Japan general election: the ‘new capitalism’

There is one G7 leader who won’t be at the Glasgow COP26 or G20 meeting in Rome this weekend.  That is Japan’s new prime minister Fumio Kishida, who, after replacing the unpopular Yoshihide Suga as leader of the ruling Liberal Democrat party, has called a snap general election.

Kishida is putting at serious risk the majority for his party in the election.  The LDP has lost support through its handling of the COVID crisis and because of the failure of the economy to make any significant recovery from the pandemic slump in 2020.  Opinion polls suggest that the LDP’s representation could be reduced from 275 seats in the previous parliament to just 233 seats this time.  The LDP would lose its outright majority and be forced into a coalition with its tame junior coalition party Komeito to sustain power.

Voter turnout will be crucial.  Higher turnouts tend to help the opposition parties, who have united tactically to reduce the LDP majority.  But the disillusionment with party politics in Japan, which I have reported on before, looks like continuing, especially among the young.  The overall turnout could be as low as the post-war low of 52.7% in 2014 and lower than the 2017 turnout of 54%, with only one-third of 18-24 year-olds bothering to vote.

Kishida is a former banker, no surprise there, and claims that he is going to revive the Japanese economy with what he calls a “new capitalism”, which is supposedly a rejection of ‘neoliberalism’ as operated by previous PMs like Abe, with his ‘three arrows’, and aims to reduce inequality, help small businesses over the large and ‘level up’ society.  This would break with Abe’s emphasis on ‘structural reform’ ie reducing pensions, welfare spending and deregulating the economy. 

Japan remains over 30% less productive than the US and Kishida wants to cut ‘red tape’ and get more women and seniors into gainful employment, with efforts to raise social benefits for those in non-regular work up to the same level as Japan’s “salary men.” A new Public Price Evaluation Review Committee will aim to lift wages for carers and childcare staff, and Kishida has called for more support for schooling and housing costs for parents.

Action is certainly needed on the economy.  After decades of slow real GDP growth (only compensated for by a falling population), the recovery from the pandemic slump (recording a 4.5% contraction) looks very weak.  Japan has lagged behind other G7 economies.

The overall economy has remained in recession until very recently. The au Jibun Bank Japan Composite PMI was up to 50.7 in October 2021 finally suggesting the first expansion in private sector activity in six months. Even so, GDP is projected to expand by only 2.6% in 2021 and 2% in 2022.  Indeed, the BoJ reckons the long-term potential growth rate will be close to zero! 

Business investment is expected to pick up as corporate profits improve (if still below pre-pandemic levels), but public sector investment is stagnant. Inflation is still running well below the Bank of Japan’s 2% target. Wage growth has been stagnant — total cash earnings were virtually no higher than they were a year earlier despite weakness last year.

Japan was known as the major manufacturing economy of the 20th century but with the rise of China and rest of east Asia, Japan’s export share has fallen.

Japan is now putting its hopes on the new Regional Comprehensive Economic Partnership (RCEP), a Asian trade agreement including China that covers about 30% of the world’s population and output. The pandemic has delayed other countries’ ratification, which is a requirement for the multilateral agreement to become effective. Once it goes into effect, the RCEP could add $500 billion to global trade by 2030. The partnership is particularly important for Japan as it lowers tariffs for Japanese exports to China and South Korea, two of its three largest trading partners.

Kishida talks about reducing inequality and Japan’s inequality of income measures are higher than in most advanced capitalist economies. 

And when it comes to dealing with the environment, the LDP’s record is hardly successful.

After the failure of Abenomics in the decade after the Great Recession, Kishida has his work cut out to deliver his ‘new capitalism’ in the decade after the pandemic.

7 thoughts on “Japan general election: the ‘new capitalism’

  1. Fukushima (which as near as I can tell isn’t over yet) is a good example of the black magic of the marketplace, I thought.

  2. Since the end of WW2, the political regime of the Japanese capitalist class has always anxiously first looked over its shoulder to observe what its American Shogun was doing before launching its own policy. Unlike Ukania (the UK), whose postcolonial political regime fancies itself as the Imperial Mind of the otherwise presumed brainless provincial yokels of the USA – the relational basis upon which Britain can still act out among the ghosts of its own dead past – the Japanese capitalist regime is most decidedly the wagged tail upon the arse end of the same beast.

    Hence the Japanese regime quite likely looked at the Biden Administration as a real turn away from “neoliberal” policy dogma, rather than the “fake-left turn” it is very likely to be, and seeks to follow. Alas, the Biden Administration is shaping up to be Obama’s Third Term, successfully corralling the latest crop of progressives disgruntled by Obama’s first two terms into selling their constituents another round of pseudo-reform, supposedly made all the more urgent by “the danger to democracy posed by Trumpism”. Bravo!

