Lessons from Abe for Europe

29.08.20 Publication:

All political careers end in failure. That saying, by a famous British Conservative politician of
the 1970s, Enoch Powell, applies especially to those politicians who stay too long in office.
The sudden resignation, reportedly caused by the worsening of a chronic illness, of Shinzo
Abe, the longest-serving prime minister of Japan in modern times and the world leader
keenest on playing golf with Donald Trump, needs to be seen in this light. Mr Abe’s record
also holds important lessons for Europe.

Mr Abe has been in office now for nearly eight years, which followed an earlier one-
year term as prime minister in 2006-07. Although his health concerns are probably genuine,
the timing of his departure likely reflects a big decline in his public approval ratings and the
increasingly loud noise of knives being sharpened by potential successors. The chance that
he could hang on for long enough to preside over the postponed Tokyo Olympics in July
2021 was looking increasingly remote.

Compared with Italy, Britain or the United States, Japan has fared quite well during
the covid-19 pandemic, with fewer than 1,300 deaths despite a population of 120 million,
and the world’s third-largest economy has suffered a smaller decline so far this year than
others. Yet Abe’s government has drawn public criticism for its erratic, inconsistent
communication and for a somewhat uncaring welfare response. Most of all, however, the
Japanese public seems to have grown tired of years of promises of economic transformation
that have not been delivered. The pandemic exposed Japan’s economy as being just as
vulnerable as it was when Abe entered office.

This needs to be noted in Europe, where talk of the “Japanification” of economies
has grown, some out of fear but mostly out of envy that Japan’s central bank has been able
to buy up huge amounts of public debt, in effect financing public spending directly, without
causing inflation or a currency crash. Yet this ignores the harsher reality: that the prime
minister’s much-fanfared policies of “Abenomics”, consisting of faster monetary expansion,
some fiscal stimulation and talk of pro-growth structural reforms, have failed to deliver
sustained prosperity or rising living standards.

In part, this is because the reforms were half-hearted and often blocked by vested
interests in big business. The bigger lesson, however, is that aggressive monetary expansion
is not enough: it raises share prices and makes a huge public debt more sustainable but
does not make the economy more productive nor living standards higher. Like Italy, Japan
suffers from depressed household incomes thanks to a large portion – in Japan’s case,
nearly 40% — of employees working on precarious short-term contracts.

What was needed, alongside monetary expansion, was direct intervention to raise
wages, reforms to reduce precariousness, public investment well targeted at raising
productivity and strong incentives for corporate investment. This has not happened. And
because incomes have stayed depressed and jobs precarious, another declared aim of Mr
Abe, to raise the country’s low birth rate, has also failed to transpire, as financial insecurity
has deterred couples from getting married and starting families.

Yet Mr Abe’s political career has not entirely been a failure. His record in domestic
policy is surprisingly poor despite having won three successive general elections and having                          commanded strong parliamentary majorities. In the end, neither for economic reform nor
for his great dream of constitutional revision, was his political position as strong as it looked.
But where it did count was in foreign affairs and defence, and that is where his true legacy
will be found.

No Japanese prime minister since the US occupation ceased in 1951 has been able
seriously to contemplate any kind of rupture with the United States, on whom it has
depended for its security. But keenly aware that America, especially under Trump, has
become a less reliable and less co-operative ally, Shinzo Abe has created the beginnings of a
more independent foreign-policy voice for Japan, building its own network of partners
around the world, while also upgrading the country’s defence.

It has been paradoxical, in a way: beginning immediately after Trump’s election
victory, Mr Abe has worked hard, sometimes embarrassingly so, to build a close relationship
with the US president; and yet at the same time he has pursued his own initiatives to build
Japan’s more autonomous role especially in trade and in international institutions.

Most notably, Mr Abe led a rescue in 2017 of a 10-country Trans-Pacific Partnership
free trade deal after Trump withdrew from a deal President Obama had advocated. He also
pushed for and completed the first bilateral EU-Japan free trade arrangement and will
shortly complete a parallel deal with Brexiting Britain. He has further strengthened Japan’s
defence relationships with India and Australia, and has played a mediation role with Iran.
And despite supposedly having only “self-defence” forces, the country now has two aircraft-
carriers and has begun discussions about creating a missile-defence system capable of
making pre-emptive strikes against North Korean missile launch sites.

The lesson here for Europe is one that has already been partially learned but not yet
fully implemented. It is that although it remains essential to maintain a close relationship
with the United States, whoever wins the White House in November, it is also both essential
and possible at the same time to strengthen Europe’s own defence capabilities and its
network of partnerships around the world. Shinzo Abe has made Japan a better partner for
the EU than any of his predecessors did, giving it a voice and presence in international
affairs that is stronger than at any time since 1945. Whoever succeeds him will likely
continue this path.