Japan and internal LDP tensions over Abenomics: A cheap Japan
Kanako Mita and Lee Jay Walker
Modern Tokyo Times
The ruling Liberal Democratic Party (LDP) is witnessing internal tensions over tackling the mountain of debt and the legacy of Abenomics. Factions within the ruling LDP are all part of the course. However, the former leader Shinzo Abe is more outspoken and still a powerful individual within the ruling LDP.
Abe supported audacious monetary easing, flexible fiscal spending, and endless stimulus packages aimed at reinvigorating the private sector – along with other angles to kickstart the moribund economy. The private sector and the stock market got a boost. However, static wages and the mountain of debt faced further stresses – while government capital infusion and the role of the Bank of Japan further entrenched itself in the stock market.
Abe became livid over the term “cheap Japan” concerning LDP individuals who seek fiscal consolidation. Hence, the headquarters for Promoting Fiscal Consolidation within the ruling LDP compiled a draft that rebukes the outcome of Abenomics – to the consternation of the former leader of Japan.
Ironically, Prime Minister Fumio Kishida seeks to double the military budget concerning his endless anti-China and anti-Russia foreign policy objectives. Kishida turned against the Russian Federation and propagated anti-Russia statements in tandem with America to appease President Joe Biden and nationalists within the ruling LDP.
Therefore, the headquarters for Promoting Fiscal Consolidation was faced with the dilemma of condemning the end result of Abe’s economic policies – while supporting Kishida’s objective of increasing military spending dramatically – because this will hinder fiscal consolidation in the draft compiled by lawmakers within the ruling LDP.
The draft by ruling LDP lawmakers was rejected strongly by Abe. He reportedly said, “Who wrote that idiotic proposal?”
Shortly after taking power, Kishida requested a report to tackle the negative fiscal health of Japan. This notably applies to the high level of national public debt compared with the yearly gross domestic product of the nation.
The draft report said, “Although many economic policies have been implemented in recent years, the result is that Japan’s economic growth over the past 30 years is the lowest among the major advanced economies.”
Abe also became angered by the terminology “cheap Japan.”
Yet, as the report clarified – and ordinary people already know – wages have been static for over three decades. Thus this period is deemed “three squandered decades.” Personal expenses – along with other negative angles to the economy in this period – for example, increasing temporary work to the cycle of poverty of the working poor all point in the direction of a nation in crisis. Therefore, endless government stimulus packages have benefitted the share-owning class – but done little for ordinary workers.
Former leaders, including Abe and Taro Aso – and past ministers – won the day. Hence, amendments deleted “cheap Japan” along with statements that alluded to the failure of Abenomics.
Kishida looks weak and ineffectual because the LDP factional string masters won the day. Ironically, the conclusion might also hinder Kishida’s desire to double military spending given the endless mountain of debt.
The final draft specified that the government needs to focus on creating a surplus in the primary balance. This entails that public work projects – and social security – should be covered by taxes and other revenues. Therefore, the curtailment of new government bonds – which further puts pressure on the fiscal health of Japan – will be curtailed.
It will be interesting to see how Kishida seeks to finance the dramatic increase in military spending that he desires.
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