Abenomics 2.0 – economic reforms in continuity

On Sunday the 22nd of October new parliamentary elections have been held in Japan. Prime Minister Shinzo Abe called for a snap election that he and his party (Liberal Democratic Party –LDP) largely won.
As happened in 2014, early elections gave LDP and its alley the opportunity to secure the 2/3 majority in the House of Representatives (that in truth they already had). Political conditions were in fact extremely favourable for Abe: a weak opposition; the Nord Korea threat; the delicate Japanese economy. Despite his growing unpopularity, the victory makes the PM stronger, and gieves him the magical number needed to amend the pacifist constitution.
abe japan bisAbe has been elected as PM for the first time in 2006. His short government was oriented in budget stability and expenditure cuts. In 2007 a series of political issues forced him to step down: the defeat at the House of Councillors elections; the suicide of one of his minister for agriculture due to his involvement in a case of corruption; and the resignations of the following agriculture minister for other judicial problems.
He has been again elected PM in 2012 when he leaded his party to a consistent victory. His second government is the occasion to implement the so called Abenomics: a systematic series of economic reforms based on 3 “arrows”: expansive monetary policy (quantitative easing); expansive fiscal policy; structural long-term reforms to encourage private investments.
In this context, the consumption tax rising has been and still is an issue of debate. The government first implemented an increase from 5% to 8%, aiming to a further rising to 10% in 2015; then, in 2014, announced the 10% consumption tax will be implemented in 2017. Months later, Abe decided to dissolve the House of Representatives. New political scandals involving ex members of his cabinet, a deadlocked parliament, and an unprepared opposition convinced him in finding a new legitimacy for his reforms.
The 2014 victory allowed Abe to continue in his program: his third cabinet announced a new phase of Abenomics, and 3 new arrows: promotion of economic growth; child-rearing assistance to push up the low birth rate; and social security measures to increase nursing facilities for the elderly.
This year, Abe has failed again in rising the consumption tax, and delayed the implementation of the measure. After his confirmation as head of government, he should have no problem in doing so in 2019 (the new deadline).
With a strong hold of the parliament, Abe will be able to comfortably continue his reforms, with the complicity of the Bank of Japan. Actually, the BoJ governor Haruhiko Kuroda, who strongly supported Abenomics, will be confirmed to his position by his main sponsor: Abe himself.

abe-kuroda
Save incidents, the new cabinet will govern the country until next elections, scheduled in autumn 2021. In this term, it will face important events such the 2020 Tokyo Olympic Games, and the preparation of the 2025 Expo, which Osaka is a candidate for. Two important opportunity for Abe’s cabinet, as well as foreign and local investors.

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