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A lesson in Abenomics

If Moon learns from the best of Japan’s turnaround, he will be able to successfully steer the Korean economy.
June 13,2017
As a leader, Japanese Prime Minister Shinzo Abe today is unrecognizable from the person he was 10 years ago. Addressing an international forum at a hotel in Tokyo last week, he was full of confidence and conviction. He spoke eloquently and resolutely with little help from the teleprompter. He mesmerized the audience and casually enjoyed his meal among businessmen.

On Sept. 12, 2007, he suddenly announced he was resigning from the prime minister post before finishing his first year, citing unclear reasons. In July that year, his Liberal Democratic Party was dealt a heavy blow, losing the majority in the upper house election for the first time in 52 years. He chose to step down after suffering one setback after another.

There had been high expectations for the youngest postwar prime minister coming from a politically prominent family that produced two prime ministers and whose father had been a foreign minister. But Abe did not prove to be that skillful. His administration was sneered as a “tomodachi cabinet” (tomodachi meaning “friend in Japanese) because he formed it entirely with faces he knew. His agenda was decisively right and did not sit well with the public or the opposition at the time. Yasuo Fukuda and Taro Aso followed with short-lived leadership of the conservative party as its popularity was waning.

In the 2009 general election, the Liberal Democratic Party lost power to the Democratic Party of Japan for the first time since the war, but the liberal government, too, did not last long. It was shunned by the people frustrated with administrative stumbling on idealistic and questionable policies that added more uncertainty to an already stagnant economy. Abe returned to the Liberal Democratic leadership with a strong and simple agenda amid the political turmoil.

Abe has enjoyed unrivaled popularity. His three-pronged “Abenomics” policy mix of loose fiscal and monetary spending and structural reforms have helped kick-start a lethargic economy. Although still moving at a snail’s pace of under 1 percent and overly dependent on fiscal and financial stimuli, the economy is brimming with life. The head of a construction company in Japan said the biggest worry for the country is hiring. The job-to-applicant ratio is 1.48, meaning there are more employers looking for workers than people applying for jobs. Some companies have to invite retirees back.

Listening to Abe’s lengthy speech, one can find a good reason for why the economy has become so robust. He is no longer the weak leader he was a decade ago. He did not boast about the Nikkei stock index climbing above 20,000 or about a job surfeit. Rather, he emphasized the need for growth led by income improvement. “Whenever I meet businessmen, I urge them to increase wages,” he said.

Abe knows the economy will fundamentally pick up when people start spending. He has been promoting pragmatic policies to stimulate corporate investment. He pushed ahead with a highly unpopular sales tax increase to 8 percent to shore up public finances. He spent heavily to keep the currency cheap in order to strengthen the price competitiveness of Japanese products. To stimulate consumer spending, he lowered tax exemptions for inheritances even when it was criticized as a policy benefiting the rich.

Korean people have high expectations for the new president, Moon Jae-in, and his economic agenda. Moon should closely study the achievements of Abenomics. He must strengthen foreign and security fronts to ensure stability in the economy. Abe carried out a policy of engagement with Russia and India and endeavored to lift Japanese influence on the global stage. He was first world leader to meet with U.S. President Donald Trump, and he supported Beijing’s Belt and Road Initiative, believing it would help the Japanese economy.

Abe initiated sweeping structural reforms. He made sure the environment was friendly for companies to increase hiring and investment. He did not dare to pursue policies like shifting temporary jobs to permanent ones or boosting the minimum wage, which would hurt small employers. He made frequent trips to parliament to persuade opposition party members on key policies. If Moon learns from the best of Japan’s turnaround, he will be able to successfully steer the Korean economy.

JoongAng Ilbo, June 12, Page 28

*The author is an editorial writer for the JoongAng Ilbo.

Kim Dong-ho