BY ARJUN KAMATH
It is fast approaching a month since Abe Shinzo, the longest serving uninterrupted Prime Minister in Japanese history, announced his decision to resign. His resignation came at a time when Japan is engulfed in the COVID-19 pandemic, already threatening Japan’s vulnerable economy. His landmark resignation has jettisoned Japan into another, albeit familiar, period of political uncertainty at a time when the country needed someone who could not only lead the way through a costly pandemic but also ensure that the land of the rising sun could shine in the international community.
Abe Shinzo’s legacy will not so much be defined by its longevity, but rather what he did to confront the symptoms of an economy plagued by deflation since the early 1990s and how he responded to major foreign policy obstacles, in particular the growing threat from China.
Abe Shinzo’s tenure was largely shaped by how he sought to treat Japan’s chronic case of deflation. Abenomics, his keynote policy, a highly ambitious 3-pronged approach designed to pull Japan out of a 2 decade long period of stagnant economic growth. The first prong involved a massive fiscal stimulus eventually amounting to $210 billion, supporting Japan’s households and public sector. To attain price stability the second prong consisted of the Bank of Japan unleashing a huge asset purchasing program and using quantitative easing to the fullest extent in order to expand the money supply with hopes of reducing long-term interest rates, fostering a more attractive investment environment. Aiming to boost output, Abenomics’ final prong consisted of dynamic supply-side reforms designed to incentivise greater competition in the labour market and across all economic sectors through deregulation and sizeable tax cuts.
According to Director Josh Lipsky at the Atlantic Council “The track record of Abenomics is mixed at best.” On the one hand Abenomics did lead to welcomed progress for Japan. From 2013-2017 Japan’s real GDP grew from ¥500 trillion to ¥550 trillion, reflecting that the fiscal interventions were effective. Furthermore, the Nikkei 225’s session closing points rose from 11K in 2013 to 24K in 2020, illustrating the BoJ’s monetary policies allowed the market to soar. Additionally, the BoJ’s aggressive monetary expansion prevented the Yen from appreciating in value which has led experts like Shigeto Nagai of Oxford Economics to argue that during “Abe’s time in office, the profitability of large firms has risen significantly, by expanding their business abroad” as the competitiveness of Japanese exports has improved on global markets. Efforts to restructure the economy by targeting workforce demographics have paid off, as World Bank data shows that the female participation rate stood at a record of 52.74% in 2019. Whilst the BoJ’s policies managed to reverse the deflationary spiral, price levels remain volatile as Japan is well below its benchmark target inflation rate of 2%, with the pandemic making progress seeming glum. At the end of 2019, Japan’s debt as a proportion of GDP stood at a ginormous 230% - the highest amongst OECD nations. Whilst deregulation may have expanded female participation, on the OECD’s labour productivity index Japan has floated around 1.0 (2013-2021), 0.5 less than the OECD average. Underwhelming is the nature of Abenomics’ successes.
Abe’s foreign policy legacy has been torn between him being a ‘Revisionist Nationalist’ and a ‘Pragmatic Realist’- one thing for certain is he fundamentally changed how Japan would engage with the world. Representing a more conservative generation, his declaration that “Japan is back” emphasises his romanticism for Japan’s old power and influence, and his determination to reassert Japan in the global community. The National Security Strategy, originating from his National Security Council involved 3 objectives: advancing the Japan-US alliance, expanding Japanese capabilities and furthering security and diplomatic relations with other nations. His pragmatism can be accredited for the flurry of foreign policy successes. Constructing solid relationships with both Presidents Trump and Obama and ensured Japan-US interests were closely aligned. For Abe it was also paramount that Japan interacted extensively with regional neighbours. Leaps were made in building stronger security ties with multilateral institutions like ASEAN and countries that face a common threat from China, particularly the Philippines, Australia, and India. Concrete security relations with NATO were also established; an organization Abe has expressed that Japan can be “natural partners” with. Recognising that the two countries shared overlapping interests, Abe launched initiatives with the UK “from peace of the seas to the security of the skies, space and cyberspace.” and since 2015 the ‘2+2’ program has enhanced the relationship between relevant government departments, allowing the Anglo-Japanese relationship to flourish.
Japanese defence policy during Abe’s tenure underwent some of the most radical, albeit vital, reforms since the end of the war. Defence spending grew by 13% between 2012-2020, enabling Japan to acquire state-of-the-art military hardware, like the F35s broadening Japanese airborne capabilities. Japan’s ability to exercise hard power has also been augmented following the introduction of the Izumo Class helicopter carriers. The most ground-breaking change was the Diet’s authorisation for the Japan Self-Defense Forces to engage in collective security operations across the world, which supersedes its original function of defending the homeland.
With his image being badly damaged by his poor handling of the pandemic, Abe’s approval rating stood at 36% by August. Even though Abe was hugely ambitious and innovative in how he wanted to engage with the challenges confronting Japan, Abenomics’s shortcomings will be his biggest disappointment. The ‘comeback kid’ must however be credited for delivering a period of unprecedented stability in Japanese politics from 2012-2020 and projecting Japan’s global outlook, which will reflect strongly on his legacy.
Image - Flickr (Bruce Detorres - Tokoyuki Matsubuchi)