28 March 2014

Abenomics honeymoon -- for how long?

How long will the Abenomics honeymoon last? This was one of the questions we recently discussed with Chie Matsumoto, a journalist and activist from Tokyo.

How long will the Abenomics honeymoon last? This was one of the questions we recently discussed with Chie Matsumoto, a journalist and activist from Tokyo.

Just four and a half years ago, the Japanese public voted an historic change of government. The Democratic Party of Japan (DPJ), a left-of-center party, was elected to govern under the leadership of Yukio Hatoyama. For most of the previous 55 years, Japan had been governed by the conservative, right-wing Liberal Democratic Party (LDP).

There were pious hopes that Japan had finally graduated to a multi-party democracy from being a virtual one-party democracy. There were also hopes that the old system of Tokyo money financing wasteful infrastructure ("roads to nowhere") which benefited local politicians and businesses much more than the economy would be abolished.

But this was not to be. The DPJ government was an inexperienced bunch. With little vision or capacity to implement change. About one-third of the newly elected politicians were first-timers with no previous experience.

The DPJ government also had fractious relations with Japan's bureaucrats, who have basically governed the country over the past half century. Attempts to reform the bureaucracy only made matters worse. And the bureaucrats undermined the DPJ government, especially in attempts to bring changes to Japan's relations with the US.

The March 2011 triple disaster of earthquake, tsunami and nuclear crisis would have challenged any government -- especially in light of the cosy relations of the "nuclear village" (power company, regulators and ministry). But the DPJ did not handle it well.

The DPJ was basically made up of renegades from the LDP. So they also behaved like the LDP had done for a long time. Infighting. Leadership changes. Lack of transparency. And incompetence.

So the Japanese public voted heavily against DPJ in the December 2012 general election, and the upper house elections of July 2013. The LDP returned to power. It was more of a vote against the DPJ than a vote for the LDP. But the DPJ and other opposition parties have very few seats in the Diet.

The new Prime Minister is Shinzo Abe, who was an abject failure in a previous one-year term as Prime Minister in 2006-2007. Hopes were not high for Abe, but he was seen to be a better bet than the DPJ's last leader, Yoshihiko Noda.

Almost by surprise, Abe has achieved great popularity in his first year in office. He has decisively launched a program dubbed "Abenomics". This has three arrows, monetary expansion, fiscal stimulus and structural reform. The monetary easing has been a great succes, with the over-valued yen falling, the stock market booming, and the first signs that deflation may be eliminated. Abe brought in his own man to be Governor of the Bank of Japan, Haruhiko Kuroda, who was previously President of the Asian Development Bank. Former Governor Masaaki Shirakawa had to pack his bags and go.

So here we are in the midst of an "Abenomics honeymoon". The first two arrows are looking good. But everyone is still waiting for structural reforms. And many doubt that Abe has the capacity to deregulate Japan's closed markets.

The blitz of Abenomics means that the LDP has virtually no opposition. Japan is a virtual one-party democracy again. Japan's mainstream media is part of the conservative establishment that rules the country.

Following the Fukushima nuclear meltdown, all of Japan's nuclear power reactors were closed down. Public opinion is firmly against restarting the nuclear reactors. Weekly protests take place on Fridays in front of the Prime Ministers residence. But Abe is still keen to restart the nuclear reactors, in light of his close relations with the nuclear village.

So the question is how long will the Abenomics honeymoon last? And what will follow?

History shows that nothing lasts forever. And cracks are already appearing in the Abenomics edifice. Here are a few:

A recent visit by Abe to the Yasukuni Shrine, which honors Japanese war criminals angered neighboring Japan and Korea (and provoked an expression of disapproval by the US). This is having adverse effects on badly needed tourism, trade and investment. Moreover, Abe confirmed his status a member of the extreme-right wing. Behind their apparent passivity, most Japanese are moderate and middle-of-the-road.

Abe pushed through the Diet, without adequate discussion, a bill granting Japan’s government sweeping powers to declare state secrets. This measure is aim at shoring up defense ties with the US. But it prompted a public backlash and revolt by the opposition.

Abe's agreement with the US to a plan to relocate a controversial US airbase on Japan’s Okinawa island was undermined when Susumu Inamine, a staunch opponent of the relocation plan, was assured re-election as mayor of the Okinawa city of Nagore.

Abe's government will raise the country's sales tax from 5 to 8 percent in April, a key measure to start getting Japan's public debt under control. There is a good deal of opposition to the tax, and much greater concern that it might snuff out the fragile economic recovery now under way.

And under the Trans Pacific Partnership trade negotiations underway, Abe will likely have to push through reductions in agricultural protection.

Seeing these cracks in the Abenomics edifice, Chie Matsumoto believes that Japanese activists should not lose hope. The fact that nuclear power reactors are still turned off is a victory of sorts for public opinion. There is much public discontent that big corporations have been the main beneficiaries of Abenomics. There is also deep public concern about the ever growing inequality and poverty in Japan. And grasroots volunteerism and activism are also growing in importance in Japan.

It is likely that Abe and Abenomics will stumble in the foreseeable future. If Japan is true to form, this will lead to political infighting and a leadership change, perhaps to a more centrist leader. This will eventually open up new opportunitiues for a change of government, of a more progressive persuasion, at the next or following election. The DPJ and other socially progressive parties must prepare now for a future return to government. Non-profit organizations and activist groups must stay active.

Japan is still slowly democratizing. The public is slowly learning that it can shape the nation's destiny. The iron triangle of big business, non-transparent bureaucrats and incompetent politicians can no longer maintain a monopoly of power.

As Chie Matsumoto said, "we have a long way to go, but the Japanese people must take control of their own destiny".


John West
Executive Director
Asian Century Institute
Tags: japan, abenomics, japanese politics, grasroots volunteerism in japan, activism in japan

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