Japan’s new prime minister, Yoshihide Suga, has arrived with a suite of ambitious policy ideas, including plans to digitise government services and revive the country’s regional banks. But he has yet to come up with an overarching theme that strikes a chord with the public. Here’s an idea: he should declare that by 2030, Japan will be positioned to make the best possible use of its one and only natural resource—its people.

Back in the 1980s, when the rest of the world looked admiringly at Japan for lessons about how to run an economy, it was assumed that the key to the country’s strength lay in its ability to tap a deep well of talent. After all, by that time Japan had become a high-wage, high-productivity, highly secure society with one of the world’s best education systems. In exchange for loyalty, Japanese high-school and university graduates alike received lifelong training and development from their employers. But, of course, this arrangement applied only to half the population: men.

Four decades later, Japan still has a great education system, which has made radical improvements on gender disparities. In the 1980s, most Japanese women had to make do with a two-year junior-college education. Less than 15% were enrolled in four-year university courses, compared to 35–40% of boys. This ‘education gap’ explains why Japan has so few female leaders to this day.

However, over the past 30–40 years, the share of Japanese girls leaving high school for a four-year university course has risen to 50%, compared to 55% of boys. The pipeline of future female leaders is now much larger. Yet, despite this massive expansion of Japanese ‘human capital’ (education and talent), its effective deployment has lagged behind, even reversing in some respects, for both men and women. There is now an extraordinary mismatch between Japanese workers’ educational achievements and their employment.

The roots of this paradox stretch back to the 1990–92 collapse of stock and property prices, which caused significant social and economic stress and was soon followed by China’s emergence as a source of competitive pressure. Since then, successive Japanese governments, egged on by big business, have departed from the legacy of high wages and high job security, in favour of a cheap-labour strategy (they wouldn’t call it that, of course, but that is what it is).

In 1990, 80% of Japanese workers were employed on permanent, highly secure contracts. But by 2019, nearly 40% were on insecure short-term contracts, owing to the relaxation of labour regulations over the past three decades. As the working-age population has declined, millions of women and retired people have been recruited to maintain employment levels. Among these, over half of the women and almost all of the retirees are on short-term contracts, with many earning the minimum wage (which is one of the lowest among OECD countries).

While this cheap-labour strategy has helped support corporate profits, it also has emerged as the single biggest factor behind the country’s sluggish economic growth in recent decades. Household consumption is chronically weak, because wages have failed to rise regardless of how tight labour-market conditions have become. And, because employers have little incentive to invest in the human capital of part-time, short-term employees, corporate spending on training and development has declined and relative poverty rates have risen, putting Japan far closer to the United States than to more egalitarian countries such as Denmark in this respect.

The cheap-labour approach may have been appropriate as an emergency measure to avert mass unemployment after Japan’s 1990 financial crisis, but it makes no sense as a long-term strategy for a highly educated, ageing country at the technological frontier. And it is simply hypocritical where women are concerned.

At the January 2014 annual gathering of the World Economic Forum, Shinzo Abe, Suga’s long-serving predecessor, spoke boldly of making Japan ‘a place where women shine’. And after 2015, his government often boasted that Japan’s female labour-force participation rate had overtaken that of the US, reflecting its policies to increase public spending on childcare facilities. But with the cheap-labour strategy remaining in place and unaltered, the quality of women’s jobs has not kept pace with their quantity.

As a result, the benefits from the educational gains that women have made since the 1980s have fallen short of their potential. To be sure, a new generation of university-educated women who graduated in the 1990s and 2000s is coming of age, and some will soon take up more prominent positions. But labour-market conditions for the bulk of Japanese women remain highly constrained.

While this problem partly reflects persistent misogyny and rigid corporate attitudes, the main culprit is the cheap-labour strategy. Too many men and women suffer from job insecurity and low wages, which almost certainly have contributed to Japan’s low marriage and birth rates. And these, in turn, haves kept the overall population in decline, putting a cap on economic growth.

