A ‘Seinfeld election’ Japan can’t afford
Prime Minister Shinzo Abe's re-election as party chief is all about his personal agenda to revise the pacifist Constitution
Political contests about nothing are called “Seinfeld elections,” a reference to the beloved sitcom famed for pointless plotlines.
America has long had them. Australia is having more and more of them. But Shinzo Abe’s Japan is really running away with the theme in ways that augur poorly for the world’s third-biggest economy. His win in today’s ruling-party election is but the latest episode.
Since December 2012, Prime Minister Abe’s government has won countless plebiscites and intraparty contests. It capitalized on an opposition in disarray and voters’ preference for stability. Thursday’s win, though, is about nothing more than Abe’s ambition to become Japan’s longest-serving leader.
While great for Abe’s sense of his place in posterity, it’s doubtful this narrative will prove a winner for Japan’s 127 million people.
What, after all, is Abe’s plan for his third term? To complete his pet project to revise the pacifist Constitution to enable Tokyo to field a conventional military. Never mind that only 8% of voters polled recently by Asahi newspaper saw it as a vital issue. This “legacy project,” as Jeff Kingston of Temple University calls it, will be Abe’s linear focus through 2020 and beyond.
You’d think he would’ve learned that in his first go as leader from 2006 to 2007. Abe took the reins from Junichiro Koizumi, who spent the previous five years putting structural change, privatization and fiscal austerity on Tokyo’s radar screen. Rather than turn the reformist momentum up to 11, Abe pivoted to Constitutional revision. Just as he is now.
This focus is self-defeating. Donald Trump’s trade war is exposing Abenomics for the hollow enterprise it is – all stimulus, sugar highs and spin that now confronts a darkening global scene.
If only Abe harnessed near-80% support rates early on to loosen labor markets, catalyze startups, slash red tape, empower women and attract talent, Japan would be less vulnerable to US President Donald Trump’s blunderbuss. While the Abenomics PR machine claims Abe did, one metric says it all: In 2017, Japan attracted nearly 27 times less investment than the US, roughly five times less than France and 39% less than South Korea.
So, if Abe’s Japan is really going places, the world’s CEOs haven’t noticed. The problem, of course, is Abe’s reliance on failed trickle-down theories of the past. Massive Bank of Japan stimulus, a weaker yen and corporate governance tweaks have been a boon for the wealthy. The strategy has been a dud for average workers who haven’t had a serious raise in 25 years.
That’s mute, anyway, as Trump does his worst to tackle China, Tokyo’s main trading partner, and upend the Asian supply chains on which Japan Inc. relies. Expect Team Abe to ramp up fiscal stimulus and the BOJ to keep its foot firmly on the gas.
Might Abe surprise us with economic upgrades? The odds aren’t great, but let’s get prescriptive. Here are five ways Abe can relocate his reformist mojo.
A startup boom
Abe would be wise to make Japan more about creating new jobs and wealth from the ground up, less about subsidizing Toyota, Sony and Mitsubishi via corporate welfare. That means slashing regulations for twenty-somethings with a laptop and a dream to hang out shingles. He should offer tax holidays to entrepreneurs, or a negligible rate – say, 5% for five years.
He should take some of the billions of dollars Tokyo tosses at public works projects and create a state venture capital fund. He should attract tech disruptors to Tokyo. Abe should lobby SoftBank’s Masayoshi Son to deploy his $100 billion Vision Fund at home. Japan’s richest man, it seems, has little faith in Abenomics, investing in the US, India and Southeast Asia instead.
Strongarm Japan Inc.
There’s nothing particularly “liberal” or “democratic” about Abe’s Liberal Democratic Party. Security and government secrecy laws passed by Japan’s answer to Trump’s Republican Party drove Tokyo’s press-freedom ranking into the dirt. In 2012, Reporters Without Borders ranked Japan 22nd.
Today, it’s 67th, trailing El Salvador and Malawi. That’s hardly consistent internationalizing business practices. Abe should demand more from CEOs. Why not tax the more than $2 trillion sitting on balance sheets? If CEOs don’t use the spoils of Abenomics to fatten paychecks, Tokyo should pounce. Otherwise, the virtuous cycle of wage and inflation gains won’t happen.
Empower the female masses
One of Abe’s greatest tricks has been convincing the world he’s acting to make women “shine.” One reality check: Japan’s gender-empowerment ranking by the World Economic Forum plunged to an all-time worst 114th versus the 98th ranking Abe inherited. True, labor participation rates for women are rising, but the vast majority are getting “non-regular” jobs that pay less, offer fewer benefits and come with negligible security.
At listed companies, women account for just 3.7% of executive roles. Economies that harness female talent are the most vibrant, innovative and productive. That message has yet to resonate in patriarchal Japan. Abe can use diversity to make Japan’s entire economy shine. Will he?
Launch an energy crusade
Abenomics is, at its core, a response to China’s ascendancy. Sadly, he’s taking on a Beijing racing forward by trying to recreate the past. His reflation scene, not unlike Trump’s, is about recreating Japan’s 1980s greatness. As Abe eyes 1985, China’s Xi Jinping is investing trillions of dollars to dominate key tech sectors by 2025. China can’t get there, though, if it chokes on its 6.5% growth.
No industry holds more promise than inventing new energy sources to enable China, India, Indonesia and others to thrive sustainably. Japan Inc. is perfectly situated to be that laboratory. Sadly, Abe’s LDP is too wedding to the nuclear power industry’s cash to grab an opportunity for its taking right in its own backyard.
Get bureaucrats out of the way
Japan, it’s often said, isn’t run by prime ministers but an array of shadowy fiefdoms. Those power structures abound in finance, energy, trade, agriculture, defense, construction, transportation, health and landministries. No move to make Japan more efficient, nimbler or more forward-leaning can work unless bureaucrats two, three and four levels below any name voters have heard of agrees.
It’s no coincidence that the most consequential change agents – Yasuhiro Nakasone (1982-87) and Koizumi (2001-06) – took on a change-averse bureaucracy. Abe must, too. Sure, he’s wrestled greater control away from ministries, but that’s mostly for show. Tokyo should end seniority-based promotions. It should reshuffle all bureaucrats every few years to avoid fiefdom building.
Abe cruised to victory Thursday, winning almost 70% of party votes. That means still has juice within the LDP. To give his third term meaning, Abe must focus on an economy he’s promised to reanimate for nearly six years. Will he? No one knows. Unlike Seinfeld, though, it won’t be a laughing matter if Abe does nothing to give households a raise.