With Japan back in recession for the second time during Prime Minister Shinzo Abe’s tenure, the future of Abenomics has been in doubt. Yet now we’re starting to get some idea of what’s next. From Reuters:
Japan’s government plans to raise the minimum wage and introduce other steps to revitalise the economy, but the draft of stimulus measures seen by Reuters on Monday appeared to break no new ground on reforms that analysts say are needed to end decades of stagnation.
Prime Minister Shinzo Abe’s government will also offer some financial support to people living off their pensions to bolster consumer spending, a copy of the draft obtained by Reuters showed.
Citing unnamed sources, the Nikkei newspaper said on Monday that the government is planning to raise the minimum wage by 3 percent. But the draft didn’t provide any specifics and analysts say the government will need to do more to foster durable growth.
On the one hand, the failure of Abenomics may have little to do with the wisdom of its architect. Chinese weakness is dragging down Japan and causing regional uncertainty that further undermines hopes that Japan can restore the dynamic economy it had in decades past. But, on the other, Japan has major structural deficiencies that minimum wage increases simply won’t solve. Japan has heavily committed itself to a reform-resistant blue model. Today’s globalized, increasingly automated world doesn’t support that kind of economy. Japan, like other developed countries, needs to figure out a new way to adapt.
There are reasons to be hopeful. In an information economy, Japan has a lot going for it. Its education system rightly takes heat for failing to instill a creative impulse in students (threatened cuts to humanities departments would only exacerbate the problem), but Japanese citizens are still very highly-educated by world standards. Back in the 70s and 80s, partly on the strength of its education system, Japan became a high tech powerhouse. It remains one, and as world militaries and manufacturers look to replace people with robots, Japan’s deep knowledge of automated systems will come in handy.
Washington needs Tokyo to counterbalance China and to reinforce the Asia-Pacific network of countries challenging Beijing in the South and East China Seas. Moreover, Japan is the only regional power with the economic muscle to compete with China for development contracts throughout Asia. Make no mistake: The success of Japan is a key American interest.