When he entered office last month, Suga promised to ‘create a cabinet that works for people.’ To make that mean something, he needs to put the Japanese people at the very centre of his national economic strategy. Japan desperately needs to develop and deploy the human capital embedded in its population, so that it can replace the 30-year-old emphasis on cheap labour with a restored vision of a high-wage, high-productivity society. Japan should be the Switzerland of Asia, not its US.

Shinzo Abe became Japan’s longest serving prime minister on 20 November. Staying atop a parliamentary democracy seems a herculean task these days, but it is especially hard in Japan, where prime ministers have tended to come and go quickly. But more than time served, Abe will be remembered for what he did while in power. He has returned his party to centre stage, reasserted Japan’s standing in the world and reinforced the foundations of Japan’s strategy in a turbulent Asia.

The Liberal Democratic Party has been far more unified and successful at the polls under Abe after its return to power in 2012. In 2014 and again in 2017, the LDP sustained its electoral advantage in the lower house and hung on, through its coalition with Komeito, to a two-thirds majority. Even the upper house elections in 2016 and 2019 produced LDP wins. Abe has used this steady foundation to implement agricultural reform, to take the legal steps needed for his reinterpretation of article 9 of the constitution, and to pass a much-criticised bilateral trade agreement with the United States.

Yet, there were difficulties. Influence-peddling scandals involving Abe’s friends and even his wife emerged, and a more pervasive scepticism over his revisionist impulses permeated public reaction to his leadership. Abe’s continued demand for constitutional revision drew some backlash, even within his own party. The public seemed to like the pragmatic Abe, but were less enthusiastic about his ideological bent.

Where Abe seems to have made the biggest impact, however, is in foreign policy. While meeting with US President Barack Obama in February 2013, Abe committed Japan to participation in the Trans-Pacific Partnership and went on to become its strongest regional proponent. Long after the US elected a new president who would abandon the idea, Abe went on to conclude the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Abe will surely be remembered for his unorthodox courting of the irascible President Donald Trump. But despite Abe’s ability to establish and build a working relationship with Trump, Japan hasn’t been immune from the imposition of tariffs on steel and aluminium or from the threat of tariffs on cars, and it’s highly unlikely that Abe will be able to avoid Trump’s demands on Japan for an exorbitant increase in payments to host US forces when negotiations begin next year.

Under Abe, Japan has moved towards investing in its own military by buying expensive new fighter jets and an expansive ballistic missile defence system. But when Washington comes calling with its new intermediate-range nuclear forces, Abe will face serious domestic resistance. Already, Okinawa’s government has warned Tokyo that it won’t accept these missiles there. While the US–Japan alliance continues to be strongly supported in Japan, Abe’s relationship with Trump could also become a liability.

But Abe may surprise us yet. Perhaps most notable in the era of Trump has been his ability to negotiate Japan’s interests around the disruptive US president. Here, the conclusion of the CPTPP stands out, as does Abe’s ability to forge trade ties with Europe. And, just as the alliance with the US seemed to be a suffocating embrace, Abe has demonstrated his ability to bring all of the strands of Japanese influence to bear on building a network of interests in the Indo-Pacific that includes Australia, India and ASEAN nations.

Japan faces some difficult decisions ahead and not even Abe can stem all of its sources of disquiet. His dedicated summitry with Russian President Vladimir Putin didn’t bring the breakthrough that Abe wanted, and while Abe and Chinese President Xi Jinping have managed to thaw their relations, China remains at the top of Japan’s list of security challenges.

Abe’s hard-won compromises on outstanding war legacy claims with South Korean President Park Geun-hye didn’t last once President Moon Jae-in came into power in Seoul, and today that relationship is spiralling downward in a tit-for-tat cycle of recriminating policy choices. Abe still has no direct route to Pyongyang as North Korean leader Kim Jong-un continues to test short- and medium-range missiles and refuses to engage with the US on a program of denuclearisation.

