print PRINT

ECONOMY > Economic Policy

Commentary – Getting ‘Suganomics’ on track: Three points to gauge PM’s progress



Prime Minister Yoshihide Suga has inherited a host of problems, including the turmoil caused by the new coronavirus, the dramatic deterioration of the economy and the intensifying conflict between the United States and China.


Indeed, we might call the Suga Cabinet a crisis Cabinet.


Suga served as chief Cabinet secretary for seven years and eight months in the Shinzo Abe administration. He is therefore the most legitimate successor to Abe’s policies. Suga himself has stated that he will continue Abe’s stimulative economic policies — known as Abenomics.


As is well known, Abenomics comprised three components: bold monetary easing to overcome deflation; a flexible fiscal policy aimed at fiscal consolidation in the medium to long term while stimulating the economy with fiscal measures in the short term; and increasing the growth potential of the economy with structural reform.


After inheriting this framework, Suga will continue and strengthen the Abenomics agenda with what might be called “Suganomics.” Whether Suganomics can be put on track is extremely important from the perspective of the new administration.


Three points regarding Suga’s economic policy should be highlighted. The first is whether the establishment of a new digital agency can be realized quickly and efficiently. Suga set a huge and ambitious goal of establishing a governmental digital agency as a desired objective during the LDP presidential election. The coronavirus crisis has underscored the need to accelerate the digitalization of government operations at once.


If the My Number system, a national personal authentication system for the digital age, could have been used effectively, the distribution of the ¥100,000 COVID-19 benefit package to individuals would have gone smoother. Had a digital education system been in place, it would not have been necessary to cancel classes nationwide. Work from home has been encouraged, but the implementation rate in small- and medium-sized enterprises is still limited. Such examples can be found everywhere. Promoting digitalization should be a prerequisite for realizing the new, post-virus normal.


But the creation of a digital agency may have an even more important significance. Suga has criticized the vertical division, or siloed administration, of government offices. Breaking these barriers between agencies is therefore important as a basic condition for the Suga Cabinet to advance its economic policies. It makes a lot of sense to promote such digitalization so each ministry and agency has a unifying platform to facilitate achieving their common goals. At the same time, special measures will be needed to prevent new kinds of disparities from going digital on such a scale. Of course, it is also necessary to bring in specialists from the private sector.


It usually takes about two years to plan and launch such an organization. However, Suga and his minister in charge are planning to submit a bill to the ordinary session of the Diet next year with the aim of launching it later that same year. If Suga can carry out such a quick execution of the plan, he will gain the support of the people.


The second point is whether early and small successes can be achieved in order to get the administration on track. Normally, when a new administration comes to power, the media and the people hold a more positive view of such a government, cutting it some slack. But over time, criticism of most administrations usually begins to increase, and in many cases, forcing it into a corner. An effective way to avoid this situation is to create an easy-to-understand success story — even if it is just a small one — in the early stages of a government’s inception. Then, the people will expect such an administration to achieve something new and different.


The Abe administration, which enjoyed a record long time in power, pursued a policy of meeting a specific inflation target with the Bank of Japan shortly after taking office and appointed a new central bank governor to achieve that aim.


Junichiro Koizumi’s administration, which lasted from April 2001 to September 2006, early on apologized to Hansen’s disease (leprosy) patients over their past treatment by the government and accepted a court ruling on granting them compensation after overcoming opposition from government bureaucrats. Such an early success facilitated that administration’s ability to stay in power.


The Suga Cabinet is now advocating a reduction in mobile phone charges and providing insurance coverage for infertility treatment, policies of which the prime minister himself has long insisted on. If these challenges can be achieved in a short time frame, it also will be an effective early success. If the people believe that the next Cabinet will be different, the momentum of the administration will increase and a road to further reform will open.


The third thing that needs paying attention to is how best to improve the policymaking process. It is generally recognized that the Abe administration made powerful government-led policy decisions. However, the policymaking process changed considerably between the first and second half of his administration. In the first half, the strong leadership of the Prime Minister’s Office was evident, but after the Moritomo-Kakei scandal surfaced, officials hesitated to exercise the influence of the prime minister.


As a result, it can be said that a bureaucrat-led revival progressed while at the same time many policy councils were also held to discuss relevant issues — diffusing the decision-making process. There is a concern that the so-called “control tower” has been vertically divided, or siloed, in addition to the vertically-divided government offices. Within these silos, the Ministry of Economy, Trade and Industry exerted relatively strong influence.


Suga has inherited the policy framework of former Prime Minister Abe. How he administers the policymaking process will determine whether meaningful reforms can be implemented.

  • Ambassador
  • G7 Summit
  • Ukraine