Two years have passed since Japanese Prime Minister Shinzo Abe’s Liberal Democratic Party (LDP) won Japan’s last general elections with a landslide. Abe, so it seems, is firmly in the saddle to lead the world’s third biggest economy. To be sure, the years ahead will be testing Abe’s leadership skills. He will be confronted with an increasingly assertive China challenging Asia’s maritime territorial boundaries in the East and South China Seas and with a new U.S. President, who on the campaign trail announced to want (much) more from Japan in terms of burden–sharing for Asian security.
Stopping deflation has been the most important macroeconomic policy target for Japan for more than 15 years. Japan’s nominal GDP was its highest level of 523 trillion yen in 1997 and had been declining to 472 trillion yen in 2011, one year before Abenomics, macroeconomic policies under Abe cabinet, was launched. The Japanese economy was stuck in a deflationary cycle for many years. Very aggressive monetary policy under Abenomics was effective to change the deflationary trend.
In May 2014 Prime Minister Shinzo Abe decided to launch the Cabinet Bureau of Personnel Affairs, a new bureau, run by Katsunobu Kato, Abe’s closest aid. This maneuver is no doubt aimed at tightening control of bureaucrats, that have been indulging overwhelming power for ages. This shows clearly the importance of bureaucracy in political life of Japan.
On 14 December Japan will hold an election two years early following Prime Minister Shinzo Abe’s dissolution of the Lower House (the first chamber of Japan’s parliament) on 21 November. Opinion polls show that Abe’s Liberal Democratic Party (LDP) will easily hold its majority of seats in the Lower House, and might even add a few seats to the two-third majority it is holding in the Lower House.
Forget the political parties that are contesting Japan’s parliamentary election this weekend. The real choice for Japanese voters as they cast ballots is between cynicism and indifference. Prime Minister Abe Shinzo has called a snap election less than halfway through the parliament’s term – but not because his parliamentary majority is at risk and voters need to give him and his party a new mandate. Just the opposite: Abe has called an election to exploit a disorganized opposition and protect his own back. This is breath-taking opportunism.
Abenomics is at a crisis point. The economy slipped back into recession in Q3, prompting a delay to the second planned consumption tax hike and a snap election. The Bank of Japan meanwhile has also reacted to weak growth by expanding its monetary easing programme. The latter decision may avoid a return to deflation but unless the ‘third arrow’ of Abenomics – structural reform – is activated, Japan’s relative economic decline is set to continue.
Japan’s (relatively) new government is arguably doing (much) better than its critics inside and outside of Japan anticipated when the Liberal-Democratic Party (LDP) Prime Minister Shinzo Abe took over power last December.
Japan’s (relatively) new government led by Prime Minister Shinzo Abe has got a very ambitious economic and monetary policy agenda. Since Abe took office last December, he adopted a massive economic stimulus package while convincing Japan’s central bank (the Bank of Japan, BoJ) to support and help adopting his plans to achieve 2 per cent inflation through am enormous quantitative easing program.