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Editorial: Abe’s revamped cabinet responsible for delivering economic revitalization

  • September 12, 2019
  • , Nikkei , p. 2
  • JMH Translation

Prime Minister Shinzo Abe revamped his cabinet and the leadership of the Liberal Democratic Party with a pledge of ensuring “stability” and tackling “challenges.” What he will be tested on is his ability to turn policies into action by making use of his long time in office. He must squarely tackle various issues of concern, such as economic revitalization and social welfare reform, and work steadily to accomplish results.  

 

In his fourth cabinet launched on Sept. 11, Abe retained Deputy Prime Minister and Minister of Finance Taro Aso and Chief Cabinet Secretary Yoshihide Suga and reassigned Minister of State for Economic and Fiscal Policy Toshimitsu Motegi and Minister of Foreign Affairs Taro Kono to the roles of minister of foreign affairs and minister of defense, respectively.

 

Don’t shy away from long-term challenges

 

The remaining cabinet members were all replaced. Thirteen of the new members have joined the cabinet for the first time. Abe appointed Shinjiro Koizumi as minister for the environment and Seiko Hashimoto as minister for the Tokyo Olympic and Paralympic Games. The lineup includes lawmakers who are close to Abe and represents a good balance in terms of factional strength, which Abe appears to have taken into account.  

 

At a press conference held following the cabinet reshuffle, Abe stressed: “The people I’ve selected are capable of advancing a nation-building style that caters to a new era. We will carry out bold reforms.” He must fulfill his vow and not shy away from addressing long-term challenges.

 

The second Abe cabinet was launched under the banner of “economic revitalization.” In January 2013, the government and the Bank of Japan released a joint statement, in which the central bank vowed to promote monetary easing to achieve the 2% inflation target and the government, on its part, promised to reinforce growth power and build a sustainable fiscal structure.

 

Over the past six and half years, corporate earnings and employment have improved. Spending by foreign visitors has also increased. But the growth strategy of improving productivity and potential growth has not produced results yet.

 

“No vested interests will remain immune from my drill.” Abe once said so to show his commitment to revamp rock-solid regulations. He must not forget the fact that he returned to power by pledging to revive the nation’s economy.

 

The Abe government has purchased large amounts of Japanese government bonds and pursued a negative interest rate and loose monetary policy under the guidance of GOJ Governor Haruhiko Kuroda, but the 2% inflation target has not been achieved and an exit from monetary easing is not yet in sight.  In an effort to rebuild the nations’ finances, the government raised the consumption tax to 8% from 5% in April 2014. The plan to increase the rate to 10% was postponed twice, but starting in October, the 10% rate will finally be implemented.

 

Thanks to Abenomics, stock prices have jumped and tax revenue has been steadily on the rise. But the amount is not sufficient to cover the expenses that will continue to swell as a result of the nation’s graying and shrinking population. Raising the consumption tax to 10% alone will not lead to a resolution of the problem. The government must implement reforms to rein in the ballooning social welfare spending.

 

The fourth cabinet lineup includes Katsunobu Kato as minister of health, labor and welfare and Yasutoshi Nishimura as minister for economic and fiscal policy, who will also serve as minister in charge of all-generation social welfare reform. In addition to talking about increasing entitlements, they must be prepared to discuss increasing the burden on senior citizens when a new study panel on social security system is launched.

 

In 2025, the “baby boomers,” who were born soon after the end of World War II, will turn 75. According to a government estimate, social welfare benefits are forecast to surpass 140 trillion yen in 2025 from the current 120 trillion yen.

 

The Abe government initially pledged to achieve a surplus in the primary balance by fiscal 2020, but now the goal has been pushed back to fiscal 2025. If the government cannot pursue reforms in both revenue and spending, it won’t be able to build sustainable finance and social security systems.

 

In addressing long-term challenges, it is desirable for the ruling and opposition camps to reach a broader consensus. When Prime Minister Yoshihiko Noda was in power, his party, the now-defunct Democratic Party of Japan, signed a deal with the LDP and Komeito Party to pursue “integrated reform of social welfare and tax systems.” The ruling and opposition camps will need to generate momentum for discussions similar to this framework.

 

Holding detailed discussions at the research commissions of both chambers of Diet is also indispensable for amending the Constitution, which Prime Minister ardently advocates. Even if the LDP uses its muscle to get the Diet to propose constitutional amendments, the public may not be able to make a decision in a national referendum if the matter is not fully discussed.

 

Abe should play a leading role in international coordination

 

The lingering trade war between the U.S. and China is upsetting global trade rules and financial markets.

 

The Japanese government realized the TPP 11 after the U.S. withdrawal from its predecessor framework, the Trans-Pacific Partnership free trade pact. It also worked hard to put into force an economic partnership agreement (EPA) with the European Union (EU). Abe should use his connections with the leaders of various countries and play a leading role in enhancing international cooperation in challenges concerning free trade and the environment.

 

Diplomacy with Japan’s neighbors is another challenge as it involves history and territorial disputes. Japan needs to continue to engage in tireless negotiations with China, South Korea, and Russia to improve ties with them and settle contentious issues. Close cooperation with concerned nations, including both U.S. and South Korea, should become the key to addressing North Korea’s nuclear and missile development.

 

In November, Prime Minister Abe will likely surpass Taro Katsura to become Japan’s longest-serving prime minister since Japan enacted its own Constitution. He is entering the final stretch of settling various challenges, which include economic management, diplomacy, national security and constitutional revision.

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