Abe has now served longer than prime ministers who are best known for navigating Japan through its difficult post-war years. Shigeru Yoshida served seven years over two stints to set the path for Japan’s post-war foreign policy; Eisaku Sato, Abe’s great-uncle, served seven and a half years and presided over the ‘income doubling’ era of Japanese economic growth of the 1960s; and, more recently, Junichiro Koizumi served a five-year term as PM and resurrected the LDP from its disastrously waning popularity in the 1990s.

What Abe has done with his eight years in power will not be taken lightly either. In the time that remains, he may need to make some hard choices for Japan’s relationship with the US. He may be confronted with mixed signals and tempting compromises from Beijing. He could even find himself locked into simultaneous confrontations with South Korea and North Korea.

Abe has until September 2021 to cement his vision of a forward-looking Japan, and the 2020 Tokyo Olympics will offer him an opportunity to project pride in Japan’s accomplishments and culture onto a global screen. Dressed up as Mario at the closing ceremony of the 2016 Rio Olympics, Abe delighted the world with his demonstration of Japanese soft power. Convincing his own citizens that they must prepare for a world in which hard power will be a necessary tool for Japan may be a far more difficult hurdle.

On 20 September, Japan’s Prime Minister Shinzo Abe is expected to win an overwhelming victory over long-time rival Shigeru Ishiba in his bid for a third three-year term as leader of the ruling Liberal Democratic Party (LDP). But it is after the votes are counted that Abe will face a harder fight: maintaining his power over the political agenda as his party begins looking ahead to the term-limited prime minister’s exit from office in 2021.

The problem is that it isn’t clear whether Abe has anything new to offer Japanese voters after six years in power. Looking at what Abe has said about his third-term agenda during the run-up to the LDP election, it seems that at this point Abe is mostly focused on completing unfinished business from earlier in his tenure rather than launching major new initiatives.

The most obvious example is constitutional revision. In May 2017, Abe called for revisions to Japan’s constitution to be ratified by 2020 and articulated a set of modest amendments that seemed intended largely to defang any resistance to revision. That process had run aground this year thanks to opposition to revision from within the government and fallout from the allegations of influence-peddling that dogged Abe and occupied much of the National Diet’s attention during the first half of the year.

Not surprisingly, having sought revision throughout his career, Abe is prepared to try again. In a speech in his home prefecture of Yamaguchi on 12 August, he stated that the ruling party should submit its four planned changes to the Diet as early as the extraordinary session that will begin soon after the party election.

It’s similarly difficult to find ambitious new ideas in either his economic or foreign policies. Abe has discussed the need for additional changes to Japan’s labour system, particularly regarding continuing opportunities for senior citizens and social security reform to control rising healthcare and pension costs. But these are not new issues; they were key planks of his October 2017 general election manifesto. In macroeconomic policy, the heart of Abenomics, the main focus for the next year will be ensuring that the 2% consumption tax hike planned for October 2019 doesn’t undercut growth and inflation.

Abe may have a freer hand in foreign policy, and managing an increasingly turbulent global system will be increasingly important during his third term, but it doesn’t appear as if he has new diplomatic initiatives to pursue. Abe has touted his efforts to—in words that evoke Yasuhiro Nakasone, another long-serving conservative prime minister—‘settle the accounts of post-war Japanese diplomacy’, including stabilising Japan–China relations, resolving the abductee and nuclear issues with North Korea and working towards a peace treaty with Russia. While the effort to improve ties with Beijing appears to be increasingly central to Abe’s foreign policy goals—and will likely receive a boost when he visits China in October—these are unfinished and ongoing projects, not new aims.

Meanwhile, in foreign economic policy, after Abe helped guide the post-US Comprehensive and Progressive Agreement for the Trans-Pacific Partnership and Japan’s economic partnership agreement with the European Union to completion, his government’s agenda may have to focus more on consolidating these gains rather than seeking out new agreements. Abe’s government may be increasingly interested in concluding the Regional Comprehensive Economic Partnership, but corralling the deeply divided 16-country group may be beyond Tokyo’s reach in the near term. More important will be resisting US demands for one-sided and politically difficult concessions—and perhaps also defending the World Trade Organization against US attempts to weaken the multilateral body.

