Japan: Abe Will Struggle With Major Reforms

Japanese Prime Minister Shinzo Abe in late June re-launched the 'third arrow' of his Abenomics reform programme, but many argue that the reforms do not go far enough, or that there is insufficient detail about the reforms or their implementation. Meanwhile, Abe has continued to push for a reinterpretation of Japan's constitution to enhance the country's military profile – despite widespread public opposition.

Thus far, Abe has been in a tremendously advantageous political position, with robust popularity and his coalition having solid majorities in both houses of the Diet. He does not face a party leadership election until September 2015, an Upper House election until July 2016, and a general election until December 2016. In other words, he has had a rare opportunity to drive forward major economic reforms. Yet even so, he has faced opposition to structural reforms from within his Liberal Democratic Party, other parties, and various interest groups.

Abe's focus on reforms to Japan's military remit is also risky, for it requires considerable political capital to enact a change that is in any case opposed by the public. In other words, pursuing defence reforms could detract from economic restructuring. At the same time, Abe will become more unpopular, and thus have less political capital to force through economic reforms. This could all turn out to be a lose-lose situation.

If Abe cannot enact economic reforms with all the advantages that he has, then it is difficult to see how any successor would fare better. Much is at stake, given Japan's ageing and shrinking population and colossal debt burden.

This blog is tagged to:
Sector: Country Risk, Defence & Security
Geography: Asia, Japan
Tags: Japan, Abenomics, reforms, third arrow

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