Keiko Iizuka: Abe’s Challenge

This blog post is part of a series entitled Is Japan in Decline?, in which leading experts analyze Japan’s economy, politics, and society and give their assessment of Japan’s future.

On December 26, 2012, Japan chose its seventh prime minister in seven years, a new record for the annual turnover in leadership that has plagued the country since Junichiro Koizumi stepped down in 2006. For a second time, Shinzo Abe has stepped up to the plate. A coalition government, comprised of the conservative Liberal Democratic Party (LDP) and the New Komei Party, has returned in the wake of over three years of reformist rule by the Democratic Party of Japan (DPJ).

After more than three years of tumultuous politics, Abe’s election seems to have prompted a broad sense of euphoria in Japan over the New Year’s holiday. An ebullient response was evident in Japan’s financial markets. The stock market was at its highest level since Japan’s “triple disasters” of March 2011. The yen continues to get weaker, creating relief for Japanese export industries and raising hopes of recovery from an extended period of deflation. Apparently, without lifting a finger, Prime Minister Abe seems to have benefited from the nation’s upbeat mood.

Given this optimistic national welcome for 2013, it seems hard to imagine that Japan’s decline is inevitable. Yet, when one looks at Japan’s low birth rate, aging population, and an array of pessimistic economic indicators, we have to acknowledge that a tough road lies ahead. Japan will continue to decline if it keeps straying without any strong political leadership.

Thus the real question is how the new leadership can manage to mitigate the impact of Japan’s decline. Slowing the rate of economic decline, softening its social impact, and designing a long-term strategy to improve economic competitiveness ought to be Japan’s top priorities. Hard choices will have to be made, and implementing these choices will depend on the skill of Japan’s political leaders.

I am a journalist who follows the day-to-day movement of Japanese politics. Many other contributors to this series on Japan’s decline have spoken to Japan’s mid-to-long-term agenda, but I thought it important to focus on one critical aspect of this debate—the immediate challenges for the new Abe cabinet.

In early December, long before the Lower House election, I saw a sheet of paper with a calendar on it that left a significant impression on me. The calendar, secretly put together by LDP leaders on the assumption that the party would win the Lower House, listed the Abe cabinet’s political and diplomatic itinerary until the Upper House election in July 2013.

The calendar clearly identified the Abe cabinet’s most pressing objective: winning a majority of seats in this summer’s Upper House election. To move away from Japan’s “politics of indecision,” the LDP aims to put an end to the tensions between its Upper and Lower Houses of parliament, the so-called “twisted parliament.”

Prime Minister Abe is currently placing emphasis on economic policies, including recession countermeasures, freeing Japan from deflation, energy policies, and smoothing Japan’s entry into negotiations on the Trans-Pacific Partnership.

Yet Abe is immediately focused on implementing a large-scale, more than ten trillion yen stimulus plan, and after that, crafting a more flexible and larger scale 2013 budget for Japan’s next fiscal year that begins in April. Both of these budgets will be absolutely essential for winning control of the Upper House.

The calendar that I saw had a minutely-detailed plan of action for how to bring these policy goals to fruition. The preparations were already made for the half-year ahead, revealing the longstanding governing habits of the LDP. These habits were groomed over half a century of single-party rule in Japan, and thus the LDP’s policymaking instincts are finely honed. I am by no means a passionate supporter of the LDP, but seeing that policy calendar, I understood easily that the LDP had what it took to return to power.

Under the three-year-three-month DPJ rule, I often felt dissatisfied with the fact that there were few DPJ politicians who had the knowledge or sense of how to plan ahead or negotiate “action plans” with related stakeholders to ensure implementation. This, of course, also meant that the DPJ leadership was unable to anticipate outcomes.

This lack of familiarity and skill in the process of governing greatly damaged public trust in the DPJ’s leadership, especially in the Hatoyama and Kan cabinets. In the Noda cabinet, there was a tacit understanding that Ministry of Finance bureaucrats wrote the calendar for implementing the consumption tax hike, and although the leaders of the DPJ designed their policy action plan, no politicians were sufficiently savvy in moving the plan forward. This inability to envision the detailed actions required to reach policy goals and thus to plan for the implementation of policy became a big factor in Japan continuing to stray off course.

Much of the New Year’s euphoria among Japan’s ministries and in the financial sector is based on the huge sense of relief that politicians with considerable skill in the process of policymaking have returned to power. It is my understanding that the government dysfunction under the DPJ brought about a psychological mood of stagnation that went far beyond the government itself, and extended even into the corporate sector which also seemed to lose its vitality over the past years.

Having said that, Prime Minister Abe needs to go beyond a concrete action plan for the revitalization of Japan’s economy. He too must display the capacity to realize his policy goals. To do so, the Abe cabinet will need to confront the Japanese public’s distrust in politics, restore hope, and bring back confidence in Japan’s leadership. More than any individual policy choice, this will be Prime Minister Abe’s true challenge.

It is early yet, but at the moment some of the concrete initiatives the prime minister has taken, such as the massive expansion of public works, look too much like policies taken under the old LDP. Skeptics abound on this approach. Granted, this is a stimulus model that worked well in the 1970s, and underpinned Japan’s economic miracle. Yet, today’s Japan has a shrinking workforce and a widely different industrial base. More innovative measures that look ahead to transform Japan’s industrial competitiveness are called for.

But perhaps first steps first. Prime Minister Abe must patiently deal with Japan’s short-term economic recovery. Indeed, if he can accomplish this initial policy goal, he will restore somewhat public confidence in government. The 2012 year-end euphoria may then transform into a hopeful 2013 that will a have stronger and deeper basis for national recovery. Japan cannot be saved through atmospherics, but market response thus far does suggest brighter prospects for the revitalization of the economy if the government can set the correct priorities and follow through on its commitments.

In this respect, the first half of 2013 will test the proposition of whether Japan is in decline. If Prime Minister Abe can produce positive results, he may be able to restore national confidence and begin to seriously tackle the longer-term project of reversing the inevitability of Japan’s decline.

If he fails, Abe and his LDP will look a lot like their predecessors the DPJ. The sense of frustration in Japan’s government will only grow, and the inevitability of Japan’s decline will seem more credible.

Keiko Iizuka is senior political writer at the Yomiuri Shimbun.