How bad could it get? America’s ugly election

A new story at last

TO KYO

Abe Shinzo has left a big mark on the country he has run for eight years

Asia

43 Feminism in Pakistan

43 India’s economy shrinks by 24%

44 Taiwan’s woolly alliance with America

45 Banyan: Thailand’s new protesters

Also in this section

---

42

Asia

The Economist

September 5th 2020

2

with the European Union and a bilateral

deal with America. That, along with lots of

golf and flattery, kept him in Donald

Trump’s good books. “If not for Abe, we’d be

treated like Moon Jae-in or Merkel,” says a

former adviser. 

Mr Abe also dealt deftly with China (see

Business section). When he took office, the

two countries were close to conflict over

disputed islands. Mr Abe had hoped Xi

Jinping would visit Japan this year, before

covid-19 intervened. But he also encour-

aged neighbours to stand up to China. Un-

der the banner of a “Free and Open Indo-Pa-

cific”, Japan has tried to uphold freedom of

navigation in Asian waters and liberal prin-

ciples in Asian markets. He built security

ties with Australia, India and countries in

South-East Asia. He created a strategy to

link Japan’s piecemeal aid projects, quietly

promoting “quality infrastructure” as an

alternative to China’s Belt and Road Initia-

tive. “No other [Japanese] politician has

such a sixth sense in foreign policy,” says

Miyake Kunihiko, a former diplomat.

Mr Abe failed in his efforts to revise the

pacifist constitution that America imposed

on Japan after the war. But he strengthened

the armed forces, reinterpreting the con-

stitution and passing national-security

and secrecy laws that, in practice, make it

possible for Japan’s “self-defence forces” to

deploy abroad. Were it to attack Taiwan,

China would have to “assume it would face

a common 

us

-Japan front”, notes Michael

Green, a former director for Asia on Ameri-

ca’s National Security Council.

Such changes were controversial, but

Abenomics kept voters happy. Mr Abe in-

stalled a new governor at the Bank of Japan,

Kuroda Haruhiko, who unleashed a “ba-

zooka” of monetary easing (see Free ex-

change). That helped reverse years of defla-

tion, even if a 2% inflation target was never

hit. Unemployment fell to its lowest rate in

decades. Reduced corporate taxes and a

weaker yen boosted firms’ profits. The Nik-

kei stockmarket index has reattained levels

last seen in the early 1990s.

Mr Abe’s government introduced cor-

porate-governance codes that led to more

outside directors on boards. Nicholas Be-

nes, who helped draft them, calls the

changes “unstoppable”. Japan’s state pen-

sion fund, the world’s largest, shifted to-

wards investing in stocks rather than gov-

ernment bonds. A new index, the 

jpx

400,

focused on good governance and high re-

turns on equity, helped spur corporate re-

form. “The bluest of blue-chip companies

were vehemently opposed,” says Kathy Ma-

tsui of Goldman Sachs, an investment

bank. But investors swooned. In a research

note, Morgan Stanley, another investment

bank, compared Mr Abe’s legacy to those of

Ronald Reagan and Margaret Thatcher.

Mr Abe sought to lessen the damage

caused by Japan’s swiftly ageing popula-

tion. His government expanded parental

leave and child-care services. Female la-

bour-force participation grew from 63% to

71%, higher than in America. “Abe main-

streamed the whole concept of gender div-

ersity,” shifting the context from human

rights to economic growth, says Ms Matsui.

Mr Abe also allowed in more immigrants.

The number of foreign workers in Japan

more than doubled during his tenure. 

Critics see plenty of shortcomings in Mr

Abe’s economic policies. Until covid-19, his

time in office was largely free from external

shocks. The biggest injuries were self-in-

flicted: two ill-timed increases in the con-

sumption tax, in the name of fiscal probity,

both of which pushed the economy into re-

cession. As a result, his government mus-

tered only meagre economic growth of 1.1%

a year on average during his eight years in

office, less than the 2% he promised. Com-

panies saw their profits rise, but many sat

on them. Women got more jobs, but not

enough promotions. Average wages fell

after accounting for inflation.

Despite the increases in the consump-

tion tax, Mr Abe also leaves behind a mas-

sive public debt, currently 238% of 

gdp

.

Markets seem unworried: the yield on

many government bonds is negative. But

the debt mountain may nonetheless bur-

den future generations. “People assume

this is free money but it’s not: it will have to

come back in terms of higher taxes or

smaller services,” says a former official at

the Bank of Japan. 

Although Japan has suffered a relatively

small number of deaths from covid-19, es-

pecially relative to its population, the pub-

lic is unhappy with Mr Abe’s handling of

the pandemic. The national government

was slow to adopt measures to curb its

spread, leaving local leaders such as the go-

vernor of Tokyo, Koike Yuriko, to lead. A

string of corruption scandals also dented

his standing. Shortly before his resignation

the approval rating of Mr Abe’s government

was 34%, the lowest since he returned to

office. In his resignation speech, Mr Abe la-

mented that he was unable to amend the

constitution or solve a territorial dispute

with Russia. Many Japanese feel he put

more energy into his ambition to reverse

these legacies of the second world war than

he did into tending to the economy. 

His successor will presumably have less

interest in fighting these old battles. Man-

aging the effects of covid-19 will come first:

the economy shrank by a record 7.8% in the

second quarter of this year. That makes it

no bigger than when Mr Abe became prime

minister in 2012. The government has

propped up companies and given cash to

consumers; bankruptcies are down this

year. But as the slump persists, a painful re-

structuring will have to take place, says

Hoshi Takeo of the University of Tokyo. 

Japan needs a “productivity revolution”,

says Ms Matsui. The tax code and the la-

bour market stifle startups and innovation.

The government uses archaic computer

systems. No one in Japan was surprised to

find fax machines being used to tally co-

vid-19 test results. “We have to erase all of

the inefficiencies and redundancies,” says

a member of a government economic advi-

sory council. 

The next prime minister cannot, how-

ever, ignore foreign affairs. China is ex-

panding its presence at sea. Japan is at odds

with South Korea; Mr Abe could never mus-

ter the patience with Moon Jae-in, its presi-

dent, that he showed with Mr Trump. Ja-

pan’s pro-coal stance and the closure of its

nuclear reactors after a disaster in 2011 have

made it a climate laggard. 

The 

ldp 

will choose its next president

on September 14th, in a vote of its members

of the Diet and some regional representa-

tives. In the interests of continuity most of

the main factions have endorsed Suga

Yoshihide, the chief secretary of the cabi-

net. If he wins, he would serve out the re-

mainder of Mr Abe’s term, which was due

to end in September next year. Then a

party-wide election will be held, which

should attract a broader crop of candidates. 

The son of a farmer from rural Akita Pre-

fecture in the north of Japan, Mr Suga has a

reputation for diligence (in a country

known for overwork) and as a master of the

bureaucracy. His instincts appear less

nationalist than Mr Abe’s. He has advocat-

ed more immigration and freer trade. He

urged Mr Abe to focus on the economy in-

stead of visiting the Yasukuni Shrine, a

controversial war memorial, in 2013.

Mr Suga has little experience on the

world stage. He is not especially popular

among either the 

ldp

’s broader member-

ship or among Japanese at large. He will

have many rivals in the party. “A lot of peo-

ple are chomping at the bit,” says Sheila

Smith of the Council on Foreign Relations.

Ominously, long-serving prime ministers

have typically been followed by strings of

short-lived, unpopular governments.

7