Japan's choice Stability, security and growth vs. stagnation, insecurity and relative decline Stephen R Nagy is a Senior Associate Professor in the Department of Politics and International Studies at the International Christian University, Tokyo “Given his long record of broken promises and unrealized goals, collective amnesia is his best bet for regaining voters’ trust”.1 You may have been forgiven for thinking the writer of the comment above was speaking of President Trump. In fact, the quote comes from a recent commentary on PM Abe’s second tenure as PM following the Governor Koike’s Tomin First victory in the Tokyo Metropolitan election2. PM Abe’s return as Prime Minister in December 2012 brought with it economic growth (Figure 1), growing security ties in and outside the region3, expanded consumer confidence and political stability. This in part has been related to a plethora of policies that falls under rubric of Abenomics4 which includes but is not exclusive to quantitative easing, deregulation, improved corporate governance5 standards and a host of other policies. The results have been increased capital investment (Figure 2) and increased corporate profits (Figure 3). Figures from the Cabinet Office since 2010 are evidence that the policy approach, although not without problems and concerns has delivered economic growth. At the same time, PM Abe’s push for constitutional reform6, his right leaning conservative track record7, and a series of scandals8 and gaffs9 involving members of his Cabinet and even himself has shaken his support amongst his conservative base. This drop resulted in a Cabinet reshuffle in early August allowing him to regain some of his support10. While PM Abe’s second stint as PM has not been without problems, missteps and questionable relationships, characterizing it as a “long list of broken promises and unrealized goals” fails to recognize the achievements of arguably the most consequential PM in Japanese post WW 2 history. At the same time, the comments fail to highlight where the current administration could and should have done better. It is in this environment that voters are now faced with a dilemma, do they continue to support a leader that has brought political stability, increased security through a tightening of the US-Japan Alliance and a series of strategic partnerships with intra and extra regional powers such as Australia11, India12, and Vietnam13, and economic growth or do they choose economic stagnation, increased insecurity and relative decline owing to weak leadership and incoherent policy? While this is not a binary choice, investors should be concerned as well as a change in government in Japan could lead to a return to the revolving door of Prime Ministers and policy inconsistency that plagued Japan for much of the past 20 years. Questionable right-wing associations and controversial policies PM Abe’s refusal to distance himself from right-wing organizations such as the Nippon Kaigi14 has tarred PM Abe with a far-right wing reputation, despite his track record as pragmatic PM that governs more from the centre than we would have expected by examining his pre-PM political career15. These groups are problematic for PM Abe as they argue that in order to reinvigorate Japan, the Japanese Constitution needs to be revised to include the following principles: 1) To nurture patriotism and position the Imperial Family at the centre of Japan’s identity; 2) To create a new Constitution based on Japan’s traditional characteristics; 3) To safeguard the sovereignty and honour of Japan; 4) To include the teaching of tradition in education to inculcate pride and love of citizens for their nation; 5) To cultivate a willingness to protect the nation and to provide it with enough defensive power to secure its safety and contribute to world peace; and lastly 6) To foster coexistence and contribute to promoting the nation’s status in the global community and to building friendship16. While these proposals are supported by some political elites with roots in Japan’s imperial past, they do not represent mainstream Japanese citizens with no ties to Japan’s imperial past17. At the same time, PM Abe has pushed through rational yet, controversial collective security legislation18 that the public has misgivings about do to deeply held post WW 2 pacifist norms and a lack of security literacy amongst quotidian Japanese19. Critics of PM Abe have also voice concern over the new anti-conspiracy bill raising important questions about the state’s commitment to democracy20. While timely and needed to deal with the growing threat of terrorism and growing threats from abroad, the legislation has been perceived by voters as not having been accurately vetted and explained to citizens. To gain back some of his credibility amongst voters PM Abe has pushed out some of the more extreme elements of his Cabinet during the recent Cabinet shuffle21, suggesting a more centrist approach to governance and the avoidance of ideologically-based politics which could upset trade