Japan

Despite a rapidly aging population and alarmingly high levels of public debt, Japan remains one the three largest economies in the world. Its per capita economic growth rate is roughly in line with that of the United States and the EU. However, disposable incomes have risen little since the early 2010s, and real per capita consumption has been flat. In a country once hailed as the epitome of equitable growth, income inequality has grown and a new precariat has emerged, with some 40% of the labor force in non-regular employment. The situation was further aggravated by the COVID-19 pandemic as Japan saw significant economic contraction and, along with it, a continuous decline in real wages.

The – for Japanese standards – long-lived government led by Prime Minister Shinzo Abe (2012-2020) pursued two major policy goals: a robust economic upturn and introducing changes to Japan’s postwar constitution. Neither of these aims were achieved. The initial economic-stimulus program of 2013 (“Abenomics”) included an aggressive course of monetary easing and additional deficit spending. The short-term effects of this policy gamble were positive, but consumption and investment levels remained anemic, leading to a weak but prolonged recovery. Deflation gave way to mild inflation without producing a definitive upswing. Monetary easing reached its limits after a few years. A lack of serious structural reforms and the population’s limited purchasing power help to explain the stimulus measures’ poor outcome.

Since 2015, the policy focus on boosting the economy, expanding childcare and improving social security programs has further deflected attention from structural reforms. Meanwhile, old-age poverty and the instability of jobs, especially among young people, remain pressing issues. Prime Minister Fumio Kishida, in office since October 2021, appears to be steering away from Abenomics, seeking to raise wages, foster startups, revitalize rural regions and reduce carbon emissions. The new government’s initial stimulus package included more funding for universities and digitalization, and incentives for employers to raise wages. Endowed with solid majorities in both houses of parliament, the government will not be able to blame political gridlock if it does not manage to achieve its aims.

Since the early 2000s, LDP-led governments have increasingly steered away from the center. However, some observers have expressed concern that tightening the political reins has negatively affected the neutrality and professionalism of the state bureaucracy. The courts and the media remain unable to provide effective checks on the government. While high-level courts have become somewhat more restless, social media criticism of the government has grown in intensity. Civil society organizations have also become somewhat more active. However, these developments have so far had a limited impact on public policy. Concerns about press freedom and civil liberties have been mounting. The governing coalition’s parliamentary strength severely impedes the opposition’s capacity to exercise effective oversight. Decreasing voter turnout rates signal indicate that alternative party options lack appeal. A traditional bulwark of liberal democracy in East Asia, Japan has become overshadowed in this regard by Taiwan and perhaps even South Korea.

Faced with an assertive China and a more inward-looking United States (especially under the Trump administration), Japan has again become more active internationally. For instance, Japan was instrumental to obtaining a trans-Pacific free-trade agreement after the United States’ withdrawal. If only on the surface, relations with China have become somewhat less strained, while Japan has also signed a free-trade agreement with the European Union, paving the way for closer strategic relations. Moreover, under the banner of the “Free and Open Indo-Pacific,” Japan has strengthened strategic links to other “like-minded” countries such as Australia and India. Seeing itself as a defender of a free and rules-based multilateral order, Japan has in recent years also actively supported multilateral mechanisms and initiatives at the global and regional levels.

Purnendra Jain, Abe and the LDP remain dominant after Japan’s Upper House elections, East Asia Forum, 25 July 2019, https://www.eastasiaforum.org/2019/07/25/abe-and-the-ldp-remain-dominant-after-japans-upper-house-elections/

77% of general election winners in favor of amending Japan’s Constitution: survey, Mainichi Shimbun, 2 November 2021, https://mainichi.jp/english/articles/20211102/p2a/00m/0na/006000c

Sakura Murakami, Abe becomes Japan’s longest-serving prime minister, The Japan Times, 20 November 2019, https://www.japantimes.co.jp/news/2019/11/20/national/politics-diplomacy/shinzo-abe-japan-longest-serving-prime-minister/

Kishida Fumio’s “new capitalism” is many things, but it is not new, The Economist, 12 February 2022, https://www.economist.com/asia/2022/02/12/kishida-fumios-new-capitalism-is-many-things-but-it-is-not-new