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Abe Administration Returns to an Economic Agenda | Keisuke Yamada Political Correspondent Manager, Sendai Bureau Jiji Press [Date of Issue: 30/October/2015 No.0248-0987]

Date of Issue: 30/October/2015

Abe Administration Returns to an Economic Agenda

Keisuke Yamada
Political Correspondent
Manager, Sendai Bureau
Jiji Press

Now that his security legislation is safely through, Prime Minister Shinzo Abe announced three new goals for the Abenomics program in September 2015 that clearly signal the return of the economy to the top of the Abe administration's agenda. However, the recovery trajectory of the Japanese economy remains fragile, while global economic prospects too are far from clear. With Abenomics having served as the engine behind the administration to date, if a shadow should fall across the program and cause expectations to sour, the administration could find itself on suddenly shaky ground. With so much riding on the economy's performance, the next few months will present Abe with his greatest challenge since coming to power.

Difficult targets for the three new 'arrows'?

The three new 'arrows' of Abenomics comprise "a strong economy that generates hope among the people," "child-rearing support measures to allow people to pursue their dreams" and "a social security system that leads to a sense of well-being." Each also has its own numerical goal, respectively a nominal gross domestic product (GDP) of 600 trillion yen, a birth rate of 1.8, and social security (cutting the number of elderly people waiting for vacancies in nursing homes to zero). The original three arrows announced by the second Abe administration back in 2002 (a bold monetary policy, an agile fiscal policy and a growth strategy that encourages private-sector investment) laid out specific steps for conquering deflation. The new arrows delineate the policy goals of Abenomics.

At the 24 September 2015 press conference where Abe announced the new arrows, he described them as the 'second stage' of Abenomics. However, he faces some steep hurdles in achieving them. Lifting nominal GDP from the FY2014 level of around 490 trillion yen to 600 trillion yen by around 2020 will require nominal annual economic growth of more than three percent, but the world economy continues to slow, China included. At home, the revised actual GDP value for the April-June quarter which the government announced in September 2015 was down by 1.2 percent on an annual basis, the first negative growth in three quarters. In October 2015, the Monthly Economic Report also revised down its basic view on the Japanese economy for the first time in twelve months.

To achieve Abe's new policy goals despite these unfavorable conditions, the government will need to boost personal consumption through, for example, higher wages, while also pursuing regulatory reform to open up the Japanese market.

Markedly defensive Cabinet restructuring

On 7 October 2015, Abe followed up announcement of his new three arrows with a markedly defensive reshuffling of his Cabinet along with key LDP posts. The Prime Minister hung on to all his key ministers, from Cabinet linchpin Chief Cabinet Secretary Yoshihide Suga to Foreign Minister Fumio Kishida, Economic and Fiscal Policy Minister Akira Amari, Defense Minister Gen Nakatani and Regional Revitalization Minister Shigeru Ishiba. In particular, Suga, who, according to a senior LDP executive, had previously shown interest in becoming LDP Secretary-General, and Ishiba, who has formed a new faction in preparation for the next general elections, both remained in their old posts. Abe favorite LDP Policy Research Council Chairperson Tomomi Inada also briefly looked to have a shot at entering the Cabinet but was ultimately passed over.

There were obviously reasons why the Prime Minister couldn't move aggressively even if he had wanted to. The greatest of these was the growing tide of public opposition to the security bills that were passed in September 2015, beginning when all three constitutional law scholars asked to provide testimony to the Lower House Commission on the Constitution in June 2015 expressed the view that the bills were unconstitutional. A string of media-bashing statements from within the LDP also increased public distrust and criticism of the security legislation, with various demonstrations staged outside the Diet.

Public opinion surveys undertaken by the media in relation to these developments have revealed plummeting Cabinet approval ratings. According to a Jiji Press survey, in July 2015, 40.1 percent of the public supported the Cabinet, while 39.5 percent did not, representing a drop in public approval of around six percentage points since the previous month. A month later in August, 39.7 percent of respondents expressed support and 40.9 percent opposition, taking the approval rate below the non-approval rate. Public opinion surveys by Asahi, Yomiuri, Mainichi and other media outlets too have all demonstrated this same turnaround since July.

While the ratings recovered slightly following Abe's statement on the 70th anniversary of the end of WWII in August 2015, they fell again after the security bills were passed in September, with the Asahi Shimbun finding the ratio of approval to opposition at 35 percent to 45 percent, the Yomiuri 41 percent to 51 percent, and the Mainichi 35 percent to 50 percent. According to one LDP senior executive, some party members were just "relieved that the ratings hadn't slipped further", but compared to the 40-60 percent approval ratings in the first half of the year, this is still a major drop of 12-17 points. To avoid the risk of an ambitious Cabinet reshuffle that might prove unpopular with the public and pull down Cabinet support ratings still further, Abe appears to have decided that it would be smarter to play it safe this time.

Abe undoubtedly also realized that his uncontested re-election in the September 2015 LDP presidential elections had created the strong expectation of a reshuffle in top party posts and also the Cabinet. In fact, the only real feature in the reshuffle was the creation (at Abe's own insistence) of a Minister in Charge of Promoting Dynamic Engagement of All Citizens. The man selected for the post was Katsunobu Kato, elected five times to the Lower House and Deputy Chief Cabinet Secretary since the administration came to power in 2012.

Minister Kato's role?

At a press conference on 7 October 2015, Abe announced the new Cabinet's plan to throw all its resources behind realizing a society in which all 100 million members remain active. Specifically, he commented that "This administration is one that actively engages the future. We will put the brakes on Japan's declining birthrate and the graying of society and ensure that Japan still has a population of 100 million 50 years from now, taking on the challenge of realizing a bright future in which all 100 million members of society remain active." He further noted that a first package of measures for immediate implementation would be drawn up as soon as possible before the end of the year and moved swiftly into action.

However, not only is 'Dynamic Engagement of All Citizens' a somewhat abstract job description but with the minister's portfolio overlapping with those of the economic revitalization and health, labor and welfare ministers, it also remains unclear how duties will be divided between the new minister and the Minister for Regional Revitalization. Shigeru Ishiba, who holds the latter portfolio, has expressed his doubts, noting that the concept has "suddenly appeared out of the blue," engendering "some confusion" among the general public. According to opinion polls taken after the Cabinet reshuffle, the Cabinet's approval rating has shown only a slight recovery.

In October 2015, the government set up a national council headed by Kato and comprising the Health, Labor and Welfare Minister and other relevant ministers, intellectuals, physically challenged individuals, housewives and students. It will now move rapidly to design before the end of the year a first package of measures to combat the falling birth rate and address social security, etc., as well as putting together a 'Japan: 100 Million Active Members of Society Plan' to serve as a road map for the initiative.

Concrete measures to realize the dynamic engagement of all citizens will be pivotal to the success or failure of Abenomics Stage 2, which will doubtless become a major bone of contention in the Upper House elections next summer.

(original article : Japanese)
(For the Japanese version of this article)

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