ELEC­TION MAY FIX JA­PAN’S TOY­OTA PROB­LEM

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Cover­ing Ja­panese pol­i­tics ar­guably has long been the most bor­ing, thank­less and ir­rel­e­vant jour­nal­ism job in Asia. That was un­til Yuriko Koike en­tered the fray. 14 months ago, she up­ended the pa­tri­archy by be­com­ing Tokyo’s first fe­male gover­nor—and Ja­pan’s sec­ond most pow­er­ful politi­cian. Koike quickly irked Prime Min­is­ter Shinzo Abe by tak­ing on the pow­er­ful nu­clear and tobacco lob­bies and de­mand­ing a full ac­count­ing of why run­away Tokyo 2020 Olympics costs are al­ready dou­ble ini­tial es­ti­mates.

Now, Abe senses an ex­is­ten­tial threat as Koike’s new Party of Hope chal­lenges him in the 22 Oc­to­ber snap elec­tion. Even if Koike her­self doesn’t lead the charge, the pres­sure on Abe could be Ja­pan’s gain. Win or lose, the chal­lenge from Koike’s party in­creases the odds Tokyo will im­ple­ment vi­tal re­forms much faster and far more force­fully than Abe has since De­cem­ber 2012.

Take Koike’s ideas on Toy­ota Mo­tor Corp. and other Ja­pan Inc. icons hoard­ing cash bet­ter used to fat­ten pay­checks. The big­gest fail­ure of Abe­nomics is that it’s been 90% mone­tary eas­ing and, at best, 10% struc­tural up­grades. Cor­po­rate prof­its surged, but wage gains have been neg­li­gi­ble. That’s de­spite some of the tight­est labour mar­kets any­where. Greed ex­plains partly why ex­ec­u­tives aren’t shar­ing the wealth. The big­ger rea­son: doubts Ja­pan’s re­vival is real.

Whereas Abe tries to spin the me­dia—“ja­pan is back!”—koike wants to tax ir­ra­tionally large cash re­serves at big com­pa­nies that to­tal about $2.7 tril­lion.with nearly $60 bil­lion of idle cash on hand, in­vestors jok­ingly call Ja­pan’s most im­por­tant multi­na­tional “Toy­ota Bank”.

For all his histri­on­ics about mak­ing Ja­pan great again, Abe hasn’t taken on Ja­pan’s most im­por­tant vested in­ter­est—the busi­ness lobby. Koike, for ex­am­ple, wants to give house­holds a tax cut. That’s quite a con­trast to Abe plot­ting to raise sales taxes and cut cor­po­rate levies. By tar­get­ing the 1%, Abe­nomics left Ja­panese house­holds be­hind.

“Yuri­nomics”, by con­trast, aims to treat the causes of Ja­pan’s malaise, not just the symp­toms. De­fla­tion, re­mem­ber, is just a fea­ture of an ag­ing pop­u­la­tion with lit­tle con­fi­dence in fu­ture liv­ing stan­dards. By fo­cus­ing on Bank of Ja­pan eas­ing, a weaker yen and mod­est cor­po­rate gov­er­nance tweaks, Abe­nomics has done lit­tle to pre­pare Asia’s rich­est na­tion for com­pet­i­tive threats from China, In­dia and up­starts around the re­gion.

Throw­ing Tokyo’s lot in with Don­ald Trump is its own his­toric blun­der. What, af­ter all, is Abe get­ting for his fealty to Trump’s chaotic White House and pledges to cre­ate $450 bil­lion of new US mar­kets? His weak ap­proval rat­ings pro­vide one an­swer. So does the fact that Ja­pan Inc. isn’t see­ing re­cip­ro­cal in­vest­ments from Amer­ica. Trump’s am­a­teur­ish trolling of North Korea is an ex­is­ten­tial threat to Ja­pan’s 127 mil­lion peo­ple. The odds of the smart, worldly Koike be­ing rolled by Trump­is­tan are, to me, quite low.

Koike’s party plans to cre­ate mil­lions of good-pay­ing jobs by phas­ing out nu­clear re­ac­tors. In the af­ter­math of the 2011 Fukushima cri­sis, most Ja­panese favour a re­ac­tor-free fu­ture. Abe’s Lib­eral Demo­cratic Party is too be­holden to the nu­clear lobby to re­spond. Koike sees in­vent­ing and sell­ing ways for China, In­dia and the rest of Asia to grow sus­tain­ably as Ja­pan’s ticket to global lead­er­ship. Re­new­ables in­no­va­tion would cre­ate more wealth than cor­po­rate wel­fare to Toy­ota and oth­ers.

Gen­der dis­par­i­ties, mean­while, could use a wo­man’s touch. For all Abe’s talk of “wome­nomics” and mak­ing the other half of the pop­u­la­tion “shine,” Tokyo is still slid­ing in em­pow­er­ment rank­ings. Ja­pan is now in 111th place in the World Eco­nomic Fo­rum’s gen­der-equal­ity in­dex, from 98th be­fore Abe took over. Gen­der isn’t just a talk­ing point for Koike, but an ab­so­lute pri­or­ity. As Gold­man Sachs has es­ti­mated, gross do­mes­tic prod­uct, or GDP, would get a 15% boost if the fe­male labour par­tic­i­pa­tion rate matched that of men (about 80%).

Abe just got a se­ri­ous wake-up call. The mes­sage to the prime min­is­ter: get se­ri­ous about loos­en­ing labour mar­kets, en­cour­ag­ing en­trepreneur­ship, cut­ting red tape, mod­ern­iz­ing the tax sys­tem and cat­alyz­ing new in­dus­tries, or move aside.

When Abe an­nounced this elec­tion on 25 Septem­ber, he thought he’d win in a wink. Just like Bri­tain’s Theresa May, though, Abe mis­read the na­tional mood and the feisti­ness of the op­po­si­tion. Nor did Abe fore­see Koike pulling an Em­manuel Macron. Just like the French Pres­i­dent, Koike sud­denly formed a new party and used her charisma to at­tract key play­ers. In short or­der, her party up­ended the po­lit­i­cal or­der, sent shock waves through board­rooms from Toy­ota to Sony, and of­fered a ray of hope to Asia that Ja­pan might soon be a re­li­able growth engine again.

Even if Abe holds on, the Koike ef­fect will force Tokyo to get se­ri­ous about rais­ing com­pet­i­tive­ness. Last week, Abe told the Yomi­uri news­pa­per that he will ac­cel­er­ate re­form ef­forts. Clearly, he’s feel­ing the heat.

Amid the un­cer­tainty wrought by Yuri­nomics, one thing is for sure: sud­denly, Ja­panese pol­i­tics is any­thing but bor­ing.

Wil­liam Pe­sek, based in Tokyo, is a for­mer columnist for Bar­ron’s and Bloomberg and au­thor of Ja­paniza­tion: What the World Can Learn from Ja­pan’s Lost Decades.

His Twit­ter han­dle is @williampe­sek.

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