relations with both China and South Korea, important markets for Japan’s export dependent economy. The jury is still out though whether these changes will be enough to allay the concerns of voters or prevent a political insurgence from within the LDP to push PM Abe out. What is clear though that questionable right-wing associations and controversial policies are leading voters to explore other political alternatives that may not lead to further political, economic and foreign policy insecurity. Lukewarm commitment to reform Critics of PM Abe have argued that his Abenomics has only half succeeded mostly because of lukewarm commitment to essential structural reform22. Whereas large exporters benefit from the yen’s devaluation, domestically oriented small and mid-sized businesses as well as families are said not to receive the benefits of Abenomics, only the higher prices of imports. Others have argued that Abenomics has been hobbled by “Japan’s consensus-based society, not favouring top down decision making” stressing that “it takes time to change long-standing policies, in particular those relating to labour markets”.23 The agriculture sector is a particularly illustrative example of a tepid commitment to structure reform. Instead of a full commitment to agreements signed in the initial TPP, we see the ‘agricultural tribe’ (nōrin zoku) of the ruling Liberal Democratic Party (LDP) poor cold water on real agricultural reforms through advocating a series of proposals, subsidies and assistance programs to blunt the impact that a fully implemented TPP would have on the agricultural sector24. The International Monetary Fund’s (IMF) Country Report on Japan which was released on July 31st, 2017 which outlined a series of nuanced of assessments on the success or failure of Abenomics. In the report, the IMF stresses that “structural impediments underlie Japan’s struggle with stagnant growth and deflation” and that “Abenomics has improved economic conditions and engendered structural reform, but key policy targets remain out of reach under current policies”25. The report stressed that low birth rates and its ageing society are structural pressures that are preventing growth from gathering momentum and productivity increasing. Through committed labour market reform, increasing the number of foreign workers and the adoption of horizontal labour mobility policies, the IMF stresses that Abenomics would garner more momentum. In short, greater commitment by political leaders in pushing through structural reforms is needed. Security and economic achievements PM Abe’s star has shined most brightly in the areas of security and economic policy, a welcome relief to voters and investors. Sustained strategic commitment to expanding the number and quality of security partnerships in Southeast Asia, South Asia as well as with extra-regional powers such as Australia, the UK, France and the UK are noteworthy achievements in that they strengthen Japan’s security while abiding by Article 9 of Japan’s Pacifist constitutional. Focusing on capacity building, multi-layered and multidimensional security cooperation with ASEAN and other countries, Japan under PM Abe has taken an important role in alleviating some of its and her neighbours security concerns26. This has been welcomed by Southeast Asian and South Asian countries but also by voters who have growing concerns about North Korea’s belligerence and Chinese behaviour in the East China Sea and South China Sea. This support has deepened in light of the missile and nuclear tests by Pyongyang in the summer of 2017 and the island building activities in the South China Sea. The advent of the strategic partnerships with India and Vietnam are significant as they expand the geographic cooperation of Japan through the Indo-Pacific bringing in new security partners. Above and beyond their security partnerships, the Indo-Pacific framework increases the scope of economic cooperation by connecting the capital rich, developed Japanese market to India and Vietnam, both developing countries with young populations to act as labourers for Japanese manufactures but also consumers of Japanese products. While security achievements have infused a sense of stable stewardship of Japan’s foreign policy, in the economic realm Yen devaluation through quantitative easing has increased the competitiveness of Japanese exports in and outside the region. These policies alongside the relaxation of visa requirements for Southeast Asian countries and China have dramatically boosted the number of tourists from the region into Japan. Tourism related industries such as hotels, restaurants, tour copies, ski and hot spring resorts, temples, and some rural areas have been transformed from a domestically oriented tourist business model to one that actively seeks out and accommodates foreign tourists. Government policies to promote corporate governance and economic leadership in terms of signing the Japan-EU Economic Partnership (EPA) in July 2017 and PM Abe’s commitment to realizing the TPP 11 are