the various small Asian countries that have been bullied by China’s push into the South China Sea. Instead of being an apologist for old Japanese imperialism, Abe is championing the rule of law and the freedom of the seas.

Michael Cucek, a blogger who writes about Japanese politics (usually very critically), calls Abe an “idealist liberal icon,” writing: “Abe Shinzo should perhaps now be considered the standard bearer of liberalism around the world.”

To me, Abe looks very much like Japan’s answer to Ronald Reagan — an unapologetic nationalist who wants to slash government and make a principled stand against a bullying rival. And unlike Reagan, Abe is a full-throated feminist.

But where Abe really shines is in comparison with previous Japanese leaders. Those of us who watch Japan could be forgiven for thinking that nothing ever changes. At times, Japanese politics seems like the movie “Edge of Tomorrow,” where everything keeps repeating and the good guys seem to never win. Koizumi was different, but Koizumi seemed like a flash in the pan. Now here is Koizumi’s protégé, continuing and expanding the work his mentor began.

The rest of the world should be paying attention. For the first time in 25 years, Japan looks like it could be at the head of the international pack. It’s far from a done deal, of course, but this writer, at least, is a Shinzo Abe convert.

Noah Smith is an assistant professor of finance at Stony Brook University and a freelance writer for a number of finance and business publications.

  • phu

    Wow… I thought this was going to be sarcastic. It turns out it’s just very, very, very selective.

    Yes, Abe’s policies have reversed deflation. Whether wages have risen in a real way and whether it’s a trend that will continue are debatable. However, accompanying this piece in the Japan Times today is a story about a committee that’s presenting ideas on the “third arrow,” the vital part of Abe’s economic campaign, which not only hasn’t happened but apparently still hasn’t been defined. The international community has been leery of the yen’s artificial inflation, and the administration’s only largely popular major economic move so far has been the consumption tax hike.

    Yes, talk absolutely can be empty, particularly when you’re saying things that “no one has said before.” In a nation where change is at best slow and uncomfortable, it would be unreasonable to expect fundamental cultural change to happen in a single official’s term and at his behest, just as it’s irrational to call his words meaningful in the absence of actual progress.

    Cutting the corporate tax rate is a double-edged sword: Less income from corporations would, ideally, be balanced out by more corporations paying in. However, until or unless that happens, this directly counteracts some of the good the consumption tax hike is expected to do in terms of funding a government in pressing need of income. The pension fund idea is fairly ludicrous and smacks of desperation, not to mention the article actually states this move has failed before, which is not at all surprising.

    I was a TPP supporter until a bit of research showed that it’s not likely to be a good thing for most of us, but that aside, the immigrant argument is truly unfortunate, and it’s not truly immigration when the ongoing real result of the program is basically indentured servitude. Not only is it abusive, it solves none of Japan’s problems, instead enabling the government to temporarily ignore the actual roots of the nation’s labor shortage.

    The foreign policy commentary is where this truly goes off the deep end. Abe’s inflammation of animosity from other countries is ongoing and serious, but it’s dismissed with a wave of the hand. The fact that his “liberal internationalism” is rooted (quite rationally) in self-interest as a way to address China’s expansionism escapes the author, and this suddenly becomes one (well, the only one presented) shining example of Abe’s wonderful foreign policy progress. Oh, and a blogger agrees. So that’s a source, I suppose.

    If Abe is “an unapologetic nationalist who wants to slash government and make a principled stand against a bullying rival,” I must not understand the words “slash” and “principled.” He most certainly is an unapologetic nationalist, which is not a good thing, particularly for international relations. He may (or may not, I think this is arguable) be reducing the power of Japan’s entrenched bureaucracy, but as far as the government itself, his administration has consistently moved to limit the rights and protections for individuals and consolidate the ruling party’s power, enabling him to do more with less oversight and removing or stunting existing checks and balances. It’s also disingenuous to assign Abe credit for a “principled stand” against China, a stand that was only taken when China started to look like it might really threaten Japan, and which has been taken much more concretely by other nations with more skin in the game.

    But apparently the coup de grace is that Abe “shines” in comparison to previous prime ministers. How is this impressive? It’s entirely meaningless because it lacks a real standard: If ten murderers and a thief are lined up, this logic makes a hero out of the thief for not being as bad as the others.

    “At the head of the international pack?” Wow. It’s one thing to ignore all the negatives in order to idolize a leader of questionable ability and motivation, but to further ignore Japan’s continuing economic slide and mounting social issues to place it on this particular pedestal is incredible.

    Japan is a great place, and I hope things do turn around with current and future measures from the government (and, hopefully, some cultural shifts to help the nation cope with the changes it will likely have to make). But this kind of blind idolatry only serves to help the incumbents continue their leisurely jaunts through office without making real progress, and that’s the worst possible situation for a nation that needs more than empty promises and feigned reform.

  • Paul Johnny Lynn

    Noah, if you don’t have your tongue in your cheek, then maybe you have your binoculars the wrong way round.

  • zer0_0zor0

    The article only addresses a few domestic policy issues in an extremely limited and misleading manner.

    All Abe had to do for the economy was reverse Noda’s disastrous policies that made the yen fall to record lows against the quantitative easing USA to regain parity.

    There is nothing particularly ingenious in any of that. the “affordable day care” quip is as yet an empty promise, and the massive protest movement in Tokyo continues unabated, due to result in more civil suits following upon two that were recently shot down in the courts on the basis of spurious reasoning.

