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The First Two Arrows of Abenomics: Monetary and Fiscal Politics in the 2017 Snap Election

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Japan Decides 2017

Abstract

This chapter addresses the puzzle of why opposition parties uniformly attacked Abenomics and the proposed consumption tax hike in the 2017 snap election, despite the seeming success of Prime Minister Abe’s signature reflationary policy. We demonstrate that the opposition was emboldened by two interconnected phenomena: first, the “social turn” of Abenomics toward prioritizing welfare outcomes, which signaled the LDP’s implicit understanding that its economic policy had not necessarily benefited the more vulnerable strata of society; and second, growing public anxiety toward the longer-term consequences of Abenomics. We examine the LDP’s dilemmas in maintaining a reflationary economy with the first two arrows of Abenomics, and discuss the key challenges facing the Abe administration as it navigates its renewed term in office.

The authors would like to thank Gene Park for his comments on an earlier version of this chapter.

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Notes

  1. 1.

    Between 2012 and 2017, government revenues increased from ¥43.9 trillion to a projected ¥57.7 trillion, thus exceeding the 1992 high. Between December 2012 and October 2017, the unemployment rate declined from 4.3% to 2.8%. See Ministry of Finance, “Ippan kaikei zeishū no suii,” available at: <http://www.mof.go.jp/tax_policy/summary/condition/010.htm>; and Ministry of Internal Affairs and Communications Statistics Bureau, “Rōdōryoku chōsa (kihon shūkei),” available at: <http://www.stat.go.jp/data/roudou/sokuhou/tsuki/index.htm>.

  2. 2.

    This unified front is even more curious given the “everlasting opposition fragmentation” discussed by Nemoto (this volume, p. 165).

  3. 3.

    Results from a poll conducted by Yomiuri in September 2017 (Yomiuri Shinbun 2017) and a web survey fielded by Endo and Pekkanen (2016: 49) in December 2014 provide evidence to support this statement. The poll and survey asked respondents to indicate how important various electoral issues were to them; results showed that economic matters were consistently rated to be among the most important. From a broader historical perspective, however, Anderson and Ishii (1997: 620) observe that the state of the economy was a less salient consideration among Japanese voters, relative to voters in other democracies, owing to the economy’s largely robust performance during the postwar era.

  4. 4.

    See, for example, Asahi, “‘Abenomikusu, ōki na kao o suru na’ Koike kibō daihyō,” October 10, 2017, available at: <https://www.asahi.com/articles/ASKBB34NJKBBUTFK003.html>.

  5. 5.

    In terms of labor productivity, Japan was recently ranked 20th among 35 Organisation for Economic Co-operation and Development (OECD) countries and the lowest among G7 countries. See Japan Productivity Center, “Rōdōseisansei no kokusai hikaku 2017-nen ban,” December 20, 2017, available at: <http://activity.jpc-net.jp/detail/01.data/activity001524/attached.pdf>.

  6. 6.

    See, for example, Cabinet Office, “Abe naikaku no keizai zaisei seisaku,” n.d., available at: <http://www5.cao.go.jp/keizai1/abenomics/abenomics.html>; and Nikkei, “Abenomikusu ‘shin sanbon no ya’ o yomitoku,” September 25, 2015, available at: <https://www.nikkei.com/article/DGXZZO92034300U5A920C1000000/>.

  7. 7.

    See, for example, Nikkei, “Shin seichō senryaku ni ‘rōkaru Abenomikusu’,” June 30, 2014, available at: <https://www.nikkei.com/article/DGXNZO73455890X20C14A6ML0000/>.

  8. 8.

    See NHK, “Nichiyō tōron,” October 8, 2017, available at: <http://www4.nhk.or.jp/touron/x/2017-10-08/21/11764/1543395/>.

  9. 9.

    See Business Journal, “Rikken Minshutō—Edano Yukio ‘senpū’,” October 20, 2017, available at: <http://biz-journal.jp/2017/10/post_21045.html>.

  10. 10.

