How Kishida’s disappearing Japanese premiership is a gift to China

Embroiled in political scandal, deeply unpopular and increasingly irrelevant, Kishida cannot push the economic reforms Japan needs to be a counterweight to China
As Biden seeks to limit China’s influence in East Asia, Kishida is becoming less of a functioning partner

William Pesek

Published: 7:30pm, 8 Feb 2024

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Not much has been going President Xi Jinping’s way so far this year. China’s economy stumbled out of the gate. Stocks have been plunging. Deflation is deepening. And Evergrande is trending as a search term again. But leave it to Japan to offer Xi a win.

Prime Minister Fumio Kishida’s fast-disappearing premiership is a gift to Xi and a blow to US President Joe Biden. Kishida’s government ended last year with public support as low as 17 per cent. One poll found public disapproval for the cabinet at its highest since 1947.

Tokyo’s pundits have settled on the financing scandals enveloping Kishida’s Liberal Democratic Party (LDP) as the culprit. This is nonsense. The problem is that Japan is in recession, or very near one, after more than two years of Kishida dithering on the economy.

In 2012, Kishida’s mentor, Shinzo Abe, led the LDP to power promising a reformist “Big Bang”; the idea was to remind China who’s boss in Asia. But Abe only managed a few small pops of positive change. They enriched investors betting on a surging Nikkei 225 Average, not households. Stocks are now at 34-year highs, as wages trail gains in inflation.

Unsurprisingly, Japanese voters are in a foul mood. New year, same old political complacency and indifference. The latest financial scandals have exacerbated the perception that Japan’s political system only serves itself.

In a healthier democracy, Kishida’s party would shunt him aside. But with opposition parties in disarray and no obvious LDP successor, Mr 17 Per Cent is safe for now. Yet Tokyo’s designs on getting back in the economic game in Asia are dwindling by the day – and playing right into Beijing’s hands.

02:17

Prime Minister Fumio Kishida offers tax cuts to help Japanese households ride out inflation

Over the past 28 months, Kishida has arguably been Biden’s most important and trusted ally. Tokyo is the cornerstone of Biden’s Indo-Pacific strategy to encircle an ascendant China. Any discussion of the Quadrilateral Security Dialogue partnership between the United States, Japan, India and Australia casts Kishida as Biden’s essential Asian ally.

Here, let’s dispense with the blather about Abe’s supposed bromance with Donald Trump. For all the photo opportunities and golf outings, Trump gave Abe zero passes on trade tariffs. Trump enabled North Korea’s Kim Jong-un, in direct conflict with Japan’s security interests. He bragged that Abe had nominated him for a Nobel Peace Prize – something Abe did not deny – humiliating the LDP.

Kishida’s bond with Biden is on a more equal footing, aimed at everything from supporting Taiwan and Ukraine to curbing Beijing’s access to vital technology. Yet what is this partnership worth as Kishida recedes into irrelevance?

What Kishida’s party also forgot is that Beijing cares little about its military spending plans. It’s nice that the LDP is increasing Japan’s defence budget – by 16 per cent this year – just as Biden had hoped. Yet economic power trumps the size of Japanese naval vessels or number of fighter jets.

02:19

Japan’s economy contracts by 2.1% amid high inflation after strong post-Covid recovery

The muscle-building that really matters is gross domestic product, innovation and winning the tech unicorn war. Sadly, government after government in Tokyo misses this reality.

“To the extent that a vibrant, technologically advanced Japan plays a heavier role in the region via its companies, FDI [foreign direct investment], and assorted free-trade agreements, an improved balance of economic power may limit what China can do and increase the possibility of Beijing returning to something closer to its past stance of a ‘peaceful rise’,” Richard Katz writes in his new book The Contest for Japan’s Economic Future. “So far, Japan’s economic travails have reduced its influence in Asia, and hence its ability to act as a counterweight to China.”

Consider this window closed. Kishida has virtually zero political capital to prod change-averse lawmakers to rekindle entrepreneurship and productivity, slash bureaucracy, catalyse a start-up boom, empower women or reposition Tokyo as an Asian financial centre with which to be reckoned.

Let’s not confuse pumped-up stock markets with real economic health

The price for Japan’s slow-walking upgrades these 11-plus years is rising as China speeds up Asia’s economic clock. Sure, Xi’s missteps over the past few years have hurt China, from the draconian Covid-19 lockdowns and tech crackdowns to the glacial pace with which it tackled its property crisis.

But the LDP’s failure to increase competitiveness or welcome disruption is malpractice of the first order. The longer Tokyo takes to reanimate its economy, the greater the advantage to Xi’s China. And the greater the disappointment for Asian governments seeking growth engines as China sputters. From South Korea to Indonesia, the spectre of Japan dragging on regional growth will dim economic prospects.

As Shanghai stocks crater and a default-plagued property market makes global headlines, China is turning inward. Europe is stumbling in other ways as Germany underperforms. Though the US is holding its own, can we really expect the globe’s biggest economy to continue beating the odds?

03:16

Biden and Kishida pledge to strengthen US-Japan ties as a counter to China

Ahead of November’s US presidential election, Biden will seek to highlight how his White House has taken on China. They include cutting Beijing off from semiconductor technologies and other goods vital to satellites, weapons systems and artificial intelligence.

A bigger win, arguably, is how Biden has worked to restore ties with Asian economies that had a rough experience during Trump’s tenure. Along with Japan, they include South Korea, the Philippines and Vietnam.

Yet, as Biden seeks to strengthen efforts to limit China’s influence in East Asia, Kishida is becoming less of a functioning partner. Unfortunate news for Washington, but some of the best Beijing has had in a long while.

William Pesek is a Tokyo-based journalist and author of “Japanization: What the World Can Learn from Japan’s Lost Decades”