important markers that the current leadership in Tokyo is committed to bolstering trade, deregulation and creating new trade rules that project intellectual property rights. Japan’s choice Pragmatism, not ideology has driven Japan’s security and economic achievements since 2012. More needs to be done to ensure that the rural areas such as those in Northeast Japan and the Fukushima area benefit from policies associated with Abenomics and PM Abe that are positively impacting Japan’s urban areas such as Tokyo, Osaka and Kyoto. To date, reforms initiated under PM Abe haven’t much effect on the rural areas that are plagued a rapidly greying population and an exodus of the youth. As to the political fate of PM Abe? What is important is a continuation and deepening commitment to current policies rather than PM Abe remaining Prime Minister. That being said, despite the stability that ordinary Japanese have experienced during PM Abe’s tenure, the recent scandals have had less of an effect on voters than the idea of a third term. For the average Tanaka, right or wrong, this smells like dictatorship. Businesses and investors on the other hand, may give more leeway on the possibility of a third term for PM Abe if it means political stability and deeper and broader economic reform. With that, there is one more important consideration, the penchant of ordinary Japanese to prefer stability and to avoid risk. Voting out PM Abe can be understood as a high-risk choice. The Japanese would need to ask themselves, why throw out a leader that has been successful and stable domestically, regionally and on the world stage as well? This is Japan’s choice. The answer to this question will have ramifications for Japanese citizens, investors and the region as a dynamic, economically invigorated, democratic Japan could provide an essential leadership role in the region. It would be a beacon for developing countries by demonstrating that in East Asia and other regions, that open and democratic societies can prosper and provide sustainable economic growth without sacrificing their freedom, openness and independence. ABOUT THE AUTHOR Dr Stephen R Nagy is a Senior Associate Professor in the Department of Politics and International Studies at the International Christian University. Previously he was an Assistant Professor at the Department of Japanese Studies at the Chinese University of Hong Kong from December 2009 to January 2014. He obtained his PhD from Waseda University, Japan in International Relations in December 2008. His recent funded research projects are “Sino-Japanese Relations in the Wake of the 2012 Territorial Disputes: Investigating changes in Japanese Business’ trade and investment strategy in China”. Currently he is conducting a research project on the entitled “Perceptions and drivers of Chinese view on Japanese and US Foreign Policy in the Region”. He has published widely in peer-reviewed international journals such as China Perspectives, East Asia, the Journal of Asian Politics and History and the International Studies Review on topics related to trade, nationalism and China-Japan relations. He has also published in think tank and commercial outlets such as the China Economic Quarterly on trade and political risk and provides consulting services related to political risk in North and Southeast Asia. In addition to writing in media and policy forms outlets in Japanese and English such as Diamond OnLine, South China Morning Post, the Japan Times, East Asian Forum and Policy Forum, Asia & the Pacific Policy Society (APPS) on issues facing the region, Dr Stephen R Nagy is a frequent analyst on CNBC Asia, Channel News Asia, the Australia Broadcasting Cooperation, Radio and TV (ABC), Al Jazeera, China Radio International and others as political/economic and security commentator on Northeast Asian politics and international relations. Endnotes 1. “A reset for Abe’s constitutional revision agenda?” in The Japan Times. July 22nd, 2017 https://www.japantimes.co.jp/opinion/2017/07/22/commentary/reset-abes-constitutional-revision-agenda/#.WaprpchJYow 2. “Koike crushes ruling LDP in battle for Tokyo”, in The Financial Times, July 3rd, 2017. https://www.ft.com/content/68c3810e-5f29-11e7-91a7-502f7ee26895 3. Nagao, Satoru. “The Japan-India-Australia “Alliance” as Key Agreement in the Indo-Pacific,” ISPSW Publication September 2015, Issue No. 375, (Berlin, The Institute for Strategic, Political, Security and Economic Consultancy (ISPSW)) http://www.isn.ethz.ch/Digital-Library/Publications/Detail/?en&id=193713 (accessed September 23 2015) 4. The Government of Japan. “Abenomics,” http://www.japan.go.jp/abenomics/index.html 5. “Japan’s corporate governance gets some long-overdue scrutiny”, in Nikkei Asia Review. July 6th, 2017. https://asia.nikkei.com/magazine/20170706/On-the-Cover/Japan-s-corporate-governance-gets-some-long-overdue-scrutiny 6. Nagy, SR 2017. “The problem of pacifism: The road to revising Japan’s Constitution”, in Asia & Pacific Policy Society (APPS) Policy Forum. May 11th, 2017. https://www.policyforum.net/the-problem-of-pacifism/ 7. Nagy, SR 2014. “Nationalism, Domestic Politics and the Japan Economic Rejuvenation”, in East Asia. Volume 31. Issue 1. Pp. 5-21. 