Abe Stays On

by Dish Staff

Michael Auslin takes a broad look at the economic implications of Japanese Prime Minister Shinzo Abe’s recent win:

[T]he question now is how far Abe will push the long-awaited structural reforms that he has promised will revitalize the economy and boost wages. There is no longer any excuse for delay, as Abe has another four years ahead of him and no significant opposition standing in his way. A failure to boldly tackle the most difficult reforms, such as in the agricultural sector or in the labor market, not to mention the Trans-Pacific Partnership free trade agreement, will seem doubly damning given Abe’s parliamentary strength. The only reason he doesn’t charge full-steam ahead at this point would be that, deep down, he is not really committed to changing Japan, Inc. That would be a missed opportunity of historic proportions.

Bloomberg View’s editors hope that Abe follows through:

Even Japan’s weak opposition parties more or less acknowledge the good that the first two “arrows” in Abe’s program — massive monetary easing and fiscal stimulus — have done. The Bank of Japan’s bond-buying has driven down the yen 30 percent against the dollar and filled the coffers of companies with global earnings. The unemployment rate is remarkably low; the stock market is rising. Nor is there much quibbling about the direction of Abe’s third arrow — structural changes aimed at improving Japan’s competitiveness.

But it’s not clear that the third arrow will hit its mark:

Tweaks — taxing corporations that sit on their cash rather than investing it or raising wages, for instance — might help around the margins. But the real problem is that for all his energy and verve, Abe has not fundamentally altered the status quo in Tokyo.

Japan’s entrenched bureaucracy waters down reforms almost instinctively. That means small changes are all but certain to be whittled to nothing. Abe’s first two arrows succeeded in part because of their size and shock value: They were designed to change expectations radically, and for a time they did. Abe needs another big bang — something much more than a $25 billion stimulus package.

Back in November, John Cassidy spelled out why he supports Abe:

There’s no convincing reason why a country that is as advanced, well-educated, and hard-working as Japan should remain stuck in an economic rut for decades on end—even if it has run up a great deal of debt. Viable policy options exist to confront deflation, to effect a permanent exit from the liquidity trap, and to get the country growing again, sustainably. These policies aren’t easy to market or enact, but, after years of being saddled with pedestrian leadership, Japan has finally found a Prime Minister, in Abe, who is willing to take some of the necessary measures and confront the people who oppose them.

Be that as it may, Joel Kotkin argues that “it is increasingly clear that the epicenter of Japan’s crisis is not its Parliament, or the factory floor, but in the bedroom”:

 Japan has been on a procreation holiday for almost a generation now, with one of the lowest fertility rates on the planet. The damage may prove impossible to overcome. Japan’s working-age population (15-64) peaked in 1995, while the United States’ has grown 21% since then. The projections for Japan are alarming: its working-age population will drop from 79 million today to less than 52 million in 2050, according to the Stanford Institute on Longevity.