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Five-year-old Shinzo Abe
Pros and cons of the second government of the Prime Minister of Japan
Head of the Center for Japanese Studies of the Institute of Far Eastern Studies
26 December last year in Japan was marked the fifth anniversary of the re-emergence of Prime Minister Shinzo Abe (the first time he lasted in the chair of the country's leader for only about a year at 2006-2007). Five years after Abe headed the state for the second time, the Japanese economy has appreciably strengthened, but still far from the revolutionary changes that he promised to take with the help of the economic course, called "Abenomics" (for more on this, see: https://www.eastrussia.ru/material/abenomika-na-marshe/). Here, in particular, how the successes and failures of Shinzo Abe's five-year activity on the economic front are assessed by Bloomberg experts in an article published by the Japan Times 27 December 2017 newspaper.
In their view, over the past five years, Japan's economic growth has been insufficient to achieve Abe's goals. Nevertheless, the economy increased by 56 trillion yen (494 billion dollars) compared to December 2012. Incidentally, the volume of only one of this growth exceeds Belgium's GDP. Currently, capital expenditure in the country continues to increase, foreshadowing further growth.
However, the problem is that Japan could have done better. Although currently its economy is experiencing the longest period of growth, since the middle of the 1990-ies, other industrialized countries have demonstrated better success. Abe promised structural reforms slowed, and Japan still strongly depends on foreign demand for its products. From month to month, its export earnings are rising, but consumption by households is marking time.
Under Abe, according to the IMF, public debt stabilized at about 240% of GDP. Stabilization is in itself an achievement, but the debt burden is much heavier than in many other large economies, and, most importantly, the prospects for its reduction are now vague. Even more worrisome is the fact that, as Japan's population decreases, this debt in per capita terms continues to grow.
The noticeable success of the last five years was the increased number of employed people, which increased rapidly by 2,7 million people, while the number of unemployed decreased by 1,1 million. In many respects, this increase is due to women returning to workplaces due to the expansion of the number of preschool institutions. However, the primary goal of the Prime Minister to increase the proportion of women to 30% in managerial positions in all areas by 2020 is very far from realization. And the number of women members of Parliament even slightly decreased (to 10,1%), and now only two ministers from 20 in the Abe government represent a beautiful gender.
The stumbling block for Abenomica is the lack of salary growth. As in many other countries, in Japan, the tense situation in the labor market does not translate into a significant increase in its payment. According to the economists surveyed by Bloomberg, in the current year, working Japanese can count only on 1% of the increase in their total revenues. However, much greater growth is required to increase household spending, and the confidence of companies in the stability of price increases has strengthened. Without these two components, the Bank of Japan will be forced through the monetary easing policy to continue the struggle to achieve the target inflation rate of 2%, although the Bank has already virtually finished deflation.
The weak increase in labor productivity, according to Yuki Masujima - economist Bloomberg - is the main failure of Abenomiki. The expert notes that productivity is growing in the manufacturing industry. However, in the service sector in which 70% of the workforce is employed, it fell by more than 10% from 2003 to 2016 years. The decline in labor productivity is a global trend and the “third arrow” of Abenomiki, consisting in structural reforms, was aimed at solving this problem in Japan. In his calculations, Masujima, on the one hand, highlights some of the achievements of the Japanese economy, such as corporate governance and the upsurge of inbound tourism, and on the other, points out its weaknesses, such as agriculture and innovation.
The decision by Donald Trump to pull the US out of the Trans-Pacific Partnership - a regional trading bloc of 12 states - was a blow to Japan, but Abe showed perseverance in maintaining talks on concluding this agreement without US participation. He also concluded a trade agreement with Australia and in December 2017 completed negotiations with the European Union on an agreement on economic partnership.
In his second coming into power, Shinzo Abe, to stop the economic downturn in Japan, closed the door for mass immigration, but at the same time allowed a large number of foreign workers to the country, which now number more than a million people.
Abe has a good chance for the third time to re-elect the chairman of the ruling Liberal Democratic Party in September this year and, accordingly, remain in the prime minister's chair until 2021, which will make him the longest-serving prime minister in the history of Japan. However, he will have to work hard to realize his economic program. In this regard, the aforementioned Yuki Masudzima put it this way: "This is a rare chance for the Japanese leader to really do something - to put the economy back on its feet." And he added: "Unequivocally, Abe will be judged by whether he will increase Japan's opportunities for growth, which still has a long way to go in order to cope with its debt and the aging population."
