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Abe’s domestic failings may cost Japan—and the region—dearly

Posted By on June 10, 2020 @ 14:45

When Prime Minister Shinzo Abe’s term ends in late 2021, it will be almost nine years since voters returned his Liberal Democratic Party to government in Japan’s 2012 general election. Abe promised [1] to rescue Japan from its lost decades of low growth and deflation, improve crisis management, and strengthen Japan’s influence in world and regional affairs by making it a ‘proactive’ contributor to international peace and security. Japan, according to Abe, ‘was back’ [2].

But given the already precarious state of Japan’s economy prior to the coronavirus crisis, and the government’s muddled managing of Covid-19’s impacts on public health and the economy, it’s likely that voters will mark the administration down to a ‘fail’ on two policies they most care about.

Abe is on relatively strong ground with his foreign policy approach, but his government’s shortcomings on the economy and crisis management fronts may ultimately threaten his vision of a more proactive Japan. That would be bad news not only for Japan, but also for Australia and the region.

According to the Abenomics faithful, Abe’s three arrows, launched back in 2013, are still in flight. GDP and inflation growth are often highlighted as evidence that arrows one (quantitative easing and asset buying) and two (massive spending) haven’t yet disappeared into the undergrowth. By 2019, however, many observers were becoming increasingly doubtful [3] about where Abe’s arrows were actually headed.

Overall, the results have been mixed at best [4] and, by late last year, downright worrying. Japan’s average annual GDP growth since 2012 had not been more than around 1.3% before it took a dive in late 2019 [5] to –1.8%, just before the coronavirus outbreak. Japan’s public debt, meanwhile, has grown to nearly 240% of GDP [6] and now looks set to blow out [7] even further.

Adding further to Japan’s woes is its biggest economic bogeyman, deflation. After a series of intermittent jumps to around 1% over recent years, the fall in prices appears to have stopped, but only just. The inflation rate last December again sat perilously close to zero at only 0.4%. Puzzlingly, [8] even though Japan has been experiencing a labour shortage since 2017, real wages have hardly changed in 30 years. One likely explanation [9] is the stiff headwind encountered by Abe’s third arrow: structural reform.

Japan’s private sector has stubbornly resisted structural reform [10] on most fronts. Government efforts to create more transparency in corporate affairs, provide better and more equal opportunities for women, and wind back the long-held practice of rewarding seniority over achievement have made little or no progress [11]. Productivity remains very low [12] (Japan is 21st in the OECD and the lowest among G7 economies) and the threat of karoshi (death from overwork) remains very real for many.

As a result, many Japanese companies and offices remain inefficient and well behind [13] the technology curve, while workers still endure excessive, and mostly unproductive, overtime expectations. Company, and government [14], offices continue to rely on fax machines and the use of hanko (official seals).

Legislation intended to protect workers from overtime abuse, meanwhile, merely limits overtime [15] to 100 hours per month. Pre-Covid-19 calls [16] for companies to adopt more flexible working hours and teleworking fell on deaf ears, as the large numbers of people still travelling to work during the pandemic demonstrated. By 20 April, only 18% of workers [17] were staying home.

While better implementation of third arrow reforms, especially in the workplace, certainly would have helped to contain the coronavirus and lessen its economic impact, most of the responsibility for the virus’s spread lies with the government failing the first real test of Abe’s commitment to improve Japan’s crisis management capabilities. Indeed, his leadership reflects many of the problems and mistakes [18] made by US President Donald Trump, and public confidence in the government’s ability to respond is rapidly fading.

Like Trump, Abe was slow to close borders. He prioritised economic impacts over health measures, sent confused public messages and largely failed to coordinate an effective national response with prefectural governments.

The many costly missteps included the health ministry’s inability to quarantine infection early on the Diamond Princess cruise ship and to carry out sufficient testing. These failings paint a telling picture of crisis mismanagement similar to the institutional paralysis [19] that plagued the Democratic Party’s widely criticised handling of the Fukushima nuclear crisis in 2011.

In contrast to Abe’s wayward arrows and the mounting domestic problems caused by incomplete policy implementation, Japan has become more proactive and influential [20] in international affairs under his leadership.

