Abe’s master plan

Shinzo Abe(…) The reason for thinking this time might be different is China. Economic decline took on a new reality in Japan when China elbowed Japan aside in 2010 to become the world’s second-largest economy. As China has gained confidence, it has begun to throw its weight around in its coastal waters and with Japan directly over the disputed Senkaku/Diaoyu islands. Earlier this month China’s official People’s Daily even questioned the Japanese sovereignty over Okinawa. Abe believes meeting China’s challenge means shaking off the apathy and passivity that have held Japan in thrall for so long. To explain the sheer ambition of his design, his people invoke the Meiji slogan fukoku kyohei: “enrich the country, strengthen the army”. Only a wealthy Japan can afford to defend itself. Only if it can defend itself will it be able to stand up to China and, equally, avoid becoming a vassal of its chief ally, United States. Abenomics, with its fiscal stimulus and monetary easing, sounds as if it is “an economic doctrine”; in reality it is at least as much about national security. Perhaps that is why Abe has governed with such urgency. Within his first weeks he had announced extra government spending worth ¥10.3 trillion (about $100 billion). He has appointed a new governor of Bank of Japan who has vowed to pump ever more money into the financial system. In so far as this leads to a weaker yen, it will boost exports. If it banishes the spectre of deflation, it may also boost consumption. But printing money can achieve only so much and, with a gross debt of 240% of GDP, there is a limit to how much new government spending Japan can afford. To change economy’s long-run potential, therefore, Mr Abe must carry through the third, structural, part of his plan. So far, he has set up 5 committees charged with instigating deep supply-side reforms. In February he surprised even his supporters by signing Japan up to the Trans-Pacific Partnership (TPP), a regional trade agreement that promises to force open protected industries like farming. Nobody could object to more prosperous Japan that would be a source of global demand. A patriotic Japan that had converted its “self-defence forces” into a standing army just like any other country’s would add to the security of North-East Asia. And yet those who remember Mr Abe’s first disastrous term in office are left with two worries. The danger with the economy is that he goes soft, as he did before. Already there are whispers that, if second-quarter growth is poor, he will postpone the first of two consumption-tax increases due in 2014-15 for fear of strangling the recovery. Yet a delay would leave Japan without a medium-term plan for limiting its debt and signal Mr Abe’s unwillingness to face up to tough choices. Fear is that he will bow to lobbies that resist reform. Agriculture, pharmaceuticals and electricity are only some of the industries that need to be exposed to competition. Mr Abe must not shrink from confronting them, even though that means taking on parts of his own party. The danger abroad is that he takes too hard a line, confusing national pride with destructive and backward-looking nationalism. He belongs to a minority that has come to see Japan’s post-war tutelage under America as a humiliation (…..)

Link: http://www.economist.com/news/leaders/21578044-shinzo-abe-has-vision-prosperous-and-patriotic-japan-economics-looks-better


Acerca de ignaciocovelo
Consultor Internacional


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