The rebuilding of the Japanese economy, which has recorded its worst postwar contraction due to the coronavirus pandemic, is one of the most crucial issues the next administration has to tackle.
Japanese Chief Cabinet Secretary Yoshihide Suga, Fumio Kishida, chairman of the ruling Liberal Democratic Party (LDP)’s Policy Research Council, and former Defense Minister Shigeru Ishiba, who are the three candidates for the upcoming LDP leadership election that will effectively select Japan’s next prime minister, generally think highly of the “Abenomics” economic policy mix. The policy was promoted by the administration of Prime Minister Shinzo Abe, who recently announced his intention to step down.
But in the wake of monetary easing and fiscal stimulus, the Abe administration failed to strengthen the nation’s growth strategy, which it described as the third “arrow” of Abenomics. As a result, government policy was in a deadlock even before the coronavirus crisis.
Adverse effects of the economic policy have gotten worse, as public debt ballooned to more than twice the country’s gross domestic product (GDP) and the gap between the rich and the poor widened further. How to shift from such an economic policy is a focal point of the leadership election.
Suga, who aspires to inherit the Abe regime, has vowed to push forward with Abenomics, saying he aims to rebuild the economy by continuing monetary and fiscal policies, reviving demand for inbound tourism and promoting digitalization.
It is clear that Suga, who also spearheaded the “Go To Travel” campaign, launched to revive the domestic tourism industry without waiting for coronavirus cases to curb in Japan, prioritizes the economy.
For the nation’s growth strategy, Suga mentioned structural reforms including reorganization of small- and mid-sized firms. His motivation apparently comes from a neoliberal point of view that places emphasis on market competition.
It is true that structural reforms are essential for Japan to recover from a prolonged slump of nearly 30 years since the “bubble” economy burst.
But small- and mid-sized companies have been hit hard due to the novel coronavirus, and if those firms bearing 70% of the nation’s employment were to go out of business, it could lead to the collapse of Japan’s economic foundations. Creating an environment where firms and workers can put effort into improving their competitiveness is a higher priority than company reorganization.
The benefits of Abenomics are biased toward major firms and upper class people, and the expansion of employment mainly focuses on non-regular workers. Due to these reasons, over 50,000 people have already been dismissed from work or had their employment terminated amid the coronavirus pandemic.
Kishida recognizes such issues as negative effects of the current economic policy, and urges a reduction in disparities through a distribution policy of enhancing the tax system as well as educational and housing support, among other aspects.
Ishiba also emphasizes increasing disposable income for those on low incomes. Striking a balance between competition and distribution is a focal point of the economic debate.
However, all three candidates are only discussing about the details of their policies, and lack crucial vision on methods to secure sustainable economic growth and a viable social security system to create a livable country amid a declining birthrate and aging population. Responsible discussion that focuses on the lives of future generations is needed.