In 22nd October, the Japanese will go to the polls so as to elect their representatives for the country’s Lower House of Parliament, once Prime Minister Shinzō Abe called for early general elections considering his current recovery with increased popularity, months after extremely low approval rates for him personally, the government and the party. More than a year ago, Abe’s Liberal Democratic Party (LDP) and its coalition partner, Komeito, secured two-thirds majority in the Upper House, after 2016 July’s elections, giving them the power needed in order to revise the post-war constitution. Despite this victory, Japanese administration seemed to the world as being much more vulnerable than what many used to believe considering what came afterwards. Apparently, this victorious battle has been the beginning of the ending.
Shinzō Abe, came in power back in 2012, after the parliamentary collapse of governing Democratic Party of Japan (DPJ) returning in high office after his short first term in 2006-2007. In September 2007, about 3 months after the defeat in that year’s elections in the Upper House, various political and economic scandals of high cabinet ministers, resignations from the government and a reshuffle; he finally decided to step down as prime minister.
I want to make it clear that in Japan, Diet works in collaboration between the two Houses of Parliament, but the Upper House, or the House of Counsellors has a bit more of an advisory role, like a Senate, meaning that if there is disagreement about a bill from the two Houses, the Lower House, or the House of Representatives, will decide in the end the acceptance or the rejection of that bill. That is also happening with the election of PM by the Houses and despite LDP having lost in Upper House elections in 2007, it remained in power until 2009, with different leaders. That is the reason, why many allege that Abe is gambling with his decision of snap elections, about a year before scheduled, considering that if he loses his parliamentary majority, quite impossible from my point of view, he will lose his job.
But we also have to remember, that Abe in May 2017 became the third longest serving PM in post war era, with 1,981 days in office- more than 2,000 today- while an ordinary term in Japan is about a year. For instance, from September 2007- Abe resigns as PM- until December 2012- Abe re-elected PM- Japan had five different PMs, two from the LDP and three from the DPJ, in a period a bit more than five years. So, with a secured job and undeniable achievements throughout his capacity, why is he gambling now?
For many decades, Japan faced extraordinary economic boom and prosperity that industrialization and technological democratization had to offer in a completely destroyed country after WWII. Unfortunately, when a nation becomes so rich so fast depended on globalization, then a bubble is created and the country lives in its own illusions which will be unable to protect it in the future. That is the case of Japanese economy after 1990, a bubble that smashed taking down everything that previous generations had built before. The diagram above shows that after 1997, when financial crisis spread through Asian stock markets, until 2016 Japan had stagnated levels of annual GDP growth or recession in years of crisis like 1997-98 or 2007-09.
Abe, as PM tried to focus his economic agenda in reviving growth levels in the so called “efficient” percentage of 3%. His program called “Abenomics” has been based on three different aspects of economic and governmental policies. The first aspect, has to do with fiscal stimulus, consisting public spending strategies, the second aspect is about monetary expansion and implementing monetary unconventionality and the third one proposes structural reforms in the labour market, liberalization acts and women empowerment for example.
The 3% growth target, is essential for labour market stabilisation, once economists believe this is the efficient way on how a country can achieve in the short-term equilibrium and stability. As you can see, growth rates for the past 5years have been near 1%, beneath the needed target, but the combination of these 3 policies was the reason why Abe has been PM for so long and it has even been described as “successful”. So, let’s take a deepen look on “Abenomics” in order to explain its success or just its sufficiency.
We have to start with fiscal policies that Abe’s government enforced. Beforehand, I have to mention that Japan has the highest debt level to GDP, with a public debt of around $11tn or 246% of GDP. Thus, LDP apart from being a typical conservative and liberal party it was also trapped by this enormous debt and that led to “moderate” stimulus. They started, a massive spending program supporting infrastructure, they raised taxtation levels from 5% to 8%, without offering real revenues in the country’s budget and at the same time they had to deal with austerity doctrines that ruled and keep on ruling the world. Fiscal expansion, was a Keynsian expirement that many Japanese governments were afraid or unwilling to start in the past and one that Abe included in his priorities, but always being a secondary one.
2012 marks the beginning of “fisal-ity” and Abe almost a year later appoints a distinguished Japanese economist and a close political allay as the new governor of the Bank of Japan (BOJ). Haruhiko Kuroda was the chosen one for lifting the heavy weight, he was quite famous as president of the Asian Development Bank, for 8 years, and since 2013 he is “notorious” as a fighter against monetary conventionality. What we can describe as monetary conventional, is low-inflation target policies, control over money supply and circulation and most importantly little intervention by the Central Bank. Imagine now, that Kuroda did the exact opposite.