    Abe is trying to undermine the bureaucracy of government agencies so that they are more responsive to the political party in power than to the people.

    I could go on with the litany of domestic policy missteps and deceptions, and that doesn’t even begin to look at the international agenda or the Constitution issues.

  • Steve Jackman

    Noah, it is unfortunate that, in spite of being an assistant professor of Finance, you seem to have flunked Finance 101. I’d like to remind you that there are two columns in a Balance Sheet and the one on the right is called “Liabilities”. It is not difficult for any country to get a temporary pop by leveraging its liabilites to the hilt. The principles of Finance dictate that the chicken will come home to roost someday and that day is probably not too far away in the future. In my book, Abe deserves no credit whatsoever.

    • http://www.sheldonthinks.com/ Andrew Sheldon

      He is not responsible for the state of the debt issues. They are a legacy of 3 decades of indifference by both parties. All Western govts around the world are doing the same. That’s why you should vote libertarian.

  • http://www.sheldonthinks.com/ Andrew Sheldon

    I agree Noah. Sadly, politicians don’t set a very high standard, but Abe is misinterpreted because people can’t get beyond the perceived nationalism; which is just Abe pandering to everyone….whilst he takes steps to open up immigration…grow the population. I don’t however think increasing the GST was good policy. Should have increased property taxes and at the same time taken steps to liberalise land regulation. I’ve always been largely supportive of his measures….with a grain of trepidation that he was as people say.

    • phu

      So you dismiss everyone who disagrees as unable to “get beyond the perceived nationalism,” as though his nationalism were a matter of opinion, and as though that’s the only objection anyone has to his actions and policies? The fact that you’re espousing support for such an impeachable leader in such a sweeping, uncritical manner should really make you reconsider the rationality of what should be a far more nuanced opinion, one way or the other.

      • http://www.sheldonthinks.com/ Andrew Sheldon

        Actually I cited his immigration policy, which is not really consistent with your argument. You concede that his inflation has occurred, and that it remains to be seen if real wages are increasing. I’m actually more sceptical there; largely because the reform process has not really started. Utilities to be privatised from 2015. Who’d have thought? TPP on the horizon. These things take time. Nothing has happened for 3 decades. I see him creating a big smoke screen from ‘nationalist zeal’ whilst he’s busily doing stuff. I think you don’t see the strategy behind it all. You think constitutionalism is protecting you. hehe. Yeh, I didn’t give you a lengthy answer last time because I was boarding a plane. Doesn’t seem so populist on nuclear power. People close to him say he’s not a nationalist. I see plenty of action of a preparatory nature. I think you are way too tragic. I also qualified it by arguing that other leaders are pretty bad…but I don’t know them all.

  • http://getironic.blogspot.com/ getironic

    “The stock market is up, growth is way up…”

    Yes, increasing the amount of currency that is out there raises stock prices. The stock prices of the Weimar Republic also hit record highs due to inflation, before the entire economy burned up into hyperinflation.

    When more yen is “printed” (via bonds being floated) it requires more yen to represent the value of the stock. So, that the market goes up does not indicate that production has actually increased or that the economy is healthier or anyone is better off, it is just that it takes more yen to represent the value of yesterday, as yen is worth less.

    “…and even wages are finally starting to rise.”

    And correspondingly, so are prices. There’s no free lunch. This inflation is just playing with numbers by robbing people of the value of their savings. It is another tax on what individuals have already earned.

    “But since taking office, Abe — whose party is famous for sexist gaffes — has become the most feminist leader I’ve ever seen.”

    The whole reason “the status of women” has become an issue in Japan is because of the economy. Yes, you would still have your standard ethnocentric outsiders decrying Japan’s place in a poll of how they think the world ought to be, lest anyone commit the unforgivable sin of offending their fragile, superior sensibilities, but none of that would have been enough to force anyone’s hand here.

    When Abe seeks to change the system to “get more women into the workplace” it has nothing to do with any sense of egalitarianism or enforced equality (not that those are good things), it has everything to do with creating more taxpayers and reaping more taxes to attempt to solve the spiraling problem of spending and debt — without addressing the problem by actually cutting spending and reducing debt, which will have to happen in a major way no matter how many women are working. Politicians are saying what they have to say to achieve the goals they wish to achieve; that is all.

    “In other words, unlike everyone else in the world, Abe listened to Milton Friedman”

    The choice is not between deflation and inflation. Nor is it between arbitrary paper money (which we cannot ever accurately inflate or deflate) and a (20th century USA style) gold standard (which cannot account for economic growth quickly enough). Both of those options are are two sides of the same government-controlled coin. They are good friends, they are allies, and false alternatives to each other which obscure the real alternative:

    The issue is having fiat currency or not. Of having a central banking system or not. That is the alternative to government control over currency.

  • Chandrakant Kulkarni

    Yes, Abe is our “Narendra Modi” of Japan!

  • disqus_Gvs3G32z1K

    I too was hoping this would be sarcasm. Although even if it was, I think North Korea’s Kim family would surpass him in terms of getting people to blindly follow them by a bit.

  • David White

    All you weed smokers who diminish Noah’s article do not understand the velocity of money. I’m here in Japan now, there is a big difference under Abe. He deserves the credit because Abe is making the changes.

    You may now return to your fond memories of electing Obama – the smartest man in any room.