Abenomics ends in Japan amid unfinished reforms and scandals

After seven years of economic recovery, yet also of unfinished reforms and political scandals, Japan’s Prime Minister Shinzo Abe is heading for the end of his second term in government .

In a country that made predictability and stability one of the keys to its post-war success, despite the weakness of its Italian-style heads of government, there is no doubt that the conservative Abe will be remembered as a reformist .

Facing the three-decades long stagnation inherited by the bursting of the real estate bubble in the 80s, he planned a strategy based in “ three arrows :” combating deflation, stimulating the economy, and promoting a wide range of structural changes from making the labour market more flexible, fostering women’s participation, to the upgrading of the private sector.

To better understand the positive impact of Abenomics , as his strategy was known alluding to American Reaganomics , it is necessary to point out that Abe also faced both the aftermath of the devastating 2011 earthquake and nuclear meltdown in Fukushima.

An overall change was urgent and Abe, having easily won the December 2012 election, proceeded to flood Japan with cheap yen, increasing public spending, and propping up the stock market while unemployment fell.

The aggressive monetary policy kept interest rates low, leaving the yen at a level that made Japanese goods affordable for foreign buyers in a moment when China’s economy surged, boosting the demand of machine tools and specialized components. Chinese tourism to Japan also multiplied, which influenced the decision to compete for the now-suspended 2020 Olympic Games .

On the external front, Abe was promoted by liberal sectors from the United States as new leader of the “ free world ,” along with German Chancellor Angela Merkel after Donald Trump’s electoral victory.

Alarmed by protectionist threats, he was the first foreign head of state to meet president-elect Trump. Abe worked with the new U.S. administration to form a separate bilateral deal, completing at the same time the Comprehensive and Progressive Trans-Pacific Partnership.

However, contrasts abound in Abe’s career and the trade war unleashed by Trump was only one factor in the return of problems to the Japanese economy. Public debt grew to 250% of GDP, forcing the country to impose a 2-percentage-point increase in consumption tax. As prices went up, consumers began buying less. By the time the coronavirus pandemic was underway, the economy had already fallen into recession.

The health crisis sunk growth by an annualized 27.8% during this year’s second quarter. Tokyo launched a stimulus package equivalent to 40% of GDP including low interest loans and cash handouts, although consumption has receded again after an improvement reported in June, prior to a second wave of COVID-19.

“If I had been asked for my analysis in 2015, I would have said that the Abenomics were a glass full at 60%. Today, I see these policies more as a 60% empty glass: it is a semi-failure,” said Jean-Yves Colin, a Japan expert at the Paris-based Asia Centre. Structural reforms have been too timid, while the flexibility of the labor market also favored its precariousness, he told France 24 .

Aging population

Colin added that the next prime minister should start planning solutions to long-term challenges, such as the aging of the population. “However, there are never important changes or announcements in Japan; even so Abenomics are dead due to Abe’s departure and COVID-19,” he affirmed.

Markets in Tokyo have reacted to the downfall of Abe's government by betting on continuing his policies, though Japan may return to an era of short-lived leadership.

Among the figures mentioned in the local press as possible successors are Chief Cabinet Secretary Yoshihide Suga , who launched his candidacy on Wednesday; former Defense Minister and Abe’s rival Shigeru Ishiba ; former Foreign Minister Fumio Kishida ; current Defense Minister Taro Kono , and Economic Revitalization Minister Yasutoshi Nishimura , who is in charge of coronavirus measures.

The name of Tokyo Governor Yuriko Koike , who often sidelined Abe in dealing with the pandemic has also emerged, yet she would have to be elected first to Parliament to be considered for the job.

Last Friday, the longest-serving prime minister in Japan , surpassing the record of his great-uncle Eisaku Sato , surprised the world declaring he is stepping down because a chronic illness , ulcerative colitis , has aggravated.

