Japan Chair Platform - August 24, 2006
August 24, 2006
Will Japan’s Structural Reform Continue?
As the Liberal Democratic Party’s (LDP’s) presidential election looms, the political scene in Japan seems predictable. Former chief cabinet secretary Yasuo Fukuda’s formal withdrawal from the race on July 21 has made it a one-sided race for Chief Cabinet Secretary Shinzo Abe. With his biggest rival on the sidelines, Abe outdistances all other prominent candidates by a large margin.2 Naturally, political commentary seems to be moving into a new phase, from “whom” to “what.” As prime minister, what kind of policy agenda would Abe pursue? Abe has spoken eloquently about diplomatic issues but is less vocal about his economic policies.
A key feature of the Koizumi cabinet was its emphasis on structural reform and the unique way in which it was conducted. The Koizumi cabinet differed from previous cabinets in that its policymaking was initiated directly from the cabinet, rather than from discussions with politicians and bureaucrats. One of the biggest challenges of the reform plan was to cut government spending by privatizing public facilities that had been defended by bureaucrats and politicians in the past. Despite severe opposition, Koizumi advanced the reform agenda emphasizing transportation and postal services in particular. At the end of his tenure, the Japanese economy finally seems to be back on track after stepping out of a deflationary spiral that had been an issue since “the lost decade” of the 1990s.
While admitting that the economy has improved, many economists and politicians still view this recovery as weak and unstable. The economic policies of the next administration will be critical to maintaining economic growth and stability.
Part one of this essay will review the economic policy of the Koizumi cabinet in the past five years and analyze how it has regenerated the economy. Part two of the essay will examine the possible economic policies of an Abe administration.