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Will Suganomics Usher in Japan’s New Dawn?
Amid a year peppered with trade disputes, Brexit talks and the pandemic’s all-encompassing impacts, long-time Japanese prime minister Shinzo Abe’s decision to step down may have gotten short shrift—a bit surprising, given Japan is the world’s third-largest economy. As Japan also looks to recover from the COVID’s economic disruption (destruction?), the question becomes whether new prime minister Yoshihide Suga and his already eponymously nicknamed economic plan, Suganomics, can finally usher in for Japan a new dawn of economic relevance. Perhaps not surprisingly, there are reasons for hope as well as for concern.
All told, there probably won’t be much visible strategy shift from Abe to Suga. Suga worked closely with Abe and former prime minister, Junichiro Koizumi. He helped develop Abenomics, kept many of the same people from Abe’s cabinet and has already indicated the three main drivers—monetary easing, fiscal spending and regulatory reform—would stay. The issue for Suga is many of the monetary and fiscal levers have been pulled, leaving regulatory reform likely the most fruitful ground for change.
Suga has indicated an interest in modernizing Japan’s private sector—i.e., moving more companies toward green investments and digitization. Across the OECD, an average of 43% of large firms engage in sales via e-commerce, versus only 32% in Japan. Meanwhile, a separate survey showed some 60% of survey respondents have to go to their offices to check documents—a rather shocking (and apparently, to date unavoidable) inefficiency amid a pandemic. This state of affairs opens up possibilities, not just for companies installing such infrastructure, but also for the Japanese government, whose bureaucracy is notorious for its literal paperwork. The daily COVID tallies, for instance, were marked by hand before faxing the figures, which led to many instances of overlapping or missing data, while daily figures in Tokyo had a three-day delay. Not hard to imagine how such a system can hamper efficiency.
Whether Suga will be successful is an open question. He’s not the first to try. And while he’s held various leadership positions over the years, he’s not especially known for his charisma or popularity. In fact, the ruling Liberal Democratic Party’s agreement to his ascension can be at least partly ascribed to his rather vanilla approach—as illustrated by his lack of affiliation with any one of the main party factions. The flipside, though, is without strong support, his hold on the PM seat is likely tenuous—an interesting variable ahead of an election he must call by October 2021. If his efforts don’t bear fruit quickly, he may find himself rather quickly out of a job given a more appealing party alternative (if one surfaces—arguably a relatively big if). Such a turn of events wouldn’t be unprecedented, though, as Japan’s prime minister office has been something of a revolving door before: From 2002 to 2006, six different prime ministers ruled.
It would seem an auspicious time for an economic turnaround in Japan—where GDP has grown more than 3% once in the past 20 years—amid China’s stated intention to turn inward and myriad geopolitical considerations, including an increasingly active and vocal China across the region. If Suganomics catches on, perhaps 2021 will bring more Japan-related headlines than 2020.
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