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Why Koike matters to Abenomics

Did Yuriko Koike just give Abenomics a second lease on life?

The emergency Liberal Democratic Party meeting on Monday morning said everything about Koike’s resounding victory a day earlier. The wallop metropolitan assembly candidates favored by Tokyo’s first female governor delivered to Prime Minister Abe’s party is a big deal. It could have national implications, just as a similar thumping presaged the LDP losing power in 2009. Koike is now, more than ever, a threat to Abe’s prime ministership.

But I’ve learned the perils of underestimating Abe. Few of us longtime Tokyo scribes thought he’d be back after his dreadful first 2006-2007 stint as leader. I’ve marveled, too, at Abe’s public-relations skills, selling a weaker yen and a few modest regulatory tweaks as Japan’s Reagan/Thatcher moment. The same goes for his often gravity-defying support rates. Then again, Koike’s win mean may signal Teflon Abe is no more. A factoid worth considering: Sunday’s turnout was almost as high as in 1993, the only other time the LDP lost power.

Yet there could be a silver lining here even if Abe hangs on: The LDP’s humiliation is wake-up call to get serious about an economy this prime minister promised to revolutionize.

Voters, it’s safe to say, have Abe’s number. He returned to power in December 2012 with a purely economic mandate. Tired of muddling along prime minister after prime minister, decade after decade, households rallied around Abe’s “three arrows” samurai metaphor. It was easy to grasp: three arrows shot together — monetary easing, fiscal loosening, deregulation — are a greater threat to Japan’s malaise than some random shots. But instead of firing all three simultaneously, Abe took a scatter-shot approach, which explains why the big wage increases Abenomics promised are stuck in the quiver.

The Koike shock could refocus Abe on the target at hand. Abe’s bait-and-switch from the economy to constitutional amendments is dawning on supporters. His recent success in ramming into law a conspiracy bill few comprehend for reasons even lawmakers who voted for it can’t explain was a gambit too far. Abe’s haste to pass a chilling secrecy bill in 2013 and to send troops abroad far outpaced public support. As voters push back, Abe should take the hint to get back to his structural reform mandate.

Abe can start in Hamburg this week, when he meets other Group of 20 leaders. There, he can pledge to redouble efforts to ensure Japan contributes more to global growth than its deflation and mercantilist policies subtract. Abe could respectfully push back against U.S. President Donald Trump’s isolationist turn in Washington. On the sidelines of the G-20 summit, for example, why not lobby Australian Prime Minister Malcolm Turnbull, Canadian Prime Minister Justin Trudeau and Mexican President Enrique Pena Nieto to make the Trans-Pacific Partnership Trump scrapped a reality and discuss pulling China into the deal? Going on the offensive would give Japan the leadership role Abe craves and allow him to return home with some of the momentum Koike just grabbed.

Domestically, Abe also could hold a roundtable with Team Abenomics, a few top local entrepreneurs and smattering of foreign economists to brainstorm on priorities.

OK, so deflation is still here nearly five years on, wages gains are few and far between and hopes for a foreign direct investment bonanza aren’t panning out. What can be done to get the drive for structural change back on track?

It’s troubling, in this context, that Bank of Japan leadership is suddenly on the radar screen. Abe surrogates, including mentor Nobuyuki Nakahara, say Haruhiko Kuroda shouldn’t get another term as BOJ governor. Arguments that the central bank needs fresh thinking ignore that Kuroda has done 90 percent of the work to make Abenomics a reality. Construction for the 2020 Tokyo Olympics has helped, of course. But it’s a dearth of success in loosening labor markets, inspiring a startup boom, taking on the bureaucracy, lowering trade barriers and empowering women that’s holding back growth, not BOJ policies.

The Koike shock, meanwhile, could make “womenomics” more of a strategy than public-relations ploy. Abe rarely misses a chance to gush about making women “shine” to enliven gross domestic product. It’s got to irk Abe, though, that the most important gender milestone on his watch was achieved by a woman he’s tried to defeat. Ditto for Democratic Party leader Renho.

When I’ve touched base with gender-economics leaders, from Goldman Sachs analyst Kathy Matsui to “Lean In” author Sheryl Sandberg, an under-appreciated problem comes to the fore: a dearth of role models. While Abe has fashioned himself as Mr. Womenomics, he’s not entrusting a top Cabinet post to women — foreign affairs, finance or chief secretary. Nor is a single Nikkei 225 company run by a Japanese woman. Only in 2015, it’s worth noting, did Keidanren get around to naming its first female executive. Well, here’s Abe’s role model.

The question is what Abe does with this Koike moment. To be sure, it may already be too late for Abe to recalibrate as scandals and gaffes hog the headlines. But a crisis is a terrible thing to waste — and Abe’s prime ministership is clearly in crisis territory. Abe should take the hint, roll up his sleeves and reclaim the mantle of economic progress.

William Pesek is a Tokyo-based journalist.