new economy

　　

On October 23, Japanese Prime Minister Shinzo Abe (President of the Liberal Democratic Party), who won a landslide victory in the House of Representatives election, held a press conference at the party headquarters. Abe emphasized measures to deal with the declining birthrate and aging population, and said that the "policy package" for free education and the adjustment of the use of tax increases on financial resources will be finalized within this year. With the goal of getting rid of deflation, "Abenomics" will be restarted. Whether wage increases can expand consumption and production efficiency reforms can increase potential growth rates will become the key.

　　 The 4th Abe Cabinet was officially launched after the prime minister’s election in a special parliament convened on November 1. At the press conference, Abe stated in response to the economic operation policy of the new cabinet, "The key to sustainable growth is to deal with the declining birthrate and aging population. This is the biggest challenge of Abenomics." He also emphasized that “we will further strengthen the momentum of wage increases throughout the country through the production efficiency revolution, and strive to get rid of deflation.”

 　 According to people close to Abe, getting rid of deflation is a policy issue that he hopes to achieve in the second half of his term (the next four years). In order to get rid of deflation, Japan will maintain the monetary easing route launched in 2013.

    In April 2018, the term of office of Bank of Japan President Haruhiko Kuroda will end. Abe plans to speed up the selection of successors, including Kuroda, and propose a personnel plan in the 2018 regular parliament.

 　 Implementing consumption tax increases is another issue for the new cabinet. Abe once stated that "if a Lehman crisis-level problem arises, tax increases will be postponed." The new cabinet must create economic conditions that can withstand the October 2019 tax increase.

 　 The current economic performance is strong, but the price of goods has not reached the 2% target, and the environment in which labor shortages cannot increase incomes has not been improved. Regulatory reform and improvement of production efficiency are indispensable, especially work style reform is a top priority. In addition to wage increases, the passage of important bills such as the "performance pay system" that evaluates on results rather than time has become the key.

 　 In order to promote enterprises to improve production efficiency, Abe will order the formulation of a supplementary budget for 2017 as soon as possible. As an important issue of "Abenomics", the budget related to the "Production Efficiency Revolution" is expected to be added to the supplementary budget to promote related countermeasures.

 　 The change in the use of tax increases that Abe called for in the election is intended to attach importance to support for families with children, support personal consumption, and even delay repayment of national debt. The "Conference on Conception of a Century of Life" will be restarted in the near future, and a specific plan is planned to be finalized within this year. Starting from the 2018 budget, it will be included in the corresponding budget in stages. In the 2020 budget where all 10% of the consumption tax is expected to be accounted for, a 2 trillion yen countermeasures expenditure will be included, and strive to achieve a "policy package." content.

    However, the relaxed side of fiscal discipline is hard to deny. In 2020, the primary balance of fiscal revenue and expenditure (Primary Balance) is difficult to achieve the target due to the adjustment of tax increases. How to set a new target will become a heavy issue. Together with the setting of a new target year, the fiscal consolidation plan is scheduled to be revised in June 2018. How to curb social security expenses and other fiscal soundness goals will be tested.

Abe won the election, but may not win the hearts of the people

The ruling party in Japan, headed by Abe, reaped the benefits of the split of the opposition party, and once again won more than two-thirds of the seats in the House of Representatives. Nevertheless, if you show arrogance or laxity again, it will be difficult to maintain centripetal force. It can also be seen from the problems of Mori Yu and Kake Gakuen that the Japanese people are taking a severe look at the situation of Abe's dominance.

Originally, Abe disbanded the House of Representatives when the opposition parties were not fully prepared to maintain the regime. What is worrying is that the self-protection posture of the Abe regime will be directly reflected in the post-election policy.

For example, the problem of declining birthrates and aging population, which Abe and North Korea have regarded as a "national crisis" together, is to solve the problem of free education. In terms of financial resources, Abe said it will adjust the purpose of the consumption tax increase scheduled to be implemented in October 2019.

However, if taxes used for fiscal reconstruction are used, how to deal with national and local debt exceeding 1,000 trillion yen? Japan must reduce social security expenditures for the elderly in order to realize a whole-generation social security system. However, Abe said in his speech that "care and medical expenditures will be expanded."

Regime vision, especially economic policy, can be said to be a "growth story", but Abe's "growth story" is one-sided and short-sighted. If you only speak nice words, you will soon lose trust. The consumption tax rate will have to be raised to more than 10% in the future, and Abe’s "Story" will end in two years.

The same goes for diplomacy. Abe seems to continue to take the line of pressure on North Korea, but what about afterwards? In addition, there is no mention of close neighbor diplomacy with China and South Korea.

At the 19th National Congress of the Communist Party of China, Chinese President Xi Jinping stated that by the middle of this century, China will be built into a modern socialist country. At that time, what kind of country will Japan become?

It is not the best policy for Abe to step up the constitutional amendment that he regards as his long-cherished wish. *** Although necessary, doing so under the current political situation will only intensify the opposition to the constitutionalists. The top priority is to get rid of deflation. If Abe wants to increase the potential economic growth rate and reform the social guarantee system, it is necessary to work hard to gain the support of the opposition parties.

The term of office of the members of the Japanese House of Representatives election is until October 2021. If he wins for the third time in the Liberal Democratic Party presidential election in September 2018, Abe will take his long-term administration for nearly nine years (from the end of 2012) into his vision.

During this period, the "Heisei" era will come to an end and enter the "Post-Heisei" era. Standing at a turning point in history, Abe has the responsibility to draw a blueprint for Japan's painful future.