the inner workings of abenomics
symposia and conventions are abuzz with discussions of the effects of abenomics on japan's economy. the focus is on whether he will succeed where koizumi failed: to fundamentally reform the japanese model of political economy.
people are discussing whether the current phenomenons appearing on the nikkei225 and in this year's shunto wage negotiations merely amount to a sugar pop or herald the beginning of a new era. few have noticed that some of the most fundamental changes are happening outside the spotlight: slowly and quietly, abe's premiership is restoring bureaucrats to their former glory and power, wrested from them under previous administrations (particularly the dpj).
in a conference organised by the economist in tokyo on april 17, the japan summit 2014, prime minister abe spoke about how he is going to be the drill (he didn't specify the brand) that will bite through all vested interests. in his dynamism, he was backed up by minister inada (in charge of administrative reform and 'cool japan') and many other leading political and business figures. they sang to his tune of the 'tokku' (the special economic zones), the upcoming liberalisation of the labour market, the stock market boom (the nikkei had shot up by over 70% since abe became prime minister in december 2012), the dawning age of japanese entrepreneurship, and the coming feminisation of japan's labour market.
of course there's no shortage of dissenting voices, pointing at the recent slide in the nikkei, at watered down reforms to corporate governance, at a lacklustre plan for japan's energy mix, and at abe's conservative agenda (revisionism, militaristic tendencies) that distract attention and energy from abenomics.
the discussion is swinging back and forth every day, fed by new data arriving in the form of labour, wage or inflation statistics. in this clutter of data, it is easy to overlook some broader power shifts that are nonetheless fundamental and will prove to be decisive for the question how far abenomics can go.
while abe and company were looking into the future, minister motegi (in charge of the ministry for economy, trade and industry, or meti) at the same conference dug out an old concept from his ministry's heyday: 'excessive competition' ('kato kyoso' in meti-speak). to prevent 'excesses' - i.e. to form cartels and stifle competition - was one of the more infamous weapons in the ministry's arsenal. it is quite remarkable that motegi is introducing this front for industrial policy as one of the corner stones of his ministry's policy; even more so as abe is stressing his decisiveness to open up japan's economy (to the outside as well as domestically), introducing stronger competitive forces.
motegi's mutterings matter. meti is not the ministry of agriculture or welfare that are traditionally closer to protectionism than to free market ideas. save for the minister of finance, the kennedy school graduate is the most powerful figure in abe's cabinet. and his ministry has been gaining power under the abe administration: abe's so-called 'third arrow' (structural reforms) is being directed mainly by meti. filling the contours of abenomics with content is mostly in the jurisdiction of the ministry of economy and the proof will be in the legislative details.
meti's sudden fondness of 1960s-concepts does not bode well for the fundamental overhaul abe has promised. watered down reforms in the energy sector and corporate governance seem to vindicate the worries of many of the more bearish observers that abe will not succeed either in wresting free japan's economy of powerful vested interests.
abe still commands enough political capital to prevent any quid pro quo in which every policy freeing up japan's economy to more competition (such as the transatlantic free trade area, the tpp) will be matched by stifling the economy elsewhere (such as regulating taxi operators more strongly).
whether abe will prove up to this task will not be decided solely by his commitment to reform, but more importantly by the fact whether he will be strong enough to force the bureaucracy, and first and foremost meti, into line.