Recommended: Japan's Prime Minister Shinzo Abe resigns citing health reasons

“It is gut wrenching to have to leave my job before accomplishing my goals,” he said, mentioning his failure to resolve the issue of Japanese abducted years ago by North Korea, a dispute with Russia over the Kuril Islands, and reforming the pacifist Constitution, which he called eight years ago his “life’s work.”

The announcement, nonetheless, was expected in Japan, where Abe’s approval ratings have sunk as low as 27% in opinion polls. Many still remember his failing first term in office (2006-2007), when Abe, then Japan’s youngest prime minister at age 52, headed a revisionist administration which paved the way for the dispute with China over the Senkaku/Diaoyu Islands.

Grandson of the former nationalist premier Nobusuke Kishi , who was a member of the pre-war cabinet and later accused of war crimes, Abe criticized the “unjust” international perception of Japan during the first half of the twentieth century.

He also proposed a review of the 1993 government declaration, accepting that hundreds of thousands of women were subjected as sexual slaves by Japanese troops in the occupied Asian countries.

Determined to make Japan a “normal” country with a stronger military and bigger role in international affairs, Abe stoked regional tensions by visiting in his electoral campaign Tokyo’s Yasukuni Shrine, where fallen military officers are honored, including those deemed as war criminals by China and South Korea. In the same vein, he met with the Dalai Lama, Tibet’s separatist and religious leader.

According to Abe himself, once in government his unpopularity grew by his attempts to extend Japan’s military presence in Afghanistan supporting U.S. forces. The ruling Liberal Democratic Party (LDP) and its ally New Komeito suffered great losses in the 2007 House of Councillors (upper house) election, marking the end of its 52-year hegemony.

As now, Abe argued health issues to justify his decision to resign; the following six years were known as the “revolving door” in politics, since neither the LDP nor the Democratic Party of Japan managed to establish a solid, long-term leadership.

Abe, whose term ends September 2021, is expected to stay in office until a new LDP leader is elected and formally approved by Parliament as caretaker prime minister. He vowed to continue political activity and “support a new administration as a lawmaker”, yet his concerns go beyond health problems , reported The Daily Beast newsite.

The outgoing prime minister is under at least one criminal investigation by prosecutors for violations of electoral laws, similar to those his former handpicked Justice Minister, Katzuyuki Kawai , is now facing.

This June, Kawai and his wife Anri were indicted on suspicion of handing out millions of yen in cash to politicians and supporters in Hiroshima prefecture, allegedly in return for their efforts to secure votes in the 2019 House of Councillors elections.

If Abe himself, as president of the LDP, approved financing Anri Kawai's campaign to the Upper House with USD $1.5 million, he would be under the spotlight. Former Special Prosecutor Nobuo Gohara said it seems clear that the investigation will expose Abe’s involvement in the bribery scheme . “Even if Abe can avoid criminal responsibility he has a moral responsibility in the matter,” Gohara insisted.

In addition, Abe attracted harsh criticism for his attempt to concentrate power at the start of the pandemic by promoting constitutional changes that were rejected by the country's former attorneys general.

His move against the Public Prosecutor Office Law began in January, when authorities decided to delay the retirement of the second most powerful prosecutor, Hiromu Kurokawa , reportedly very close to Abe and Chief Cabinet Secretary Yoshihide Suga.

The majority of prosecutors are required by law to retire at 63; Kurokawa was allowed to stay on due to a “reinterpretation of law” in Abe’s words. However, it was soon revealed that Kurokawa had routinely played mahjong with journalists, gambling on games in clear contravention of law. The so-called “guardian deity of cabinet” was reprimanded and had to resign.

Jake Adelstein, The Daily Beast collaborator in Tokyo, highlights the influence of the far-right Shinto cult Nippon Kaigi (Japan Conference), which also serves as a political lobby, in Abe’s return to office in 2012. The group, he says, will continue to wield great power in Parliament long after Abe.

Editing by Sofía Danis

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