Abenomics and Japanese Politics
Masanobu Ido (Waseda University)
In today’s world economy, global finance capital exerts a strong influence. According to the neoliberal orthodoxy, political leaders face the dilemma of either having to implement neoliberal reforms (and sacrifice the interests of their political supporters) or accept continued economic decline in the world economy. On the other hand, arrival of global finance capitalism has opened up possibilities for populist leaders to liberalise economies with a new political approach. Specifically, this study argues that a new variant of populism, ‘stock market populism’, is emerging as a mode of governance in which political elites take advantage of global capital, such as hedge funds, for their political rule. As a key example, it describes Prime Minister Abe’s economic revival program, Abenomics, in 21st century Japan. In this study, I relate the latest phenomenon of stock market populism to the political dilemma that was faced by political leaders of the ancien régime in the neoliberal age and illustrate how these political leaders mobilise the political support of citizens (especially non-affiliated voters and urban residents) by exploiting global finance capitalism. Furthermore, I provide a list of preconditions for its materialisation.
In the 2012 general election, with its slogan ‘Reclaiming Japan’, Abe’s Liberal Democratic Party (LDP) returned to power. The Abe cabinet quickly put its economic revival program, Abenomics, into practice to rescue Japan from its 20-year economic stagnation, called the ‘Lost Two Decades’. In effect, Abe promised to replace the post-war Keynesian regime with one based on a neoliberal policy, namely, through his Abenomics program. However, can Abe, a leader of the LDP—an old institution that is strongly linked to Japan’s post-war growth—realise a radical neoliberal economic reform that will sacrifice the LDP’s old clients, such as farmers and the construction industry? At first glance, this appears to pose an insurmountable challenge for a politician like Abe, who relies on the LDP’s clientelistic networks that have mobilised the political support of people in the protected sector in the post-war ancien régime.
In the post-war era, the conservative Keynesian policy regime and large exporting manufacturers led to economic growth, while the LDP assured political stability by redistributing pieces of the economic pie to farmers, shopkeepers and local populations. This pattern continued until the economic bubble burst in the 1990s. In the ‘Lost Two Decades’, Japan’s economy stagnated, and the nation accumulated huge amounts of debt while deflation plagued its economy. The successive LDP governments failed to change the situation. As a main instrument of Japan’s post-war growth, the LDP faced the political dilemma of either introducing neoliberal economic reforms that would prompt its supporters to abandon it or protecting the vested interests of its supporters and living with a continued economic decline.
To escape this dilemma, Abe’s LDP chose to depend on global finance capitalism. In fact, Abe has implemented Abenomics by adopting the same trick that Koizumi, his mentor, used in his neoliberal reforms. By cajoling foreign investors into investing in the Tokyo stock market with their promise of neoliberal reforms, both Koizumi and Abe sparked economic growth with a weaker yen and a rise in stock prices; this led to high approval ratings for them (especially among the urban population). By acquiring the dependency on global finance capitalism, they could implement neoliberal economic reforms that would harm the interests of their supporters.
Clearly, one of the major goals of the stock market populism of Koizumi and Abe is bringing about socio-political changes, i.e. a reformulation of the social class coalition. Indeed, Abenomics is a conservative project that aims to build an alternative social class coalition suitable for the age of global finance capitalism. With the purpose of mobilising their political support, each arrow of Abenomics’ ‘three arrows’ is actually directed at different social groups: The first arrow (loose monetary policy) targets global companies—still the core in the new social class alliance; the second arrow (public works projects) targets farmers and the construction industry—key members of the old social class alliance who are marginalised in the new one and the third arrow (liberalisation of the economy) targets urban residents and consumers—new components in the new social class alliance. With the restructuring of its social foundation, Abe seeks to revive Japanese communitarian capitalism as a new model with a global outlook.
As the background factors for the adoption of stock market populism, this study points to three new trends in the past two decades: (1) global finance capitalism, (2) liberalisation of the Japanese economy, once an archetype of bank-based capitalism and (3) increased instability of Japanese politics. First, the globalisation of finance has advanced. Institutional investors such as hedge fund investors and international rating agencies influence the ups and downs of national economies, posing a threat to the autonomy of national economic policies. Second, networks of cross-shareholding among banks and manufacturing firms—the essence of Japanese communitarian capitalism—have unravelled. On the other hand, foreign shareholders have augmented their presence in the Tokyo stock market. Lastly, since the 1990s, the LDP has lost its ability to mobilise citizens (e.g. decreased party membership and support for the LDP in opinion surveys). On the other hand, the number of non-affiliated voters (mostly urban residents) has sharply risen. As the largest political force, they increasingly determine electoral outcomes.