The aim of Abenomics was for Japan to shake free from deflation with the “three arrows”: a daring monetary policy, agile fiscal policy, and growth strategy. The goal of achieving 2% inflation in two years has not been achieved even now. What were the success and what were the failures? Mainichi’s Satoshi Murao sat down with Akira Amari, chairperson of the Liberal Democratic Party (LDP) Research Commission on the Tax System, who led the growth strategy as Minister in charge of Economic Revitalization from 2012 to 2016.
It seemed that there was an invisible wall in Japanese economy prior to Abenomics. The exchange rate had become fixed at a rate which was far from the real value. The stock market was valued low and did not reflect its actual value. Then-prime minister Shinzo Abe believed that Japan could break out of deflation by increasing the money supply, but was that really sufficient? In fact, when the massive monetary easing began, the invisible wall was instantly taken away and the economy returned to what it should be.
Then-Finance Minister Taro Aso, then-BOJ governor Masaaki Shirakawa, and I created the joint statement the government issued with the Bank of Japan (BOJ). At that time, I felt that history was being made. I also felt that Shirakawa was at a bit of a loss. The head of a central bank is tasked with fooling the market. Shirakawa, however, was a very serious-minded person. He may give the impression that people should not be surprised at the daring policy because it is actually not very substantive. The head of a central bank must have a “bad” side, to make small changes look like big changes. Current BOJ governor Haruhiko Kuroda is the exact opposite of Shirakawa. Kuroda issued bold messages, and the market responded. I was surprised that a word from the BOJ governor could be so powerful.
In terms of the growth strategy, we created the Trans-Pacific Partnership. U.S. President Donald Trump’s mistake was to think that trade is a zero-sum game, that the other’s gain is his loss. Free trade, however, makes one plus one come out to three. A major outcome of Abenomics is that only Japan continued to issue such a message, and this stopped the world from looking even more inward.
The key to the growth strategy was to make Japan an innovative country. I in my Diet speech and Abe in his policy speech declared that Japan would become an “innovative country.” Japanese companies compete on the basis of price, to make good products at low prices. To compete in the global market, though, is to sell good products at high prices. The pricing competition should have shifted to a competition based on added value.
To that end, we decreased corporate taxes and created tools to decrease taxes on investments. Japanese companies still do not have the determination to enter a competition for added value. We already have the tools, but companies have not adapted to the trend to the degree that I wonder if the companies expect the government to guide them every step of the way. Some criticize the strategy of the three arrows, saying it failed. Although the government is responsible for the first and second arrows (monetary and fiscal policies), the private sector must lead in the area of the third arrow. The government’s role is to provide an environment that enables the private sector to grow explosively. It is a mistake to think that the government will implement all three arrows.
The government has implemented many reforms, such as the reinforcement of corporate governance including the system of external directors, and the introduction of a three-classification system for national universities based on their specialization. In order for the growth strategy to succeed, a change in awareness on the side of the implementers was necessary. Looking back, I feel the purpose of the reforms was not sufficiently conveyed [to the stakeholders]. Changing the thinking of companies and universities was a daunting task, like changing the direction of a 100,000-ton tanker. The private sector should be the one to think about shifting to value-based competition and increasing productivity, as if their lives depended upon it. Possibly, we could have issued stronger messages to the public.