Assessing Abe’s Economic Statecraft

Just days after setting the record for longest consecutive term as Japan’s prime minister, Shinzo Abe announced on August 28 that he was resigning on grounds of poor health. Beyond its durability, Abe’s term may be remembered mainly for its disappointments: his failure to pull the Japanese economy out of its decades-long torpor, to achieve his dream of amending Japan’s constitution, to resolve tensions with neighbors in Northeast Asia. But in one area Abe deserves better marks from historians: his economic statecraft in the Asia-Pacific region and beyond.

Abe came back into office in late 2012 determined to avoid the mistakes of his first, aborted term as prime minister in 2006-2007. In that earlier stint, Abe had shown virtually no interest in economics, putting his own constitutional-reform ambitions over the bread-and-butter concerns of most Japanese citizens. Abe 2.0 would not make the same mistake, announcing a three-point economic revitalization plan dubbed “Abenomics” by Japanese commentators.

Abenomics was well conceived but unevenly implemented. It consisted of “three arrows” aimed at prodding Japanese growth and productivity: aggressive monetary easing, accommodative fiscal policy, and structural reform. Abe did well on the first arrow, appointing a new governor of the Bank of Japan, Haruhiko Kuroda, who made clear he would keep the monetary taps open until deflation was defeated. The fiscal policy record was more mixed, as repeated stimulus packages were undermined by two poorly handled consumption tax hikes. Most disappointing was the third arrow, as many of Abe’s promising structural reform initiatives, from “womenomics” to corporate governance reform, got bogged down by entrenched interests.

To be fair, Abe’s domestic economic program faced massive headwinds caused by Japan’s daunting “3D” challenges: deflation, debt, and—most intractable of all—demographics. With the country’s aging population set to drop from 128 million at its peak in 2010 to 87 million by 2060, it would take a miracle of enhanced productivity for Japan to generate more than mediocre growth.

But even with a weak hand at home, Abe understood that Japan’s economic weight as the world’s third-largest economy and a commercial powerhouse in the Asia-Pacific region gave him a trump card in foreign policy. And over his eight years in office, Abe played the economic statecraft card well. He used it to advance two enduring and interrelated goals of Japanese foreign policy: keeping the United States engaged in the Asia-Pacific region and managing the risks of a rising China.

One of the first things Abe did upon returning to office was to lean into the Obama administration’s “rebalancing” strategy toward Asia. In early 2013, he traveled to Washington and declared in a seminal speech (at CSIS) that “Japan is back.” He made clear his interest in Japan’s joining the U.S.-led Trans-Pacific Partnership (TPP) trade negotiations then underway. Despite the stiff resistance he expected from Japanese farmers and other vested interests at home, Abe saw TPP membership as a multifaceted strategic ploy to strengthen the U.S.-Japan alliance, keep the United States embedded in the region, deepen ties with Japan’s Southeast Asian partners, and—not least—send a message to Beijing about Tokyo’s throw weight in regional rulemaking and norm-setting.

The election of Donald Trump halfway into his term forced Abe to sharply shift tactics while attempting to preserve the basic goals of his strategy. He quickly tried to ingratiate himself with Trump (famously flying to New York just weeks after the November 2016 election bearing a gift of a golden golf driver) in an effort to deflect the bilateral trade pressure that Abe knew was coming. While not entirely successful in these efforts, and paying a heavy price for what domestic critics saw as slavish behavior, Abe managed to avoid the worst of Trump’s tariffs on allies—most significant, threatened duties against the crown jewels of Japanese industry, automobiles.

Trump’s decision to withdraw from TPP on his third day in office was a major inflection point for Abe. Where other Japanese prime ministers would likely have resigned themselves to collapse of the regional trade initiative without its principal sponsor at the table, Abe made one of his boldest moves: he took up the chairman’s gavel and persuaded the other 10 TPP members to carry on with the negotiations. Historians are likely to point to Abe’s stewardship of those talks to a successful conclusion—salvaging most of TPP in an eventual Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)—as one of the singular achievements of his term.

Again, part of Abe’s strategic calculation about CPTPP was that it would plant a stake in the ground in the intensifying competition between Japan and China for regional leadership. As I have written elsewhere, while geographic proximity and commercial interdependence necessitate that Tokyo engage constructively with its large neighbor to the west, no Japanese leader can accept a Sinocentric order in the Asia-Pacific based on Beijing’s preferred rules and norms. Abe thus focused much of his economic statecraft on trying to offer alternatives to partners in the region.

In addition to CPTPP, other noteworthy efforts in this regard included his campaign to promote “quality infrastructure.” Launched in 2015 as a thinly veiled response to China’s ambitious Belt and Road Initiative (BRI), Abe’s Partnership for Quality Infrastructure initially offered regional partners $110 billion (a number suspiciously close to the initial $100 billion capitalization of Beijing’s Asia Infrastructure Investment Bank) of Japanese investment in railways and ports with high standards of transparency and social, environmental, and fiscal sustainability. Abe then used his 2019 chairmanship of the Group of 20 (G20) to get his fellow economic leaders—including President Xi Jinping of China—to endorse a set of six “Principles for Quality Infrastructure Investment.” 

Data governance was another area in which Abe tried to make a statement about Japan’s preferred rules and norms. Often described as the “new oil,” data flow throughout the modern economy, yet there are few internationally agreed rules to govern the collection, storage, transfer, or privacy of data. Europe and China are staking out their own preferences in this area, but neither approach rests comfortably with Japan. Again, Abe used his role as host of the G20 in 2019 to win agreement to his concept of “data free flow with trust,” with the aim of starting a global conversation on this topic—along Japan’s preferred lines.

Toward the end of his term, Abe worked more quietly to sharpen Japan’s domestic tools of "economic security." He won passage of legislation to tighten the country’s foreign investment screening mechanism, authorized stronger enforcement of export controls, and set up a new economics office in his National Security Secretariat. Most recently, Abe’s ruling Liberal Democratic Party has been considering proposals to strengthen intelligence agencies’ tools against commercial espionage.  

Balance—between offensive and defensive tools, between soliciting Washington’s favor and protecting Japan’s commercial interests, between engaging with and hedging against China—has been the hallmark of Shinzo Abe’s economic statecraft. His successor would do well to carry on this important dimension of the outgoing prime minister’s legacy.

Matthew P. Goodman is senior vice president for economics and holds the Simon Chair in Political Economy at the Center for Strategic and International Studies (CSIS) in Washington, D.C.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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