In the meantime, as the newspaper "Mainiti Shimbun" writes in the issue of 12 January, the fruits of Abenomica are not yet felt by ordinary Japanese. Only 6,5% of Japanese, recently interviewed by the Bank of Japan, said that they are starting to feel comfortable financially. This is 0,8% less than it turned out such Japanese according to the results of the previous poll in September 2017.
The results of a December 2017 survey of Japanese residents about their daily life experiences were published on 11 January. They show that notable improvements in corporate earnings in the context of economic recovery do not affect ordinary households. Only 12,9% of respondents said that their incomes increased compared to the previous year. This is 0,9% less than the results of the previous poll. At the same time 41,5% responded that their expenses increased by 3% compared to September of 2017. According to experts of the Bank of Japan, the worsening of respondents' feelings is caused by growing costs due to the increase in prices and the need to replace durable goods, while their incomes remain unchanged.
The big business is quite different in assessing the economic situation in Japan. Three-quarters of 121, a large Japanese company polled by the Mainichi Shimbun itself, said that the current recovery in the economy will continue, at least until October of the year 2019, when the next increase in the consumer tax is expected from the current 8% to 10%.
If this happens, then the period of economic growth, which began in September of 2012, may exceed the record period of economic growth in Japan for the entire time since the end of the Second World War. This period is 73 months, starting from February 2002 year. At the same time, many companies believe that the recovery will last even longer. So 23% of the companies surveyed believe that economic growth will continue until the summer of 2020, when the Olympic and Paralympic Games will be held in Tokyo.
At the same time, there is a strong fear that the increase of this tax in October 2019 will slow the development of the Japanese economy. However, many companies are also confident that investment in infrastructure for the Olympic Games in Tokyo in 2020 and the massive consumption of foreign game visitors will strengthen the Japanese economy.
In September last year, the government stated that the duration of the current economic growth has already surpassed Idzanagi Keiki, a period of particularly high economic development in Japan, which began in November 1965 and lasted 57 months. Those were the years of accelerated economic development of Japan in the post-war period, which was called the Japanese "economic miracle."
Many companies noted that the growth of exports due to the expansion of the global economy and the weakening of the yen, as well as the improvement of the situation in the sphere of employment and income, have become the factors of the economic recovery observed in Japan. In addition, some companies pointed to the already increased demand in connection with the Olympic construction projects as a reason for the upward trend in the economy.
The main worries, called 121 company, were the upcoming increase in consumer taxes, labor shortages and weak consumer demand. Some large corporations have said that they are also concerned about the impact on the world financial markets of US fiscal policy and geopolitical risks, for example, related to the situation around North Korea. Others highlighted the risks caused by the downward movement of the world economy due to the growing uncertainty in the policies of the countries located in Europe and North America and the slowdown in the growth of emerging economies.
According to the author of these lines, a certain achievement of economic, however, as well as political, Five-Year Plan of Abe can be considered activation of economic and other ties of Japan with Russia. It began in May 2016, when the Japanese Prime Minister invited Russian President Vladimir Putin a well-known plan for economic cooperation, consisting of eight items. And in December of the same year in Tokyo, the two leaders agreed on joint economic activities in the southern Kuriles, which Tokyo claims to be their "northern territories". Last year, active contacts were made between the two countries with a view to the practical implementation of the agreement of their leaders. They also once again turned to this topic, meeting on the margins of the APEC summit in Vietnam in November 2017.
At the same time, the largest Japanese newspaper, Yomiuri Shimbun, published on the last day of 2017, drew attention to the fact that in his New Year's congratulation to the Japanese Prime Minister, the Russian president did not say a word about the planned joint economic activity in the South Kuril Islands.
We will add that the word "economic" in the text of the greeting, stated on the website kremlin.ru, is not available at all, except for mentioning the St. Petersburg International Economic Forum where Vladimir Putin expects Shinzo Abe in May of this year. Perhaps, then, the situation with the implementation of the economic agreements reached by them will become clearer.