Commentary / Japan

Challenges of a long-running administration

by Heizo Takenaka

A presidential system like that of the United States sets the maximum tenure that a president can serve. In South Korea, the maximum tenure is a single five-year term, while in the U.S. a president can serve up to two consecutive four-year terms (for a total eight years). In Japan, which has a parliamentary Cabinet system, there is no maximum tenure for a prime minister. But there are rules in the governing party that set term limits for the party leader (president in the case of the Liberal Democratic Party). Under the parliamentary Cabinet system, the top leader of the ruling party will in principle head the administrative branch as prime minister. In practice, the term of the ruling party chief sets the tenure of the prime minister.

Previously, the LDP, the main party in the ruling coalition, set the maximum tenure of its president to two consecutive three-year terms (for a total of six years). The past long-running LDP-led administrations in recent history, such as Prime Minister Yasuhiro Nakasone’s (1982-87) and Prime Minister Junichiro Koizumi’s (2001-2006), ended in just shy of six years.

At a party convention in March last year, however, the LDP revised the party rules to make it possible for a prime minister to serve three consecutive three-year terms. Prime Minister Shinzo Abe, who won his third-term as LDP chief in the Sept. 20 party election, can theoretically stay in office through September 2021. If he serves out his third term, he will have surpassed the record of Prime Minister Taro Katsura in the early 20th century of having the longest-running administration in Japan’s modern history.

There are big advantages to a long-running administration. Political stability paves the way for a stable development of the economy. Japan’s economy under the administrations of Nakasone and Koizumi grew considerably more rapidly than under their immediate predecessors and successors. Of course, it can be said that the economy’s robust growth paved the way for political stability and enabled the long-running administrations.

The longer the political leader’s stay at the helm, the greater international trust in the administration and in particular the prime minister himself should grow, thereby bringing positive diplomatic results. In fact, Abe has achieved a fairly strong presence in top-level diplomacy. He now leads the second oldest administration among the Group of Seven leaders, only after German Chancellor Angela Merkel.

On the other hand, the administration faces a host of challenges — all the more for its long duration. Since the administration has lasted for so long, people expect him to leave a legacy for the future. The biggest challenge for the prime minister in his third term as LDP president is whether he can leave behind such a legacy.

Both the Nakasone and Koizumi administrations implemented policies that served as legacies and had major socio-economic impacts on this country. Nakasone’s Cabinet privatized the government-run Japanese National Railways and National Telegraph and Telephone Public Corp.

The JNR, which had been incurring massive losses and raising train fares almost every year, was privatized and reorganized into the Japan Railways group companies — and railway fares stopped rising after that. The state-run telecom operator was turned into NTT Corp. to take charge of the revolutionary changes to telecommunications service since the 1990s.

Koizumi’s Cabinet privatized the state-run postal services — then the largest government-affiliated institution — and that had a major influence on streamlining the operations of other state-run institutions. His administration also facilitated the disposal of non-performing loans in the banking sector — which had plagued Japan’s economy following the burst of the bubble boom in the early 1990s — and paved the way for reinvigorating the financial economy.

Since coming to power in December 2012, the Abe administration has introduced various steps to resuscitate Japan’s economy. Notable among its achievements is the agreement that it struck with the Bank of Japan to set the 2 percent inflation target. Under the target, the BOJ launched an unprecedented monetary easing operation, and as a result, share prices have tripled in five years and the unemployment rate has come down to historically low levels in the mid-2 percent range. Due to its appropriate macroeconomic management and easing of the visa requirements on foreign visitors, the number of inbound tourists has roughly quadrupled in the past five years.

As such, the Abe administration no doubt has had great achievements in turning the economy around for the better. But it also faces the challenge of formulating policies that will make the economy better for the next generation. In particular, it has to set its sights on the rapid changes taking place in the economies of many other countries with their progress amid the major wave of the global economy called the fourth industrial revolution. Implementing such policies is what’s required of the prime minister to create a legacy for his long-running administration.

Several issues have already been identified as the policy tasks needed to foster a better future. The biggest among them is the fundamental reform of the social security system. With the rapid aging of the population, social security-related expenses keep expanding every year and now account for a third of the annual fiscal expenditure. There will be no fiscal consolidation without an overhaul of the social security system. Everybody’s watching for when the Abe administration will start tackling such reforms in earnest.

Another key policy agenda that the Abe Cabinet should pursue are the steps to enable Japan’s economy to maintain its present status and raise its expectations for the future amid the fourth industrial revolution. Such elements as artificial intelligence, robotics, the internet of things, big data and the sharing economy have all combined to radically reshape industrial society.

Japanese companies hold pieces of valuable technologies in each component of these developments, but they remain unable to give full play to their potential as efforts to lift various social regulations take time and people’s awareness of the times often lag behind.

In the efforts to put self-driving vehicles on the road, for example, Japanese firms own excellent technologies in vehicle manufacturing, as well as in key components such as sensors and cameras. However, the nation still lacks a plan to test the technologies on public roads. Also needed to realize autonomous driving will be the development of big data on road traffic information as well as reform of the road infrastructure itself.

In short, the structure of cities itself needs to be changed to achieve a comprehensive reform of the social infrastructure. One idea to realize that would be the development of a city or an area as a real testing ground for the changes — or to create what may be called an IR4 Super City to achieve the fourth industrial revolution. Such an initiative can also be a powerful tool to push forward both the growth strategy and regional revitalization that the Abe administration has sought to promote.

This is the kind of policy that will be expected of a long-running administration — and one that only a long-running administration can implement.

Heizo Takenaka, a professor emeritus of Keio University, served as economic and fiscal policy minister in the Cabinet of Prime Minister Junichiro Koizumi from 2001 to 2005. He is a member of the government’s Industrial Competitiveness Council.