Commentary / Japan

The Democratic Party's existential crisis

Top opposition force must convince voters it has a better economic alternative to Abenomics

by William Pesek

The 4.0 percent jump in Japan’s economy last quarter is Yukio Edano’s worst nightmare. No, the lawmaker hoping to be the next head of the opposition Democratic Party isn’t betting against his nation. But accelerating growth comes as he’s trying to convince voters he has a better alternative than Abenomics.

Edano shouldn’t just stay the course — he and his fellow DP bigwigs should pound the table even harder. They also should think much bigger and bolder.

Japan’s gross domestic product is volatile and subject to sizable revisions. That said, the breakdown of this reading for the three months ending June 30 offers space for optimism. The growth spurt wasn’t due to exports, but private consumption (up 0.9 percent) and business spending (up 2.4 percent). Japan has now had six straight quarters of growth, the longest run since 2006.

Let’s have some perspective, though. Wages remain a disappointment despite drum-tight labor markets that anywhere else would have central bankers panicking. Nor is Tokyo any closer to its 2.0 percent inflation goal, while the yen is rising. In fact, inflation expectations are barely greater than in December 2012, when Prime Minister Shinzo Abe took office. This 4.0 percent growth, meanwhile, is largely the result of last year’s giant stimulus efforts and a resulting public works boom. It’s more about policy steroids than true, sustainable revival.

Enter Edano, 53, and his fellow DP bigwigs. Come Sept. 1, DP members will decide whether the former chief Cabinet secretary or former Foreign Minister Seiji Maehara, 55, will grab the reins from the departing chief Renho.

For starters, the DP’s message should be we’ve been here before. In 2015, investors went gaga over a 5.0 percent growth reading one quarter, only to see it fall back toward 1.0 percent. Next, the DP should explain how it’ll do better to increase living standards and boost wages.

Last week, Edano said (correctly) that “inequality has increased and consumption has stagnated” on Abe’s watch. A couple of growth surprises don’t change the gulf between what Abe advertised five years ago and Japan’s reality today.

I focus on Edano here because he played a central role in Japan’s biggest post-World War II crisis — a giant 2011 earthquake and resulting nuclear meltdown. Each day, as a traumatized nation tuned in to NHK, there was Edano in blue technicians’ overalls informing the public about the potential Chernobyl in their midst. It conveyed a take-charge attitude that’s been lacking in the Abe era. Abe has acted more like a top-down CEO and corporate pitchman than technocrat rolling up his sleeves to remake the third-biggest economy. And it shows. Abe, for example, has pulled off more snap elections than major economic reforms (he may hold another in October).

That’s precisely where Tokyo needs to do better. Edano is calling for higher pay for day-care workers, nurses and home-care professionals. Maehara talks of wealth transfers to help lower-income families as a means of “getting the economy moving from the bottom up.” More generous programs for education as well as elderly and disabled care also might be in the cards.

Good to hear, but how about taking the shackles off the economy? With a 90 percent share of monetary easing and 10 percent, at best, of deregulation, Abenomics is more a sugar high than a plan to take on an ascendant China and a South Korea that’s catching up with Japan Inc. It might have gotten more traction if Abe used the first two years of his prime ministership to loosen labor markets, encourage innovation, alter tax-policy dynamics and empower women. With his approval ratings in the 30-40 percent range and scandals mounting, the days when a big bang was possible are over.

The odds of the DP winning an October election aren’t great. That fact that Japan, for all protests to the contrary, is essentially a one-party state complicates the chances of any party unseating the LDP. There’s scant policy daylight between the LDP and the DP. A combination of inertia, apathy and a day-old-bread vibe keep Abe’s tribe in business.

It’s time the DP changed the narrative by offering a clear alternative. Stop trying to pick off scandalous Abe Cabinet members and start being about something. The DP’s new-and-improved manifesto should focus on prodding companies sitting on trillions of dollars of cash to fatten paychecks, penalizing them with taxes if necessary. Why not announce a tax holiday for startups and add a couple of zeros to Japan’s paltry venture capital industry using public funds to encourage risk taking?

The DP might consider quotas for female board seats, management positions and even political representation. It might articulate a government push into renewable energy and phase out nuclear reactors to create safer and better-paying jobs (something a previous incarnation of the party did when it held power between 2009 and 2012). It could wrestle the power away from Tokyo’s change-averse bureaucracy, something Edano’s former boss, then-Prime Minister Naoto Kan, proposed in 2010.

It’s time Edano and his party got those blue overalls out of storage. As growth disappoints anew and Abe’s numbers slide further, the DP must be ready to offer a genuine alternative of the kind Japan hasn’t had in decades.

William Pesek is a Tokyo-based journalist and the author of “Japanization: What the World Can Learn from Japan’s Lost Decades.” Twitter: @williampesek