    Koike used the expression of “ōki na kao o suru na!” (which figuratively means “don’t get ahead of yourself!”) to attack Abenomics. This particular speech was made when she campaigned in Toshima-ku, Tokyo, on October 10, 2017. See Asahi, “‘Abenomikusu, ōki na kao o suru na’ Koike Kibō daihyō,” October 10, 2017, available at: <https://www.asahi.com/articles/ASKBB34NJKBBUTFK003.html>.

  11. 11.

    Some called this BOJ move from quantity of monetary base expansion to interest rate “stealth tapering.” In fact, the BOJ has reduced its annual JGB purchase from ¥80 trillion to ¥60 trillion since September 2016.

  12. 12.

    The BOJ’s report published then ascribed the failure to achieve its inflation target in the last three years mostly to external factors including declining oil prices, the impact of the tax increase on domestic consumption, and the slowdown of emerging market economies. See BOJ, “Comprehensive Assessment: Developments in Economic Activity and Prices as well as Policy Effects since the Introduction of Quantitative and Qualitative Monetary Easing (QQE).” Available at: <http://www.boj.or.jp/en/mopo/mpmdeci/state_2016/index.htm/>.

  13. 13.

    Data available from the Ministry of Finance: <http://www.zaisei.mof.go.jp/data/>.

  14. 14.

    At the time of writing, the consumption tax increase to 10% is to come into effect in October 2019.

  15. 15.

    Economists have already raised exit concerns ranging from the accumulated JGBs, possible future balance sheet losses for the BOJ, and impact on the exchange rate, as well as overall legitimacy of the country’s currency (e.g., Fueda-Samikawa and Takano 2017; Sumitomo Mitsui Trust Bank 2017).

  16. 16.

    For the full report, see Tokyo Shinbun, “Abenomikusu ‘kitai sezu’ 56% zenkoku yoron chōsa,” October 1, 2017, available at: <http://www.tokyo-np.co.jp/article/politics/list/201710/CK2017100102000127.html>.

  17. 17.

    Asahi Shinbun, “Keiki kaifuku ‘jikkan shiteinai’ 82% Asahi Shinbun yoron chōsa,” November 14, 2017, available at: <http://www.asahi.com/articles/ASKCF5Q76KCFUZPS008.html>.

  18. 18.

    Data available from the Ministry of Health, Labor and Welfare: <http://www.mhlw.go.jp/toukei/list/30-1a.html>.

  19. 19.

    This was slightly down from July 2016, when 65.7% of respondents expressed the same feeling. See Cabinet Office, “Kokumin seikatsu ni kansuru yoron chōsa,” September 2017, available at: <https://survey.gov-online.go.jp/h29/h29-life/2-1.html>.

  20. 20.

    Discussion derived from an article by Hiroshi Yoshikawa and Hirohide Yamaguchi, “Abenomikusu no go-nen(chū); Shōhi kaifuku e shōrai fuan fushoku o,” Nikkei December 1, 2017, available at: <https://www.nikkei.com/article/DGXKZO24089140Q7A131C1KE8000/>.

  21. 21.

    See Asahi, “Shijō wa Abenomikusu keizoku to omoikiya … Kibō no tō hassoku de ippen,” September 29, 2017, available at: <https://www.asahi.com/articles/ASK9X3JQ8K9XULFA006.html>.

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Authors and Affiliations

  1. School of International Relations, University of Southern California, Los Angeles, CA, USA

    Saori N. Katada

  2. Political Science and International Relations Program, University of Southern California, Los Angeles, CA, USA

    Gabrielle Cheung

Authors
  1. Saori N. Katada
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  2. Gabrielle Cheung
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Correspondence to Saori N. Katada .

Editor information

Editors and Affiliations

  1. University of Washington, Seattle, WA, USA

    Robert J. Pekkanen

  2. Chuo University, Tokyo, Japan

    Steven R. Reed

  3. University of California, Davis, Davis, CA, USA

    Ethan Scheiner

  4. Harvard University, Cambridge, MA, USA

    Daniel M. Smith

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Katada, S.N., Cheung, G. (2018). The First Two Arrows of Abenomics: Monetary and Fiscal Politics in the 2017 Snap Election. In: Pekkanen, R., Reed, S., Scheiner, E., Smith, D. (eds) Japan Decides 2017. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-76475-7_14

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