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Kishidanomics promises ‘virtuous growth cycle’ with redistribution

KOSUKE TAKAMI, Nikkei staff writer

 

TOKYO — Japan’s presumed next prime minister, Fumio Kishida, has positioned a “virtuous cycle of growth and distribution” of wealth as the centerpiece of his economic policy, but he also signaled the status quo in many areas, such as sticking with Abenomics to defeat deflation. 

 

During the Liberal Democratic Party presidential election, Kishida called for income redistribution to rebuild a broad middle class, advocating a modern version of the 1960 “income-doubling plan” that helped Japan grow into an economic power.

Specifically, he promises to help families with children, workers without full-time status, women and students by compiling a pandemic relief package totaling hundreds of billions of dollars.

 

“I want to build a new form of capitalism,” Kishida said in a news conference after the election. “Without growth there can be no redistribution. But without redistribution, we can’t stimulate new consumption and demand.”

He also supports a flat 20% tax on financial income, which applies mainly to the wealthy.

 

“The fruits of growth have been concentrated in the hands of a few people,” he said. “I want to spread the benefits as widely as I can for everyone to enjoy.”

 

Yet with Japan still plagued with persistent deflation and low growth, the overall framework of his economic policy is unlikely to deviate too much from the path paved by his predecessors.

 

When announcing his platform this month, Kishida called “escaping deflation the top economic priority.” To achieve this, he intends to stick with the “three arrows” of Abenomics, former Prime Minister Shinzo Abe’s signature economic policy consisting of bold monetary policy, flexible fiscal policy and growth strategies.

 

He will also keep in place the target of stable 2% inflation pledged in a joint statement the government released with the Bank of Japan.

 

On the energy front, Kishida also sees a role for nuclear power. He has said that “suddenly dropping nuclear power is not realistic” from the standpoint of “maintaining normal daily life and business activity while keeping electricity prices under control.”

 

Keeping in line with the current policy, he plans to retain Japan’s nuclear fuel cycle policy, which entails reprocessing and reusing spent fuel.

 

Kishida does not plan to tinker with the latest draft of Japan’s basic energy policy, which calls for nuclear’s share of the energy mix to rise to about 20% by fiscal 2030. His government will try to decarbonize through aggressive adoption of renewable energy and restarting nuclear facilities whose safety has been certified.

 

Though seen as fiscally conservative, Kishida will have no choice but to rely on government spending in the short term to achieve his goals. How his efforts to tackle inequality will be paid for — and, if it is through government debt, how it will be paid back — remain open questions.

 

In promising to present a big-picture view of his long-term economic policy, Kishida signaled a move away from the neoliberal economic policies pursued by the LDP since the early 2000s under then-Prime Minister Junichiro Koizumi.

 

Yet the presumptive prime minister has yet to spell out the deregulatory moves deemed necessary for growth. Balancing economic growth with fiscal consolidation will be a major test for the new leader.

 

In a comment published Wednesday, Moody’s Investors Service said it expects little change from the current accommodative path of fiscal and monetary policy.

 

“The credit implications of the leadership transition will ultimately be determined by the ability of Kishida to secure a strong mandate in the forthcoming general elections, which could support difficult reforms promoting economic growth and fiscal sustainability,” the statement said.

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