When it comes to low-inflation policies, Kuroda has been doing his best in order to secure 2% inflation- we believe that this is a steady level where all economic institutions can predict their future accurately- re starting quantitative easing (QE) program; mass bond buying program by the BOJ which was first enacted in 2001-2006 and Kuroda reinforced in 2013. With QE it would be easier for Japanese government to finance its investing programs while creating a secure environment for private sector enterprises. The second doctrine of money controls also tears apart because the BOJ in order to implement QE has to put more money into circulation and monetarise public and private debts.
Neoliberal, monetarist actions end with Zero Interest Rates (ZIR) and Negative Interest Rates (NIR) that BOJ put in action. There is a new Economic Thinking which provides evidence that even extremely low interest rates in the long term can’t provide a solution over deflation phenomenon. Japan, has formed an example of this thinking, due to the country’s high levels of savings, despite even charging them via NIR and its “commitment” to deflation. This is how, BOJ right now intervenes without hasitation in market’s institutions.
With a country so mature economically and with people so devoted to obbey the orders of keeping money for future generations it makes no suprise to me that even with these 2 strategies we have seen no clear signs of improvement. Nevertheless, what we urgently need today, more than ever before in the past, is the synergy of fiscal and monetary policies. What Japan needs, is not something great, unfortunately there will be no great solution to restore Japanese economy, but it does need something which will be enough and fiscal policies were not enough. On the contrary, Kuroda has been commited to save the Yen no matter what it will cost him, taking the responsibilty for all actions and stating clearly many times that he will not stop until his purpose is fulfilled.
I believe that Abe has been passionate to change labour landscape in Japan, the same way Kuroda changes monetary one. It is obvious, that a “Tory” party would legislate laws for more flexible conditions, support for private insurance companies and minimanization of state’s role in the economy. This, classic liberal tactic offered Japanese people the highest levels of employment and the lowest levels of unemployment for the past 22 years being number 1 in many OECD surveys. But when we as economists see prosperity and maximazation in analysis or in surveys we completely forget real people and their lifestyle. We act the same way bourgoise used to in a different era “If they don’t have bread to eat, let them eat cake”.
The last 30 years or so of crisis have created a new term described as “Japanization”. With this term, we try to explain the prolong stagnation era in Japan but if we try to move beyond that, we will see that in the case of Japanese people they will not have rice to eat, don’t even mention cake. Stagnated wages, generations becoming poorer and poorer, people dieing from over work (karōshi) in black companies (buraku kigyō), with labour ministry offering just fringe sights of hope, doing nothing to harm profitable businesses like Dentsu corporation and with millenials working part-time having no money to get by decently.
We shouldn’t forget that Abe has also pushed reforms for “womenomics”, supporting women empowerment, without changing the patriarchal system that has been dominating Japan. Japan, ranks 163rd out of 193 countries for female representation in Parliaments with LDP being above the average level of around 10-12% and Japanese Communists, being the only party with a logical level near 25%, still very low but with hopeful remarks for the future. Thus, why such a prosperous nation is so poor in its core?
Whether we like it or not, our world is heading to “Japanization” and sooner or later we will all find ourselves in this condition. Economics have been based in circles and waves of growth and recession, but countries and capitalism now are in their peak of maturity and the means that we have already determined our future as economies. That also means that economics, will not be the primary source of political debate during campaigning but social and political issues might list their priorities. This is happening now in Japan, with a shift from economic questions about “Abenomics” to questions about constitutional reform, pre-war state of order and security, considering North Korea’s constant threats.
Shinzō Abe is in a rush today, so as to win this battle that he personally started, with his decision of early general elections. With a former LDP minister, Yuriko Koike the governor of Tokyo, as his main contender, Abe has to fight not against opposition parties but his own past rhetoric and a conservative woman who knows how to rule over men. From my own personal perspective, judging from the post-war Japanese era, there are little chances of LDP losing first place, but it is possible that Abe will lose his secured two-thirds majority. But, I think that Koike’s Party of Hope will support in the future bills proposed by the LDP, simply because its members come from LDP and support conservatism.
What, we have to see more carefully is radicalization. Theresa May, in the UK the second most powerful remaining monarchy in the world after Japan, called for early elections in June being confident of increasing her parliamentary majority, nonetheless, she ended up losing her majority forced to form a deal with the conservative DUP, once the Labour party offered radical solutions under Jeremy Corbyn’s leadership winning about 30 seats more than in 2015.
Abe should not be afraid of past colleagues of his, but he should keep an eye on the popular Communist Party, which has centralized its rhetoric in less extreme ideology increasing that way its approval. Theresa May, made the mistake of offering opposition the lead in proposing main questions in political debate and Abe should learn from May’s mistakes and offer his agenda and not the promises of opposition in the debate table. No matter the result, Japan faces and will keep on facing difficulties that neither Abe nor Koike can solve. We just have to remember one little thing, banzai!
 Banzai, was widely used by soldiers during WWII, meaning “Long live the Emperor”
Student, Aristotele University of Thessaloniki, Thessaloniki (Greece)