AKIO FUJII, Nikkei chair of editorial board
TOKYO — Shortly after Yoshihide Suga took office as prime minister one year ago, I wrote in this column that it was important for the new government to integrate its response to the coronavirus pandemic with the structural reforms that Japan needs.
Suga, whose predecessor Shinzo Abe stepped down because of a chronic illness, said he would carry on the policies of Abenomics. Of Abenomics’ “three arrows” — monetary easing, fiscal stimulus and structural reforms — the third arrow of structural reforms that boost productivity was always a bit lacking. Reflecting on that, Suga launched a digital agency to break down the barriers among Japan’s government ministries.
However, coronavirus infections continued to rise, and the Tokyo Olympics proceeded amid divided public opinion. The cabinet’s approval rate plummeted. The ruling Liberal Democratic Party, anxious about the next general election, turned sour on Suga’s government. Suga faced little choice but to say he would step down after only one year at the helm.
Various factors have been blamed for driving the Suga government to this end, but the most significant policy failure was the lack of far-reaching structural reforms.
The health care system is a perfect example. With each wave of infections, the system was described as being at risk of collapse, even though the number of serious coronavirus cases has been low by international standards and Japan maintains a comparatively high number of hospital beds.
The need for expanding the delivery of medical care sparked a debate a year ago, but policymakers chose instead to emphasize restrictions on where and when people could go out. Improvements to emergency care were put on the back burner.
Japan’s vaccination rates are now in line with those in Europe and the U.S., but the start of the vaccination campaign was delayed by two months because the Ministry of Health, Labor and Welfare insisted on domestic clinical trials, the standard procedure in normal times. If inoculations had begun two months earlier, people may have been in a better mood to welcome the Olympic Games.
The number of infections is now dropping, but the coronavirus remains a threat. The next government still needs to fit coronavirus measures into the bigger picture of structural reforms.
The next LDP president, who will be chosen on Wednesday, is virtually assured of being selected by parliament to become the 100th prime minister of Japan since the first, Hirobumi Ito in 1885. The new leader will face three major challenges.
First, the new prime minister must speak with the people. A more conscientious message than normal is needed to reach people who have become isolated by teleworking, online classes and restrictions on social activities.
During the Great Depression of the 1930s, U.S. President Franklin D. Roosevelt explained his bold New Deal to the American public through radio addresses. His “fireside chats” are one of the best examples of a leader communicating with the public during a crisis.
Monetary policy is another area where dialogue is needed with the public. Central banks used to be mysterious entities that rarely had the opportunity to explain their policies themselves. The Bank of Japan is something of an exception, as it has long held news conferences, but the U.S. Federal Reserve began to put a greater emphasis on communicating with markets and the public in this way only 10 years ago. Central bankers must communicate the reasoning behind their policies, rather than simply counting on markets to follow them.
The attitude that actions speak louder than words holds a certain appeal, but the reality is that modern society wants more than to simply watch its leaders at work.
The second challenge is to ensure transparency in policymaking. During the pandemic, the Japanese public has struggled to understand the government’s thinking. The prime minister and experts offered different information, and policy changes were announced suddenly.
On issues where public opinion is split, such as balancing the need to control infections and to maintain economic activity, the government must make sure its internal discussions are understandable.
One survey offers food for thought. The International Budget Partnership, a U.S.-based group of fiscal analysts, examined the level of transparency for budgeting and fiscal management in various countries. It found that Japan is below average among countries in the Organization for Economic Cooperation and Development. The IBP flagged issues like budget oversight by parliament, long-term planning and evaluation indicators for public finances, and expanding the framework for citizen participation in budgeting.
Issues that require balancing the benefits and burdens on the public — such as pension reform, energy and environmental policy, and security — require clear data and policy options.
“Now is the time to make policy more visible,” said Yoko Takeda, head of the Center for Policy and Economy at Mitsubishi Research Institute.
The third challenge is the creation of a new policy vision. The Heisei era of 1989 to 2019 was 30 years of struggling to recover from the chaos that followed the bursting the Japan’s asset price bubble. The model of the Showa era (1926-1989), which supported the high economic growth of the postwar period, is outdated, but a new model has yet to take its place.
Leaders need to present a vision for the future that will revitalize Japan, rather than just gloomy forecasts. This should not be a pipe dream, but something backed up by data and evidence. The next prime minister needs to tap into the wisdom of both the private sector and Japan’s bureaucracy to come up with a plan. The government is overflowing with policy councils, but the next leader should consider reorganizing them and creating a council to formulate a vision for the future.
“The Tokyo Olympics and Paralympics will mark a watershed period of change,” said Kazuhiko Toyama, chair of the Industrial Growth Platform.
Comparing the opening and closing ceremonies of the Olympic Games, which had a certain nostalgia for the Showa era, and the Paralympic Games, which were marked by the works of young artists, many online commenters said they felt a new era in the latter.
Many also have felt encouraged by the young Japanese athletes competing in the Olympics and Paralympics. The success of young people of talent in various fields, like baseball star Shohei Ohtani and Sota Fujii — a prodigy in shogi, or Japanese chess — has been an inspiration for many.
Japan’s economy and society need to be upgraded from the Showa era to the Reiwa era that began in 2019, allowing young people to play a more active role. The two-month period between the LDP’s leadership election and the upcoming general election is a pivotal time for Japan. Both the ruling and opposition parties should put forth broad visions for Japan’s future and engage in a robust policy debate.