A new cabinet was formed on Aug. 3. The ruling parties’ victory in the recent House of Councillors election underscores that their political management over the past three and a half years was endorsed by the public. The new lineup will be tasked with promoting key policies. It should not shirk the daunting task of carrying out reforms in the social welfare system and the labor market and help boost growth potential.

Abe has maintained the portfolios of key figures who have been with him since the inauguration of the existing government. Deputy Prime Minister and Finance Minister Taro Aso, Chief Cabinet Secretary Yoshihide Suga, Foreign Minister Fumio Kishida and several others have stayed in the same posts. It is of great significance that high-caliber ministers have been assigned to continue their duties to handle various concerns both at home and abroad. But to avoid political inertia, the whole government needs to reaffirm what policy goals need to be prioritized.

The cabinet has welcomed ten newcomers into the fold. Defense Minister Tomomi Inada was inaugurated under a tense situation, as North Korea launched a ballistic missile off Ogata Peninsula, Akita, on the morning of Aug. 3.

Kozo Yamamoto assumed the post of minister in charge of regional revitalization. He will be tasked with handling regulatory reforms and “breathing life into communities, people and jobs.” In the previous cabinet, regulatory reforms, which cover the entire country, and the establishment of special economic zones, which focus on the local economy, were handled separately and there was insufficient policy coordination. It is a step forward that the task of introducing efforts to establish special economic zones nationwide will be handled by one minister.

A new ministerial post in charge of reforming people’s working styles has been created. Minister for Promoting Dynamic Engagement of All Citizens Katsunobu Kato will assume this duty. He will concentrate on rectifying the practice of long working hours and overhauling the labor market, as well as working out measures on child-rearing and nursing care. He is expected to produce tangible results.

The leadership of the Liberal Democratic Party has also been renewed. Abe attached important to experience and stability when he picked the top three party executives. Now that Sadakazu Tanigaki has stepped down as secretary-general due to his injury from a cycling accident, the dynamism within the ruling parties may change.

Abe’s term as LDP president will expire in September 2018. Toshihiro Nikai, new secretary-general of the LDP, will likely broaden his footprint as he prepares for the next general election and discusses his proposal for extending the presidential term by revising the party’s bylaws.

Rebuilding the stagnant economy is the top priority for the reshuffled cabinet. It must handle this task steadily. Structural reforms should be carried out to make the economy stronger in the mid- to long-term.

The participation of women and senior citizens in the labor market and productive working styles are indispensable to lifting Japan’s growth potential. What is strongly urged is the implementation of measures that can produce not just temporary results but effects that last over a longer period.

The economic package that the government has recently endorsed calls for “making investments in the future.” But it includes stopgap measures, such as doling out 15,000 yen for every low-income person across the board to ease the burden of the consumption tax increase that has been postponed until October 2019. Though the stimulus package has been touted as including infrastructure projects for the 21st century, aid to smaller businesses, and disaster reconstruction, some policies are being called into question over whether they can really help grow the economy.

Personal spending will not gain momentum unless people are relieved from the anxiety they have about the future. In 2025 and beyond, the baby-boomer generation will turn 75. The goal of achieving a primary balance surplus by fiscal 2020 may not be achieved. It is time for the government to seriously face up the challenge of social welfare reform to maintain balance between benefits and costs.

Finance Minister Aso has recently met with Bank of Japan Governor Haruhiko Kuroda and confirmed that the government and the central bank will work together to accelerate Abenomics. The BOJ decided on additional monetary easing at the end of July and will assess the effects of its easy money policy in September. Negative interest rates may come with side effects and dampen corporate earnings. The government needs to work out well-balanced measures with an eye on structural reforms. (Abridged)