Abe’s legislative changes and agreements allowed increased security cooperation with the US and other states (beyond just disaster management), in particular with Australia. His leadership helped save the Trans-Pacific Partnership from Trump’s ‘America first’ posturing, and revive the Quadrilateral Security Dialogue. These are compelling examples of how much Japan’s foreign policy and defence capabilities have changed under Abe.

However, Abe’s foreign policy successes may soon be threatened by his inability to make Japan less vulnerable to external shocks like Covid-19. A bigger concern is whether states, especially democracies, will become more inward-looking as they seek to recover from the huge economic and human costs of the pandemic, which are likely to continue for some time.

If so, the resources for Japan’s more proactive foreign and defence policy approach, in particular funding for foreign aid, may well shrink again, as it did during the late 1990s and 2000s [16].

The potential costs of Japan becoming less involved in the region go well beyond Abe’s place in the history books, particularly in light of China’s growing belligerence, Trump’s increasingly dangerous unpredictability, and the even more unstable [21] post-pandemic world that likely awaits us. In the absence of US leadership, Japan has stepped up to support the existing order by building closer relations with like-minded states and promoting multilateral cooperation and engagement.

Whether Japan can, or will, continue to do so while trapped in a deep recession without any means of escape—thanks to another decade of lost opportunity for reform—however, is far from clear. But the implications of Abe having presided over yet another ‘lost decade’ will be felt not only by Japan, but by the entire region.



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URL to article: https://www.aspistrategist.org.au/abes-domestic-failings-may-cost-japan-and-the-region-dearly/

URLs in this post:

[1] promised: https://japan.kantei.go.jp/96_abe/statement/201212/26kaiken_e.html

[2] ‘was back’: https://www.mofa.go.jp/announce/pm/abe/us_20130222en.html

[3] increasingly doubtful: https://www.reuters.com/article/us-japan-abe-economy-analysis/japan-may-slide-toward-recession-as-abenomics-impact-fades-idUSKBN1XO2YN

[4] mixed at best: https://www.reuters.com/article/us-japan-abe-economy-graphic/scorecard-of-japans-abenomics-stimulus-policies-idUSKBN1XP05L

[5] took a dive in late 2019: https://tradingeconomics.com/japan/gdp-growth

[6] nearly 240% of GDP: https://www.fitchratings.com/research/sovereigns/japan-coronavirus-response-increases-public-debt-challenge-15-04-2020

[7] looks set to blow out: https://www.pewresearch.org/fact-tank/2020/04/29/coronavirus-downturn-likely-to-add-to-high-government-debt-in-some-countries/

[8] Puzzlingly,: https://www.nippon.com/en/currents/d00342/why-are-wages-not-rising-despite-the-labor-shortage.html?cx_recs_click=true

[9] explanation: https://www.tkfd.or.jp/en/research/detail.php?id=388

[10] resisted structural reform: https://www.fujitsu.com/jp/group/fri/en/column/message/2016/2016-03-23.html

[11] little or no progress: https://www.tokyoreview.net/2018/07/japan-productivity-overwork/

[12] very low: https://www.nippon.com/en/japan-data/h00619/japan%E2%80%99s-labor-productivity-lowest-in-g7.html

[13] behind: https://www.ft.com/content/7992a88a-7dde-11ea-82f6-150830b3b99a

[14] government: http://www.asahi.com/ajw/articles/13342719

[15] merely limits overtime: https://www.business-humanrights.org/en/japan-govt-bill-to-allow-overtime-over-80-hrsmonth-karoshi-line-reports

[16] Pre-Covid-19 calls: https://www.isdp.eu/content/uploads/images/stories/isdp-main-pdf/2011_edstrom_japans-foreign-policy.pdf

[17] 18% of workers: https://english.kyodonews.net/news/2020/04/826fe0930a43-only-18-of-japanese-stopped-going-to-work-due-to-covid-19-poll.html

[18] reflects many of the problems and mistakes: https://www.washingtonpost.com/opinions/2020/04/20/japans-leader-is-following-trumpian-playbook-coronavirus/

[19] institutional paralysis: https://www.tandfonline.com/doi/abs/10.2753/JES2329-194X400102

[20] more proactive and influential: http://www.theasanforum.org/the-foreign-policy-of-abe-shinzo-strategic-vision-and-policy-implementation/

[21] even more unstable: https://www.aspistrategist.org.au/author/paul-dibb/

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