Abenomics did not cause the recession. The problem was Abe raised sales tax from five per cent to eight per cent in obedience to the previous Government
I need to hear the voice of the people,” said Japan's Prime Minister Shinzo Abe. “I will step down if we fail to keep our majority because that would mean our Abenomics is rejected.” And with that feeble excuse, he announced that he was calling an election two years earlier than necessary, on 14 December.
“Abenomics”, the Prime Minister's drastic strategy for kick-starting Japan out of 20 years of deflation and economic stagnation, has not actually been rejected by the public, but it has failing nevertheless. After an initial burst of growth last year, Japan has fallen into a recession despite the trillions of yen that the central bank has pumped into the economy.
Japanese voters would love to see “Abenomics” succeed. It's no fun living in a no-growth economy, and Mr Abe's plan was the first they had seen in a long-time that had even a chance of turning that around. But two years in the kick-start has stalled, and Mr Abe's public approval rating recently fell below 50 per cent for the first time. Maybe he's just going for another four years now because he fears that later, the prospects will be even worse.
To be fair to the Prime Minister, “Abenomics” didn't actually cause the recession. The problem was that Mr Abe raised the sales tax from five per cent to eight per cent last April, in obedience to a law passed by the previous Government. Unfortunately, Japanese consumers responded by cutting their spending, especially on big-ticket items — and so the economy tumbled into recession.
Mr Abe has learned his lesson, and he is now promising that the scheduled second rise in the sales tax next year, from eight per cent to 10 per cent, will be postponed until 2017 if he wins the election. In fact, he is portraying the election as a referendum on whether the public wants him to kill the next tax rise — as if they were likely to demand that he go ahead with it.
If he can keep the debate centred on the economy, Mr Abe should cruise to an easy victory, for the Opposition parties are divided and disorganised and have no plausible alternative solution. However, if the focus shifts to Mr Abe's plans to restart the country's nuclear power stations and remove the pacifist elements from the Japanese constitution, the election's outcome will get much harder to predict.
On the nuclear issue, as on the sales tax, Mr Abe is doing the sensible thing. Nuclear power used to provide 30 per cent of Japan's electrical power, and the shutdown of all the country's reactors has compelled it to spend huge amounts of money on imported energy.
It's now high time to turn the nuclear reactors on again. But the Japanese public, post-Fukushima, has an acute nuclear allergy, and the opposition to restart the reactors is large, vocal, and well-organised. If that becomes a central election issue, Mr Abe will lose a lot of votes.
The fact that it will be a relatively short campaign, helps Mr Abe, but if these two issues catch fire he will be in serious difficulty. It's unlikely that his liberal Democratic Party, in power for 53 of the past 59 years, will actually lose control of the lower House of the Diet, but it could lose enough seats to force him to drop his nuclear and constitutional projects. And there is an outside chance that he could actually lose the election.