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Komaki Fujii opened his vegetarian restaurant in central Tokyo in 2013, when the future looked bright. Shinzo Abe, Japan’s prime minister, had just taken office and promised a bold package of reforms that would boost the country’s stagnant economy and transform the way it operated.
Now Abe is preparing to resign with many of those broken promises. That will make it even harder for Japan to recover from the impact of the coronavirus, which has seen the world’s third-largest economy after the United States and China contract at its fastest pace since World War II.
Abe’s successor will face off against Japanese voters and businessmen who have seen their hard-earned financial gains over the past eight years disappear in the face of the pandemic. Many will wonder if Abe’s promises, so closely identified with him that they came to be known as Abenomics, ever changed much.
While Fujii doesn’t blame Abe for his current difficulties (the entire world is facing a devastating economic crisis), she isn’t sure if he deserves much credit for his past success.
“I don’t know if Abenomics was the right answer,” she said by phone from her store in the Akihabara district, which until the coronavirus hit in February was packed with tourists and businessmen hungry for dishes like fried noodles.
Abenomics fails to comply as Japan prepares for Prime Minister Shizo Abe’s resignation
But when it comes to his own business, he said, “there’s nothing you can really point to and say, ‘That was great.’
The conservative Liberal Democratic Party is expected to choose a replacement for Abe in September. He likely stuck to some version of the economic policies of the same name, which called for making money cheap and readily available, increasing public spending, and transforming the way the country’s bureaucracy and corporations did business.
“Sir. Abe’s resignation happened so suddenly that nobody has an agenda, they have a strategy, they have thought about how they are going to run this government,” said Gerald L Curtis, emeritus professor of political science at Columbia University.
“They will try to do things to make the economy recover after it has been so hit,” he said. But new ideas? New policies? I do not think so. It will be a continuation of Abe’s policies, no matter who he is. “
Those policies have had a mixed record.
Shinzo Abe sought to reactivate the economy, fulfill the conservative agenda
“The market is on the rise, the unemployment rate is low, so that’s a good thing for the economy,” said Nobuko Kobayashi, a partner in Tokyo for the Japanese arm of consultancy Ernst & Young. “That said, it is very difficult to single out Mr. Abe’s contribution.”
On the positive side, Abe’s appointments to the country’s central bank kept borrowing costs low and flooded the economy with the yen, Japan’s currency. That helped the country overcome decades of economic stagnation and prop up its stock market.
Other efforts were less successful.
Japan remains a rich country and an export powerhouse, but it faces long-term challenges. It has the highest public debt in the developed world compared to its economic output. It has a shrinking and aging population that will increasingly put the country’s social safety net to the test.
Those concerns clouded Abe’s promise to stimulate growth through public spending. While he injected money into the economy, he also sought to keep the country’s debt burden under control with two increases in the consumption tax. Both times, the move triggered a recession.
His promise to introduce much-needed structural reforms also failed to meet expectations. It expanded the participation of women in the workforce, but did little to improve their situation there. And her efforts to relax a rigid labor market and shake up Japan’s comfortable corporate boardroom culture, which has kept Japanese companies and industries less profitable and efficient, made limited progress.
“When it comes to a work style change and a faster introduction of digitization, the shock that came from the crown probably had a bigger impact” than Abe’s policies, said Takuji Okubo, director of The Economist Corporate Network in Asia. from North.
With the economy in crisis, Japan’s next leader “needs to move in a different direction,” he said. “The next prime minister will not be able to use monetary policy as much. The scope for further expansion, for further relaxation, is very limited. “
When Abe began his tenure, Japan’s economy was stagnant after decades of economic stagnation and the double crisis of the 2011 earthquake and the nuclear collapse in Fukushima.
Shortly after taking office, he advocated aggressive monetary policy that kept interest rates low, injected huge amounts of cash into the country’s markets, and kept the yen at a level that made Japanese products affordable for foreign buyers.
He combined that with large government spending focused on preparations for the Tokyo 2020 Olympics. As money flowed into the economy, unemployment fell and tourism, investment, property prices and financial markets rose.
Beyond Japan’s borders, Abe worked to increase market access and lower tariffs. When the Trans-Pacific Partnership, the largest trade deal in history, collapsed following the Trump administration’s withdrawal, Abe helped mobilize the remaining members to reach their own deal.
Their efforts benefited from the timing. China’s economy soared during his tenure, increasing its appetite for Japanese machine tools and the specialized components needed to make things like high-end cars and electronics. Chinese tourists, eager to spend their rising wages, flooded Japan’s cities and tourist sites, splurging on luxury goods.
But late last year, Japan’s economy began to contract as slowing global demand and trade tensions between the United States and China reduced Japanese exports.
Japan’s national debt stood at one and a half times its annual economic output, and in an attempt to write it off and shore up funds for social programs, Abe pushed for a 2 percentage point increase in the excise tax. As prices rose, consumers began to buy less. Then a fierce typhoon devastated the center of the country, accumulating damage.
When the pandemic began, the economy had already plunged into recession, defined as two consecutive quarters of negative growth.
The coronavirus brought it down, forcing Abe to postpone the 2020 Summer Olympics, cutting tourism to zero and taking an even bigger spoonful from domestic consumption while people, wary of the virus, stayed home.
Growth slumped to an annualized 27.8% during the second quarter after a national emergency that lasted through most of April and May.
Possible Successors of Japanese Prime Minister Shinzo Abe
The Japanese government faced the crisis with a stimulus package valued at around 40% of the country’s GDP, including low-interest loans and cash grants.
Economic indicators showed modest improvement in June, but consumption has receded again after a second wave of the virus hit the country, forcing some local governors to declare a state of emergency and pressuring Tokyo to petition the bars and restaurants that reduce their hours.
Analysts have little hope that the new government will take bold steps to meet the challenge of the pandemic. Abe does not have a clear successor. And while his policies have failed to deliver on their promise, none of his potential replacements have offered an alternative.
Here’s how Japan could choose its new leader after Shinzo Abe’s departure
“In the short term, the new prime minister’s number one priority will be to consolidate power and ensure that markets and the economy remain well supported,” said Izumi Devalier, chief economist for Japan at Bank of America Merrill Lynch. That, he said, “means the continuation of the status quo.”
The status quo is something Fujii cannot afford. The pandemic has pushed his business to the limit. It closed its doors for two months and has seen an 80% drop in business as the office workers and tourists that made up its customer base have mostly disappeared.
“I realize, now that we are in this situation, that I felt like this administration was always leaving its citizens behind,” he said.
“Even when Mr. Abe leaves,” he said, “the problems he created will remain.”
