The resignation of Japanese Prime Minister Shinzo Abe last Friday took many by surprise. But it wasn’t long before a host of observers in Japan and abroad had cobbled together various op-eds in praise of his years of leadership. For those abroad, especially for those who worked closely with him, Abe brought a level of engagement in world affairs that far outstripped that of his predecessors. For many Japanese at home, he brought political stability and steady governance. In both cases, Abe represented the possibility of a reinvigorated Japan.
But as he prepares to depart the Kantei, Japan faces considerable challenges. Three in particular will weigh on his successors. The first is the COVID-19 pandemic and the unavoidable economic setback it presents. Across the globe, leaders have struggled to contain this virus, and although Japanese citizens were disgruntled with what they saw as the Abe cabinet’s slow response to its spread, Japan has fared relatively well. Today, the Health and Welfare Ministry reports just over 70,000 cases of infection, with roughly 31 percent of those cases in Tokyo. The number of deaths from the coronavirus has also been low, with a rate of 1.9 percent, putting Japan at the lower end of the scale of global COVID-19 mortality rates.
The economic impact, however, has been devastating. The biggest immediate consequence came from the loss in revenue from tourism, followed by the decision to postpone the 2020 Tokyo Olympics. But it is the overall slowdown in Japan’s economic output that matters. Already coming into 2020 with a more sluggish economy than hoped for, the pandemic has already wiped out the gains of the prime minister’s economic agenda, dubbed Abenomics. Second-quarter annualized losses were 27.8 percent of gross domestic product compared with the previous quarter, suggesting an overall setback to Japan’s annual GDP of almost 6 percent. Leaving aside whether the policy goals of Abenomics will be embraced by the next prime minister, the loss will amplify Japan’s vulnerabilities. If a wave of increasing protectionism hits the world, Japanese manufacturers will be hard-pressed to diminish their reliance on the global supply chain, which means an even greater hurdle to overcome in years to come. Japan’s economy, already struggling, will continue to suffer from the pandemic’s impact on the global economy.
A second priority for Abe’s successors will be to ensure Japan’s security in an increasingly fraught Asia. Without a doubt, Abe was an effective advocate for bolstering Japan’s defenses. During his tenure, Japan increased its defense budget, reinterpreted its constitution to allow Japan’s Self-Defense Forces to work more closely with others, and developed new laws to protect state secrets. A two-thirds majority in the lower house of parliament allowed Abe, his party, and his coalition partner Komeito to effect significant change on how the military can operate.
But there is more work ahead. This summer, the minister of defense, Kono Taro, aborted an agreement with the United States to introduce the Aegis Ashore missile defense system to Japan, claiming it no longer offered sufficient promise of strengthening Japan’s defenses. North Korea had rapidly increased its own ability to confound its adversaries’ ballistic missile defenses; local residents where the system was to be located could not be assured of its safety, and the costs were too great to justify deployment. The cancellation of Aegis Ashore then led to a decision to rewrite Japan’s National Security Strategy, initially drafted in 2013, and to adjust its 10-year national defense plan. One of the items up for debate is the acquisition of conventional strike capability that would give Japan the ability to retaliate in the event of a ballistic missile attack. Thus, Japan’s next prime minister will have to decide whether to move Japan’s military from a defensive to an offensive force posture in an era in which the regional military balance is rapidly shifting.
Finally, as its population ages, Japan’s leaders will need to guide their society through a complex array of structural transformations. Today, 28.4 percent of the Japanese population is 65 or older. In 16 years, that share will rise to 33.3 percent. Taking care of those in retirement will burden state finances. Pension reform, never popular in any country, looms large, as Japan’s government debt remains more than 200 percent of GDP. The added impact of the coronavirus on public debt cannot be ignored, making debt an even more compelling priority in the year ahead.
On the flip side of this demographic challenge, there will be fewer working-age Japanese available to sustain the nation’s economic growth. To stay the world’s third-largest economy, Japan’s productivity will need to rise considerably. The Abe cabinet began structural reforms designed to address this challenge. Agricultural reforms, including zoning to allow commercial use of land for agriculture and creating better commercial support for agricultural products increasingly on demand in world markets, allowed Abe and his Liberal Democratic Party (LDP) to move beyond their traditional policy of subsidizing rice farmers and allowed greater opportunity for other agricultural producers. Diversifying and commercializing Japan’s agricultural products for export also energized this sector and allowed a more forward-leaning approach among farmers for the opportunities for trade. By making Japan’s agricultural sector more competitive in regional markets, the Abe cabinet could then embrace the market liberalization required to participate in the Trans-Pacific Partnership (now the Comprehensive and Progressive Agreement for Trans-Pacific Partnership), a multinational trade pact projected to increase Japanese GDP by 2 percent by 2025.
Another Abenomics reform was to support greater participation in Japan’s economy by women. More funding for child care, a strong push for female leadership in corporate Japan, and initiatives to improve the gender balance in employment helped. But Japanese women still face considerable challenges in gender equity.
Further productivity gains will require greater labor mobility in Japan, and this cannot be achieved without change to Japan’s immigration policy. A new policy increasing job opportunities for skilled workers in 2018 was a first step, but Japan will need to do better in the future to attract the kind of talent it needs to fuel its economic requirements.
Although potential successors may want to pick up many of Abe’s economic programs, they are less likely to embrace are some of his more politically fraught goals. Although still on the LDP’s platform, revising the nation’s constitution will likely recede as a priority in the coming years. Some of the more politically sensitive aspects of Abe’s tenure, such as the allegation that the prime minister (and his wife, Akie Abe) were overly supportive of a new kindergarten that emphasized patriotic values, are likely to be less attractive to incoming leaders. On the diplomatic front, Abe’s successors may see an opportunity to tackle some of Japan’s more thorny relationships, such as its relationship with Seoul. But Abe will still be seen as an asset in much of Japan’s diplomacy. Especially important would be his close personal ties with U.S. President Donald Trump if Trump is reelected in November.
The LDP has decided to hold its election for Abe’s successor on Sept. 14. Senior leaders of the party, including its secretary-general, Toshihiro Nikai, want to avoid any disruption of government during the COVID-19 pandemic. Three candidates are currently in the running, two of whom worked closely with Abe. His long-standing chief cabinet secretary, Yoshihide Suga, is widely seen to be the front runner, but Fumio Kishida, currently the head of the LDP Policy Research Council, also served as Abe’s foreign minister for five years. Only one candidate, Shigeru Ishiba, is seen as someone with divergent views from Abe, but he too served in the top post of the LDP when Abe returned to power. While more vocal in his criticism of Abe in recent years, Ishiba would be unlikely to abandon current policy and more likely to refine the government’s priorities.
But Japanese voters will have to wait for the next general election, an election that must come by October 2021, to hear a full-throated debate over how best to improve Japan’s future prospects. Even without him, in other words, Japan will be following Abe’s priorities for some time to come.