    Ironically however, the Japanese regime is not faced with the excruciating pressures of its US counterpart from the Right and the Left domestically, thanks to the hopeless anachronisms of its 18th century mercantile constitution and the 19th century residual stratum of the “Jacksonian” political system conducive of genocide, slavery and apartheid, nor does Japan now pretend to rise to confront a “China challenge” on the economic front, where it has effectively surrendered. Hence the Kishida government is free to actually conduct such a “turn” in what has always been for all intents and purposes a one-party political system.

    The only remaining question will be, which swing of the USA’s rear end to follow: Obama or FDR?

  3. “A new Public Price Evaluation Review Committee will aim to lift wages for carers and childcare staff, and Kishida has called for more support for schooling and housing costs for parents.”

    That ship has already sailed. The time to do that was the beginning of the 1960s.

    Now, profitability is simply too low. It won’t happen.

  4. I am not surprised by Japanese productivity flatlining. Total productive assets (fixed plus inventory) for the whole economy were down 7.5% in trillions yen between 1994 and 2019, and for industry only up 7%. https://www.esri.cao.go.jp/en/sna/data/kakuhou/files/2019/pdf/point_stock_en20210120.pdf As for machine orders the long-term trend between 2005 and 2019 was down by 10%. Even adjusting for cheaper machinery, it is likely the volume of machinery is barely higher than it was in the 1990s (of course this is a quantitative not qualitative metric). The rate of return based on fixed assets plus inventory has also fallen by 20% since its last peak in 2015 in line with global trends.

    What interests me is not productivity in industry but why the political productivity of Japanese workers has been so low given the putrid state of the Japanese economy. Is this a warning sign to western workers who are now experiencing Japanese style economic developments.

    The other important take is that the purging of capital is just as important as the accumulation of capital in the cycle of life of capitalism. Japan, because of the Keiretsu system, did not purge capital in the way US capital did in the 1980s, and now US capital is mimicking the Japanese because of central bank financial engineering.

    I will be posting the latest profitability data on China and Japan on my website next week theplanningmotive.com

  5. Not on topic, but since there’s not an open thread, forgive me for asking here.

    What does Marxian analysis of the capitalist economy has to say about taxation?

    I know that within the confines of proposals for a planned economy, Marxians like Paul Cockshott favour an income tax, but that’s not what I’m asking about: how taxation would occur in an economy based on labour credits and the abolition of money looks pretty straightforward. It would be a tax on surplus value earned by workers in the productive sector to pay for infrastructure, research, social welfare (health, pensions etc.), defence, education etc.

    But I do lightly dabble in mainstream economics and towards its fringes I see several intriguing proposals:

    i. Jack Rasmus and others propose a transactions tax, and their argument looks very cogent, in that it would reduce inequality by affecting richer people (who do more transactions) more heavily.

    ii. Dean Baker and others propose to eliminate tax evasion by levying a one-time charge in the form of preferential shares (without voting rights) on all corporations, and from there collect dividends as a replacement for corporate taxes. Since corporations need to pay dividends to shareholders, no matter where they realise their earnings, the government would get their share.

    iii. Robert Frank and other behavioural economists have argued for a progressive consumption tax that would modify social behaviour and replace luxury spending by investment, with cascading effects downwards in the wealth scale.

    Even if you think, as I believe you do, that taxation cannot revert the secular tendencies like the TRPF, could these proposals be effectively used to alleviate the ravages of capitalism and delay its demise?

    1. @ DGB
      In a post-capitalist society it is not money (and taxes are only money) that is the leading factor, but working time plus labor productivity plus resources of material and energy.
      The self-governing society has to come to a conclusion about how much working time plus resources it needs for tasks relating to society as a whole (formerly state functions), how much working time plus resources it needs for individual reproduction and how much working time and resources it needs for stockpiling and economic expansion (increasing labor productivity and increasing the Affluence) it wants and can spend. No more and no less.

      Wal Buchenberg, Hannover

  6. ‘The beloved Japanese corn snack, Umaibo, is going up in price for the first time in 43 years … from 10 yen (9 US cents) to 12 yen (10 US cents).’ SCMP

    On Sat, 30 Oct 2021, 10:24 Michael Roberts Blog, wrote:

    > michael roberts posted: ” There is one G7 leader who won’t be at the > Glasgow COP26 or G20 meeting in Rome this weekend. That is Japan’s new > prime minister Fumio Kishida, who, after replacing the unpopular Yoshihide > Suga as leader of the ruling Liberal Democrat party, has called ” >

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