New York – For a man who swept to office almost eight years ago vowing to restore Japan’s economic vitality after two decades of malaise, going back to the starting line must be particularly painful for Shinzo Abe.
Japan’s longest-serving prime minister, Abe has huge parliamentary majorities and no internal challengers to his command of the ruling Liberal Democratic Party. Yet despite this security, Abe’s response to the COVID-19 pandemic has shown anything but leadership.
After weeks of speculation and lobbying by prefectural governors, Abe on Tuesday declared a state of emergency that will hand local governments power to implement virus-containment measures. He had to be dragged to postpone the Olympic Games — a decision announced only after a number of nations said they wouldn’t send teams. Abe looks more like a prisoner of events than someone at the zenith of his power.
The government is preparing significant stimulus to support the economy, which is slumping under the weight of the coronavirus and an ill-advised consumption tax increase late last year. The economic package amounts to 20 percent of gross domestic product. But here again, party officials and ministers have done much of the talking.
While Japan has the fewest virus cases of any Group of Seven country and won early plaudits for containment, a recent spike in infections puts that into stark relief. “We’ve been saying that we are on the brink of the brink, but it’s becoming a very tense situation,” economy minister Yasutoshi Nishimura said during a Fuji Television broadcast Sunday, as Tokyo reported its second day of 100-plus new cases. Japan had more than 4,000 cases and nearly 100 deaths by Monday.
Tokyo Gov. Yuriko Koike pushed aggressively for the emergency declaration that would allow her to impose measures to restrict economic activities and people’s movements.
This isn’t the moment for policy timidity. Abe announced Monday a ¥108 trillion package, which builds on support unveiled late last year and is almost double the ¥60 trillion favored by party officials just last week. But the amount of new spending is likely to be only a fraction of that. Japanese supplementary budgets typically include money not spent from previous rollouts along with the estimated value of loans, loan extensions and corporate initiatives.
For weeks as the outbreak spread, Abe had been missing in action just when the economy needed him most. His triumphant return to power in 2012, after a one-year stint as prime minister ended in 2007, was framed as a departure from the frail, post-bubble economy of the 1990s. Through the intervening years, the country suffered on-again off-again recessions, a succession of banking crises and bouts of deflation. When I lived in Tokyo in 1999 and 2000, that sense of decline was palpable as you saw prices virtually frozen on signs along the street, and financial scandals proliferated. A revolving door of short-term prime ministers (Abe included) added to the funk.
After years in the wilderness, Abe led the LDP back into power promising an expansionist economic platform — one outcome of his interim years spent surrounded by reflationist advisers. At the center of his new program were the “three arrows” of Abenomics: monetary policy, fiscal stimulus and regulatory reform. He paired this ambition with a more muscular national security agenda. Wary of China’s commercial and strategic ascendancy, he also favored changes to Japan’s postwar pacifist constitution.
One of Abe’s first major appointments was Haruhiko Kuroda as BOJ governor in 2013. While Japan had cut rates to near zero sometime before then, it was Kuroda who presided over a massive expansion of quantitative easing. The program had some success; while inflation is less than the bank’s 2 percent target, Japan is no longer in deflation. The other two arrows have been a mixed bag, though the economy has expanded for most of Abe’s tenure.
Abe hasn’t endured a systemic shock on his watch, having missed the global financial crisis and the Fukushima nuclear disaster. Now destiny beckons for this son and grandson of conservative politicians. His grandfather, Nobusuke Kishi, was an infamous minister in Japan’s wartime Cabinet — he was imprisoned by American forces after the war — and ruled as prime minister from 1957 to 1960. It was during Kishi’s term that Japan was awarded the rights to host the 1964 Olympics, a first for Asia. The games were a kind of coming out for postwar Japan, whose economy was beginning to accelerate.
That probably makes the deferment of this year’s games an even bigger personal blow for Abe. But the coronavirus recovery can also be a galvanizing moment. It’s not too late to get back to his economic mission. This leader, with almost unchallenged power, now faces the ultimate test.
Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously he was executive editor of Bloomberg News for global economics.
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