A Second Chance for Abe
Comment of the Day

December 15 2014

Commentary by David Fuller

A Second Chance for Abe

Tweaks -- taxing corporations that sit on their cash rather than investing it or raising wages, for instance -- might help around the margins. But the real problem is that for all his energy and verve, Abe has not fundamentally altered the status quo in Tokyo.

Japan's entrenched bureaucracy waters down reforms almost instinctively. That means small changes are all but certain to be whittled to nothing. Abe’s first two arrows succeeded in part because of their size and shock value: They were designed to change expectations radically, and for a time they did. Abe needs another big bang -- something much more than a $25 billion stimulus package.

The most obvious place to start would be with the Trans-Pacific Partnership trade deal, which would crack open some of Japan’s most inefficient sectors. Abe barely mentioned the pact during the campaign, for fear of alienating the powerful farm lobby. Now he need not be so timid. While the U.S. Congress may still derail any deal, Abe could at least pressure Washington by making key concessions on agricultural and auto tariffs.

Abe has also walked too gingerly around the issue of immigration reform. The economy desperately needs new blood -- from nurses to care for the elderly, to construction workers, to high-skilled entrepreneurs who can teach Japan Inc. how to innovate again.

There is a chance that Abe could mistake his mandate as license to push ahead with more controversial elements of his agenda, including revising Japan’s postwar constitution. He would strengthen Japan far more if he instead worked toward his own Nixon-to-China rapprochement with Beijing next year, the 70th anniversary of the end of World War II. While tensions with the mainland are inevitable, the current chill in relations risks more harm to Japan than to China: By some estimates, China might need to import as much as $4 trillion to $6 trillion in services over the next decade -- a huge potential opportunity for Japanese businesses.

Some of the strongest resistance to all of these moves will continue to come from within Abe’s own party. But voters returned the Liberal Democratic Party to power because they saw little alternative and want to believe Abe can bring Japan's economy back. His party needs to let him try. 

David Fuller's view

Neither Shinzo Abe nor anyone else can turn around an economy quickly that has been sliding for 25 years.  There are some interesting suggestions above, although I would not be increasing taxes on corporations, mentioned in the first sentence.  I would not raise the sales tax again either, at least not until the economy is clearly on a stronger footing.   

Japan is a high-tech entrepreneurial society, so it should be able to prosper once again in today’s environment of accelerating technological innovation.  Abe should promote this effort.  He could also champion Japan’s most underutilised asset - its educated women who deserve equal opportunity employment policies.  He could also show diplomatic initiative and attempt to break the 70 year old post WWII hostilities which make regional cooperation more difficult.  

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