Reminder to Shinzo Abe: The Economy Is Your Legacy
(The Bloomberg View) -- After his victory last week in an internal vote to lead Japan’s ruling Liberal Democratic Party, Prime Minister Shinzo Abe looks set to remain in office till 2021 — longer than any Japanese political leader since the days of the samurai. He has a lot still to do in this third and last term, and shouldn’t waste his remaining time in power.
Thanks to a series of scandals, Abe’s popularity isn’t what it was. Nonetheless, he is granted — and deserves — credit for keeping some of his earlier promises on the economy. His three-pronged “Abenomics” program, built around loose monetary policy, fiscal stimulus and structural economic reform, has gotten results. The economy has grown steadily if modestly for nine of the last 10 quarters. Unemployment is near a 25-year low. Wages are creeping up.
He rescued the Trans-Pacific Partnership after the U.S. withdrew, and signed the world’s biggest bilateral free-trade agreement with the European Union. As a result, the outlook for exports — trade wars permitting — is good. Labor-market reforms have drawn women and foreign workers into an otherwise dwindling work force. Corporate-governance reforms have begun to improve Japan Inc.’s returns on equity.
Even so, Abe has often retreated in the face of political opposition, preferring half-measures to the bolder changes that are needed. Efforts to boost wages, and hence consumer spending, have been largely ineffective. Roughly 40 percent of jobs are part-time, offering little in the way of security or benefits. Women especially are being shunted into lower-paying, non-regular work. Nearly three-quarters of Japanese companies still have no female managers. Low-skilled migrants find it easier than before to work in Japan, but they can’t bring their families and can’t immigrate permanently.
Everyone from Bank of Japan Governor Haruhiko Kuroda to the International Monetary Fund recognizes that monetary and fiscal stimulus alone aren’t enough. Far-reaching structural reforms are needed, too. Abe has no more elections to fight, and no longer any excuse for holding back. Rising trade tensions, which threaten Japan’s tentative export-led recovery, make action all the more urgent.
Japan’s seniority-based lifetime employment system chokes off mobility and helps to suppress wages. It needs to be changed. The economy could still use more foreign workers, and in more sectors of the economy: To get them, the government ought to grant permission to settle permanently. Better incentives are required for companies to create more full-time jobs, share more of their profits with workers in the form of higher wages, and hire and promote women and other outsiders to Japan’s boardrooms. There’s much more work to be done on deregulation, promoting entrepreneurship, and reviving regions outside Tokyo.
Abe shouldn’t spend his limited political capital on a quixotic quest to revise Article 9 of Japan’s Constitution — the so-called peace clause. He says change is necessary to legitimize the country’s Self-Defense Forces, but no one seriously questions their role, and most voters oppose tinkering with the Constitution. The real prize would be to complete the economic program that Abe has championed and knows is essential. Japan’s longest-serving prime minister would then have the accomplishments to match that record.
Editorials are written by the Bloomberg View editorial board.
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