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Abenomics
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If he comes back with a big election win, Abe will hope to silence all the critics and claim he has a fresh mandate. Photo: Bloomberg

Can an electoral win for Abe stop Abenomics floundering?

Kevin Rafferty says the prime minister can't lift Japanese gloom without taking on vested interests

Abenomics

Japan's Supreme Court this week made a ruling which goes some way to explain the country's dire plight as an advanced country rapidly losing its way. It ruled that last year's upper house election, in which rural votes had up to 4.77 times more weight than urban ones, was held in "a state of unconstitutionality". But, bizarrely, the court did not rule the election unconstitutional - which means the old vested rural interests will hold sway when Japan goes to the polls next month.

Shinzo Abe called the election, two years ahead of schedule, supposedly as a vote of confidence in his "Abenomics" reforms. The hard reality is that Abe's vaunted reforms are not working and will not work unless he shows more guts and imagination.

Oddly, Abe still has supporters in high places who believe he is doing a great job to put Japan back on the right economic and social road. In the past few weeks, I have heard International Monetary Fund managing director Christine Lagarde and Nobel Prize-winning economists Paul Krugman and Michael Spence declare their faith in Abe's agenda.

In Tokyo, Nicholas Smith of CLSA also sang Abe's praises when interviewed by Bloomberg. Smith's checklist of Abe's achievements includes: the Tokyo stock price index up by 93 per cent since Abe became prime minister in 2012; the yen down against the US dollar by 47 per cent, supposedly boosting Japan's exports; corporate profits up 78 per cent; unemployment down to the structural minimum of 3.6 per cent; plus 40 economic restructuring bills presented with an execution rate of 97 per cent.

Why, then, does Abe need an election since he is still riding high with a two-thirds majority in the lower house? Opposition parties are in such disarray that he may get at least as big a majority, unless voters punish him for wasting their time.

In addition, Abe's popular support has slipped to 44 per cent, still relatively high by the standards of recent prime ministers, who have seen their support in single digits. But diminishing popular support leaves him vulnerable to critics within the ruling Liberal Democratic Party.

If he comes back with a big election win, Abe will hope to silence all the critics and claim he has a fresh mandate.

But his problem still remains: Abenomics has not yet succeeded; it has crucial flaws, not least Abe's failure to tackle the entrenched vested interests. The achievements listed by Smith ignore that Japan is back in recession and Abe dare not go ahead with the 2-percentage-point increase in the consumption tax, taking it to 10 per cent, low by the standards of other developed countries, for fear of deepening the decline.

Abe promised three arrows for his Abenomics, but in reality he relied on only one, monetary policy, which exacerbated Japan's problems.

The rich got richer as massive monetary easing lowered the value of the yen and propelled stock market gains. Huge increases in company profits have not been passed on in higher wages, in spite of Abe's urging of corporate leaders, so consumers are fearful. The falling yen has not boosted exports significantly since Japanese companies shifted production abroad.

Japan's problems are well known. It is a mature and ageing society. Government debts are 250 per cent of gross domestic product and set to grow with the burdens of that ageing population. The extra consumption tax was supposed to help upgrade the system of elderly care as well as bridge the swelling budget deficit.

Without radical measures, Japan's plight will get worse. There are ways forward. Increased immigration is one. Deep reforms of the economic and social system are another, to break the grip of entrenched interests, like agriculture, construction, medical and social security, and to bring more women into the economy. Abe promised restructuring as his third arrow, and has made some of the right noises, for example, setting up childcare centres. But without breaking a male-dominated work culture where executives stay at their desks until late at night, women workers will be second-class nine-to-five citizens.

In reality, Abe has been strong in pandering to his right-wing friends over security issues, allowing arms sales and rewriting wartime history. In doing so, he has neglected restructuring and encouraged opposition to reforms. How can anyone trust that a re-elected Abe dependent on the same old interests can bring in reforms?

More worrying, Japan is becoming a zombie society, where people do not question old shibboleths. Abe particularly gives short shrift to those who question his controversial view of history or his plans to make Japan "more normal", with a military it cannot afford.

From my base at Osaka University, I despair of the emphasis on conformity and refusal to question authority, when Japan needs more questions, more solutions and more entrepreneurial thinking, not more zombies.

This article appeared in the South China Morning Post print edition as: Even an electoral win for Abe isunlikely to stop Abenomics floundering
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