If Shinzo Abe wins the snap election he’s just called for next month, he could become Japan’s longest-serving postwar prime minister. A better legacy would be as the man who reshaped the world’s third-biggest economy.
Abe came into office pledging first and foremost to transform the economy. He’s made some progress -- bringing more women into the Japanese workforce, improving corporate governance, negotiating (and now, keeping alive) the Trans-Pacific Partnership trade agreement and welcoming more migrant workers into Japan’s famously closed society. The economy has expanded for six quarters; at 2.8 percent, unemployment is the lowest among G-7 nations.
Yet the task is unfinished: Wages and consumption remain stagnant, and most new jobs are part-time positions. Growth is expected to slow in 2019 as the infrastructure boost for the 2020 Olympics wanes, while the Bank of Japan will soon face pressure to wind down its massive quantitative easing program.
Expectations that Abe might push through more dramatic structural reforms have waned. His main focus now seems to be restoring Japan’s status as a “normal” country, in part by strengthening the military and revising the country’s pacifist constitution. Certainly, that’s an appropriate -- and, given North Korea’s provocations, necessary -- debate for Japan to have. Abe is justified in seeking to bolster the country’s missile defenses.
Nevertheless, Abe would do well to remember that nations are only as strong as their economic foundations. His pledge to spend new tax revenues on social programs, including education and child and elderly care, may win him votes at the expense of shoring up the country’s fiscal position.
If Abe wins next month’s election, he needs to use it as a mandate to strengthen and accelerate his program for making Japan’s economy more open, innovative and nimble. Japan’s future -- and his legacy -- may well depend on it.
Editorial by Bloomberg