No Alternative to Abe Seen in Japan’s Industrial Heartland

(Bloomberg) -- Shuttered factories dot the streets of Osaka, a city that once reverberated with the sound of trucks delivering all manner of parts to Japan’s industrial giants.

Signs advertising available space underscore how competition from places like China and South Korea has eaten away at the fortunes of small companies in what was once a thriving manufacturing heartland. Prime Minister Shinzo Abe has done little to turn this situation around, laments Koichi Kawakami, who owns small machinery parts company.

Even so, Kawakami, the 53-year-old president of Shinsei Co., says he’ll probably vote for Abe’s ruling Liberal Democratic Party in Sunday’s election for the upper house of parliament.

“I really don’t have anybody I want to vote for,” Kawakami said. “The opposition parties can’t seem to pull themselves together, so I’m guessing Abe might be the best option in terms of stability.”

Kawakami’s view is reflected in the polls. Fifty-five percent of respondents to an Asahi survey published Monday said Abe should rethink his economic policies. Even so, his LDP party is set to maintain its majority in the upper chamber, receiving support from 31 percent of voters, far outpacing the 9 percent support for the main opposition Democrats.

Growing apathy is also clear, with 23 percent of respondents saying they support no party and 26 percent not knowing who to vote for with the election nearing.

Touting Stability

More than three years into his second term as prime minister, Abe has stressed the need for political stability at a time of global uncertainty following the U.K.’s decision to leave the European Union and ahead of the U.S. presidential election. His ruling coalition is seeking a two-thirds majority that would let him start a process to revise the U.S.-imposed pacifist constitution.

Abe came into office in December 2012, vowing to revive the economy with a three-pronged strategy of “bold” monetary easing, fiscal spending and structural reforms. Early optimism led to a doubling of the benchmark stock index as a weaker yen boosted exporters and tourism. Corporate profits soared to record highs, though jitters about the economic outlook made companies reluctant to boost wages and investment at home.

The yen since the start of 2016 has reversed course. It hit the strongest level against the dollar since 2013 after the June 23 Brexit vote.

Abe last month decided to postpone a consumption tax increase, citing worries it could further erode consumer spending and dent the nation’s economy. Opposition parties say this shows that Abe’s policies have flopped.

Democratic Party chief Katsuya Okada on Friday called Abenomics a “failure,” saying the prime minister had wasted “3 1/2 years of precious time” in power by failing to implement much-needed structural reforms while the yen was weak.

55% of Economy

Small- and mid-sized companies, or SMEs, generate about 55 percent of Japan’s economic activity, according to government data. A survey released by the Bank of Japan on Friday showed sentiment among such firms worsened in the second quarter while that for large manufacturers showed a surprise improvement.

Kawakami, who employs four full-time and about 50 part-time workers, said that last year’s increase in the minimum wage led to higher costs. Sales, he said, were down 20 percent in May from a year earlier.

“There’s nothing wrong with pursuing external policies such as foreign exchange, but he should leave wages and other domestic issues to us to deal with,” Kawakami said.

Yen Dynamics

Fellow Osaka business owner Mamoru Shimada, whose company supplies auto parts for Toyota Motor Corp., says he supports the LDP for having helped boost corporate profits. But he added that owners of smaller firms shouldn’t tie their business strategies to the weaker yen as market moves are beyond their control.

“It’s too simplistic to think that production will be moved back to Japan just because of the yen’s weakness,” Shimada said. “Japan has to make unique high-tech products. Currency rates won’t be an issue if that’s the case.”

Takashi Noumi, who runs a processing plant for parts used in ships and large construction vehicles, says Abe has not done enough to cultivate the manufacturing sector.

“Abenomics has helped bring in foreign tourists but has shown little interest in supporting the manufacturing sector,” he said, citing the takeover of Sharp Corp. earlier this year by Taiwan’s Foxconn Technology Group.

Still, in a country that has been led by seven prime ministers over the past decade, Noumi said political stability is important.

”It’s not good for the ruling coalition to maintain their current strength, but I also don’t want the government to be overturned,” he said.

--With assistance from James Mayger and Takashi Hirokawa To contact the reporters on this story: Masatsugu Horie in Osaka at mhorie3@bloomberg.net, Kazunori Takada in Tokyo at ktakada17@bloomberg.net. To contact the editors responsible for this story: Brian Fowler at bfowler4@bloomberg.net, Andy Sharp, Jodi Schneider