The Japanese stock market rocketed to a 21-year high with a record 15-day winning streak after the result of the Japanese parliamentary election. Japanese capital was pleased that Prime Minister Shinzo Abe’s Liberal Democratic Party (LDP) had won the snap general election and, with its Buddhist-affiliated Komeito, the incumbent coalition had retained the two-thirds majority necessary to pass legislation without recourse to the upper house.
This means that Abe can claim a mandate to change Japan’s constitution from a ‘pacifist’ defensive role for its military to a fully offensive imperialist stance for the first time since the end of the second world war. Abe claims this is necessary to resist the growing danger of nuclear attack by North Korea and the insurgent presence of China. In reality, it is an obsession within the ruling clique of the LDP to reassert Japan as an imperialist power and not just a lapdog of the Americans.
However, even with this vote, Abe will have to proceed cautiously because Japanese citizens are still divided on whether any constitutional change is necessary and Abe has had to agree not to move on this until 2020 at the earliest. But now he has a longer-term mandate to do this.
If you can call it a mandate. The reality is that Japan’s electorate had little to choose from among the parties. The opposition was in total disarray. The Democrat party, which had a brief run in government, offered no alternative policies, whether economic or political. And when the conservative governor of Tokyo, Yuriko Koike decided to set up her own national party, The Party of Hope, the Democrats immediately split with half joining Koike and the other half forming a new party, the Constitutional Democratic party under Yukio Edano. Actually, Edano’s party beat the Party of Hope to become the main opposition on a platform of opposing the constitutional change. The Party of Hope turned out to be a damp squib with Koike not even running and leaving the country during the vote!
Once again, the real winner in Japan’s election was the ‘no vote’ party. The voter turnout was just over 52%, the second lowest since 1945 and up only 1% on 2014 – a turnout even lower than in the US elections. The majority of Japan’s working class, seeing no party representing their interests, just did not vote. Indeed, Abe’s LDP gained less seats than in 2014 (down 6) as did Komeito (down 5).
In 2014, Abe also called a snap election but that time it was to get a mandate for his so-called Abenomics: a set of policies of monetary easing, fiscal tightening and ‘supply-side neoliberal ‘reforms’ designed to get Japanese capitalism out of its stagnation.
How has Japan done since then? Well, on the main target of getting Japan out of deflation (falling prices), despite the advice of top Keynesians (Paul Krugman) and monetarists (Ben Bernanke) coming to Japan – and massive injection of money by the Bank of Japan – the monetary arrow of Abenomics has miserably failed.
The core inflation rate is still hovering around zero after three years of effort.
But maybe that does not matter – why strive to ‘cause’ inflation, as long as the economy is growing? And Japan’s real GDP has been rising for six consecutive quarters. Japan is now achieving modest economic growth after a nasty recession in 2014.
And when you take into account that the population has fallen by over one million since the end of Great Recession as Japanese get older, faster, then real GDP per person has risen even more. However, in dollar terms, Japan’s GDP has really stagnated because the yen has fallen substantially against other currencies. Indeed, GDP in dollars is still below the level of the early 1990s – so the falling population has only compensated for that.
The second arrow of Abenomics was fiscal spending and no other G7 government is running such a large budget deficit, Keynesian-style. The annual deficit had reached nearly 10% of GDP in 2012, although thanks to some recovery in real GDP, the deficit has fallen back to around 4%. But the Japanese government has now run a deficit for over 25 consecutive years, while public sector debt (even when netted off for government assets) is well over 130% of GDP. All that this Keynesian effort has achieved is a miserable average annual economic growth of under 1% in the last ten years. And now Abe intends to introduce a huge sales tax increase to reduce the deficit further, at the expense of working-class consumption. He also hopes to liberalise gaming and allow casinos to suck in more revenue at the expense of the poorest.
The real purpose of Abenomics was the third arrow of ‘supply-side’ reforms, namely to reduce labour costs (ie hold down wages) and boost the profitability of Japanese capital. And here Abenomics has had some success. Japanese capital’s rate of profit had been in long-term decline, driven by the classic Marxist law of a rising organic composition of capital as Japan became a leading industrial power after the 1960s.
The Koizumi Thatcherite measures of privatisation and reduction in labour rights did achieve a modest recovery in profitability in the early 2000s, although this was mainly fuelled by the global credit boom. The Great Recession put an end to that. But under Abe, real wages per person have been held down and profitability has begun to move up.
So far, Japanese capital has not responded by boosting investment.
Net investment (after covering depreciation) is very low and even gross private investment is crawling along. Japanese companies prefer to employ more labour at low wage rates rather than invest, or take their investment overseas (shades of the UK and the US).
Japan’s economy has picked up a little. Industrial production growth has accelerated somewhat as exports pick up with a falling yen and as the world economy has an upturn. Business sentiment has improved; and Japanese capital has become more optimistic about the future. But it is all still very modest and any economic improvement is not being felt by the bulk of Japanese, with real wages stagnant and available jobs only part-time or poorly paid.
Abe may have won the election easily and the stock market may be hitting new highs. But this is only hiding the frailties of Japanese capitalism: low investment, productivity growth flat (with levels still below 2007); and profitability still near post-war lows. Abe will be in office when the next global recession comes. Abenomics and his imperial ambitions will then be tested.