When Fumio Kishida became prime minister last October, few of us longtime Japanese observers expected much.
Still, the 64-year-old has been strangely proportionate and, dare I say, productive as Covid-19 does the best it can, China has boosted its weight, and Russia has invaded Ukraine. In the latter, Kishida was quick to point out sanctions and remind the global that Japan is a key democratic player.
The bad news, however, is that Kishida’s economic ambitions have been, for the most part, a failure. This is evidenced through the news that factory production fell for a consecutive moment in January. This is in line with other signs that hopes of an economic rebound this quarter will fade.
The smart news here is that Kishida has the strength to make a difference. In the coming weeks, he plans to put flesh in the bones of the promise of the “new capitalism” he forcibly brought. Essentially, this means incentivizing cash-rich companies to fatten wages, especially those of middle-class workers.
However, it is becoming increasingly realized that the 147 days Kishida was prime minister have been enough time not only to detail his plans for the redistribution of wealth, but also to put some of them into effect.
Kishida’s idea, after all, is new. In neighboring South Korea, President Moon Jae-in has been humming since 2017 about “cascading growth. “China’s Xi Jinping is getting closer to everything his Communist Party calls, ironically, “common prosperity. “
The challenge for Kishida: Japan is the wolf-screaming economy. For 21 years, from the days of Prime Minister Junichiro Koizumi from 2001 to 2006, global investors have noticed that 10 leaders promise Japan’s economic game and achieve little.
To be fair, Koizumi privatized the expanding Japanese mail and ended the bad debt crisis of the 1990s. Since then, Japan has noticed few genuine structural reforms that can increase its competitiveness.
Of course, Kishida’s boss, Shinzo Abe, beefed up corporate governance a bit during his tenure from 2012 to 2020. But most importantly, Abe pushed the Bank of Japan to relax further by suspending the painful upgrades needed to develop innovation and productivity.
Can Kishida break the cycle? It will have to dramatically increase speed if this government is to be remembered as a game-changer, not just an uplifting narrative.
Having covered those 10 governments on the floor in Tokyo, from Koizumi to Kishida, I know we should not be too optimistic. Still, Kishida can gain ground quite temporarily only by pretending a little political will.
With the economy stagnating again, the game is going to be more stimulus spending. Japan is still lagging behind its peers to return to pre-pandemic levels. This is not where Kishida’s Liberal Democratic Party should be before next summer’s elections. Ongoing source chain The disruptions, which are forcing Japan’s biggest automakers to cut production, are sure to reinforce the preference for short-term thinking.
However, the BOJ’s budget package and other bond purchases will not revive Japan’s animal spirit. The ghost of John Maynard Keynes continues to haunt a government that has forgotten that true economic power comes from persuasion, not just public spending.
The explanation for why most Japanese staff have not had a noticeable pay raise in the eternities is that CEOs do not trust the Japanese economy to be more buoyant in three, five or ten years.
Kishida is expected to deliver on her promises to make hardwork markets more flexible, cut red tape, catalyze a startup boom, incentivize corporate giants to take risks, empower women and attract foreign talent. Basically, all the things that Abe talked about for only about 8 years in effect and didn’t.
One economic victory Kishida can get is the U. S. president’s resolve. The U. S. President, Joe Biden, earlier this month to reduce Japanese steel price lists. Abe sucked Donald Trump for four years and may not get this concession from Washington. At a time when China dominates the maximum talks in Asia. , it was a diplomatic coup that Kishida, and his party, needed.
It is time for a coup of economic reform. A critical mass of another 126 million people in Japan will enjoy shaking up its uncompromising economy as tech unicorns grow in a region it once dominated. The same could be true for potential Kishida Party operatives, including Abe, who knows that the absence of a regulatory Big Bang over the past 20 years has clouded prospects for the next 20.
Kishida has an exclusive opportunity to surprise conflicting parties who expect little from Japan’s leaders. But he wants to get to the paintings immediately, before Tokyo’s revolving door starts turning again.