Japan’s new prime minister faces two main challenges: reviving the economy while managing the coronavirus pandemic, and dealing with a rapidly aging population. His pledge to build on the legacy of his predecessor, Shinzo Abe, is a step in the right direction – but may not be easy.
In late August, the Shinzo Abe era of Japanese politics came to an abrupt end after eight years, when Japan’s longest-serving prime minister announced his surprise resignation due to health complications. Abe leaves the country at a crucial juncture point, requiring a certain degree of stability and continuity to offset the economic and geopolitical volatility of the post-coronavirus era.
The good news is that Abe’s successor, Yoshihide Suga, provides precisely that: Suga served as Abe’s chief cabinet secretary for the past eight years and has vowed to build on Abe’s legacy. This begs the following question: what was the foreign and domestic legacy that Abe left behind, and how can Suga’s policies build on that progress?
Economically, Abe’s policy platform—dubbed “Abenomics”—sustained growth during his tenure in office, transforming Japanese monetary and fiscal policy in the process. Premised on an ultraloose monetary policy, fiscal spending, and a growth strategy aimed at boosting private-sector investment, Abenomics helped pull the country out of deflationary stagnation. However, this approach only achieved modest growth at best: between 2013 and 2019, annual GDP growth averaged a mere 1 percent, only exceeding 2 percent in two out of Abe’s eight years in office. Moreover, the overwhelming majority of that growth came from increases in capital and labor inputs, as opposed to absolute productivity gains. Although Abe had to grapple with a rigid labor market and unfavorable demographic trends (28 percent of the country is older than 65), employment sustained steady growth during the Abe years in which Japan’s female labor-force participation rate soared, most recently surpassing that of the US.
Looking forward, it is highly unlikely that Abe’s economic trajectory will shift significantly under a Suga administration, but structural reforms are imperative if the new prime minister looks to establish his own leadership style and sustain Japan’s global position.
Suga’s first challenge is to boost economic growth while managing Japan’s public health and debt crisis. The Abe administration’s pandemic-response measures have further increased Japan’s net public debt, which was sitting at a staggering 150 percent of GDP in pre-pandemic measures, the highest among the world’s advanced industrial economies. In response, a policy orientation toward revenue-increasing measures or hasty fiscal tightening will be particularly challenging for Suga, given the need for stability. To revive and sustain economic growth, pursuing and effectively implementing structural reforms should be a top policy priority for the Suga administration. Productivity-enhancing labor-market and regulatory reforms are particularly important—these include accelerating the economy’s shift to more productive sectors, encouraging new market entrants, and institutional support to energize Japan’s bureaucratic policymaking process through digitization. The new administration has a particularly enticing window of opportunity to pursue these reforms given that COVID-19 highlighted the pressing need for bold regulatory and administrative changes
Abenomics isn’t Abe’s hardest act to follow—that honor is given to his diplomatic prowess. The increase in protectionism globally didn’t stop Abe from playing an instrumental role in global politics by promoting multilateralism, free-trade, rule of law and a rules-based international order. Two substantial and praiseworthy achievements stand out: first, Japan’s rescue of the 12-country Trans-Pacific Partnership (TPP) trade pact following the withdrawal of the United States and the recent Japan-EU free trade deal are testaments to Abe’s faith in multilateral cooperation. Second, Abe’s efforts in the realm of personal diplomacy—by building and fostering close relationship with his foreign counterparts — advanced Tokyo’s national security posture at both regional and global levels. Under Abe’s leadership, Japan performed a carefully orchestrated balancing act between the US and China—one in which the former represents a cornerstone of Japanese national security, and the latter represents 20 percent of Tokyo’s total exports. On the flip side, territorial disputes that were present at the start of Abe’s tenure will outlast him, and Japanese-South Korean relations remain strained.
What does this mean for Suga? Japan’s regional role as a stabilizing force will only increase in importance, particularly given rising tensions between the US and China. India and other Southeast Asian countries will look to Tokyo to bolster a robust Indo-Pacific security framework. Suga’s skill and willingness to engage in extensive diplomatic outreach will be crucial to whether Abe’s absence is felt on the global stage. Successfully navigating a tumultuous US-China rivalry while building on Abe’s embrace of multilateralism is no small feat, but if Suga is to build on his predecessor’s legacy, its one that his administration must embrace and proactively address.
While Suga proved his effectiveness as Abe’s cabinet secretary, his new role will push to him not only to administer, but guide, lead, and motivate a nation and new administration. To build a legacy of his own, Suga will need to couple effective policies with a clear vision and message to guide the Japanese public towards a brighter future. Strategically leveraging and building on Abe’s legacy is the first step there.
Sultan Althari is an adviser and recent Masters graduate in Middle Eastern Studies from Harvard University’s Graduate School of Arts and Sciences (GSAS). He tweets @sultanalthari