8. Mulgan, Aurelia George. 2017. “Scandals starting to stick to the Abe administration”, in the East Asian Forum. June 21st, 2017. http://www.eastasiaforum.org/2017/06/21/scandals-are-starting-to-stick-to-the-abe-administration/ 9. “Gaffes by Abe Cabinet ministers sign of carelessness due to stable approval rates”, in The Mainichi. April 18th, 2017. https://mainichi.jp/english/articles/20170418/p2a/00m/0na/016000c 10. Harris, Tobias. 2017. “After cabinet reshuffle, public remains dissatisfied with Prime Minister Abe”, in Japan’s Political Pulse. August 8th, 2017. https://spfusa.org/category/japan-political-pulse/ 11. The Ministry of Foreign Affairs of Japan (MOFA). “Japan-Australia Joint Foreign and Defence Ministerial Consultations Joint Statement 2008”, December 18th, 2008. http://www.mofa.go.jp/region/asia-paci/australia/2plus2joint08.html 12. The Ministry of Foreign Affairs of Japan (MOFA), 2015. “Japan and India Vision 2025 Special Strategic and Global Partnership: Working Together for Peace and Prosperity of the Indo-Pacific Region and the World”, December 12th, 2015. http://www.mofa.go.jp/s_sa/sw/in/page3e_000432.html 13. The Ministry of Foreign Affairs of Japan (MOFA), 2016. “Japan-Viet Nam Foreign Ministers’ Meeting”, May 5th, 2016. http://www.mofa.go.jp/s_sa/sea1/vn/page3e_000488.html 14. Nippon Kaigi/The Japan Conference. http://www.nipponkaigi.org/ 15. Nagy, SR 2017. “In Japan’s national interest: Shinzo Abe’s visit to Pearl Harbour”, in Asia & Pacific Policy Society (APPS) Policy Forum. January 6th, 2017. https://www.policyforum.net/japans-national-interest/ 16. 16 Nagy, SR 2017. “The problem of pacifism: The road to revising Japan’s Constitution”, in Asia & Pacific Policy Society (APPS) Policy Forum. May 11th, 2017. https://www.policyforum.net/the-problem-of-pacifism/ 17. “Abe sets 2020 target to revise Japan’s pacifist constitution”, in The Financial Times. May 3rd, 2017. https://www.ft.com/content/a4d2aaa0-2fd9-11e7-9555-23ef563ecf9a 18. Borah, Rupakjyoti, 2015. “Japan’s Controversial Security Bills Pass in the Upper House. Now What?” in The Diplomat. September 19th, 2015. http://thediplomat.com/2015/09/japans-controversial-security-bills-pass-in-the-upper-house-now-what/ 19. Boyd, Patrick, J “The perils of legislating Abe’s collective self-defence”, in the East Asian Forum. March 19th, 2015. http://www.eastasiaforum.org/2015/03/19/the-perils-of-legislating-abes-collective-self-defence/ 20. Maslow, Sebastian and Wirth, Chris. 2017. “Is Abe securing or threatening Japan’s peace and democracy?” in the East Asian Forum. June 22, 2017. http://www.eastasiaforum.org/2017/06/22/is-abe-securing-or-threatening-japans-peace-and-democracy/ 21. Bosak, Micheal, M 2017. “Abe’s Cabinet Reshuffle, Explained: Despite a drastic public opinion slide, Abe’s new cabinet was remarkably consistent”, in The Diplomat. August 5th, 2017. http://thediplomat.com/2017/08/abes-cabinet-reshuffle-explained/ 22. “End of the affair: The government of Shinzo Abe is increasingly at odds with the central bank”, in The Economist. April 11th, 2015. https://www.economist.com/news/asia/21648020-government-shinzo-abe-increasingly-odds-central-bank-end-affair 23. Yashiro, Naohiro. 2014. “Strategic zones and labour reform to get Abenomics back on track?” in The East Asian Forum. April 6th, 2014. http://www.eastasiaforum.org/2014/04/06/strategic-zones-and-labour-reform-to-get-abenomics-back-on-track/ 24. Mulgan, Aurelia George. 2016. “Japan’s TPP agriculture spending a return to business as usual”. in The East Asian Forum. January 6th, 2016. http://www.eastasiaforum.org/2014/04/06/can-abes-third-arrow-pierce-japans-agricultural-armour/ 25. International Monetary Fund (IMF). 2017. IMF Country Report No. 17/242: Japan. July 31st, 2017. http://www.imf.org/en/Publications/CR/Issues/2017/07/31/Japan-2017-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-the-Executive-45149 26. Shoji, Tomotaka, 2015, “Japan’s Security Cooperation with ASEAN: Pursuit of a Status as a “Relevant” Partner”, National Institute of Defense Studies. Ministry of Defense (MOD) http://www.nids.mod.go.jp/english/publication/kiyo/pdf/2015/bulletin_e2015_5.pdf
Figure 1. Nominal GDP and growth rate Source: Cabinet Office “National Accounts”; “Fiscal 2017 Economic Outlook and Basic Stance for Economic and Fiscal Management” Figure 2. Capital investment Figure 3. Corporate profits Source: Cabinet Office, “National Accounts;” private non-residential investment Source: Ministry of Finance “Financial Statements Statistics of Corporations by Industry,” all industries, all (firm) sizes, seasonally adjusted figures


The Japanese would need to ask themselves, why throw out a leader that has been successful and stable domestically, regionally and on the world stage as well?

Japan PMs revolving door legacy

Shinzō Abe returned as prime minister following five in five years