Ultimately, Abe’s relatively modest ambitions for his third term may implicitly reflect the political constraints facing a leader running in his last leadership race. This is not unique to Abe or Japan. Having pushed and cajoled his party to follow him for six years, centralising power in the process, the LDP’s backbenchers may simply be more reluctant to follow his lead quietly. Even before the party election there have been stirrings of discontent as ambitious party leaders seek to reclaim some control over the political agenda.

The political calendar could further complicate Abe’s leadership. In the year following the LDP election, Abe will face nationwide local elections, the transition to a new emperor (which could make the public particularly resistant to divisive political initiatives like constitutional revision), upper house elections and a consumption tax hike on 1 October 2019—at which point attention will turn to the run-up to the Tokyo Olympics in July 2020. Once the Olympics are past, Abe will have just over a year left in his term and the LDP will likely be fully consumed in the race to succeed the prime minister in 2021.

If next year’s upper house elections go poorly for the LDP, Abe could find himself constrained by both the ruling coalition and the opposition, especially regarding constitutional revision. The very fact of an impending upper house election also makes it unlikely that the Diet will pass revisions before next summer.

Abe may be poised to secure his party’s vote in a landslide on Thursday, but his victory may mark the beginning of the end of his time as an effective prime minister instead of inaugurating a new era of energetic leadership.

In February, Japanese Prime Minister Shinzo Abe called on the National Diet to amend Article 9 of the country’s constitution, which renounces war as a means of settling disputes. Drafted by the United States after World War II, the constitution contains ‘some parts [that] do not fit into the current period,’ Abe said. He is particularly concerned with the constitutional provision that prohibits Japan from maintaining ‘land, sea, and air forces,’ arguing that it seems to be in direct contradiction with the existence of the country’s Self-Defense Forces.

At a glance, Abe’s proposal seems deeply unpopular. According to one poll, some 50.3% of the Japanese public objects to amending Article 9. Only 37.5% of those polled favor such action. The good news for Abe, however, is that opposition to his efforts, though broad, does not seem to run deep. Voters, it seems, are less concerned about the direction Abe is taking the country than they are about his decision to make the issue a top priority.

Revising the constitution would provide stronger legal grounding for Abe’s controversial defense measures. Introduced last year, the new legislative provisions lift restrictions on deploying Japanese forces overseas and expand the definition of self-defense to include aiding an ally. These, too, are unpopular – at least superficially. Some 51% of Japanese voters disapprove of the measures, compared to 30% who support them. And yet only 38% say they would like to see Abe reverse course and repeal the legislation.

To be sure, many in Japan are concerned about the implications of Abe’s agenda, feeling that it runs counter to the country’s national security and proper international stance. They worry that Abe’s defense moves will make it more likely that Japan will be dragged into war, putting an end to its post-war pacifism.

Another avenue of criticism regards worries that Japan’s new defense doctrine will worsen its relationships with its neighbors. Several countries have indeed already expressed concerns. China’s Foreign Ministry spokesperson, Hong Lei, stated that Japan’s new approach was ‘out of step with the trend of the times featuring peace, development, and cooperation.’ His counterpart at South Korea’s foreign ministry commented that his country would ‘never tolerate’ Japan’s exercise of the right to collective self-defense on the Korean peninsula ‘without the [Republic of Korea’s] request or consent.’ And North Korean state media reported that Abe’s reforms were intended to ‘pave the way for invading other countries.’

Not all of the opposition to Abe’s agenda, however, stems from substantive objections. In some cases, concern focuses on the legitimacy of the process that produced the laws. According to one poll, 67% of respondents disapprove of how the ruling coalition pushed the legislation through the Diet. There is a widespread feeling in Japan that Abe’s cabinet ‘did not make a sufficient effort’ to explain the legislation to the public. By ignoring criticism from the majority of voters, Abe’s government allegedly discredited Japan’s democratic system.

Similarly, some 51% of respondents disapproved of the laws on constitutional grounds, believing them to be in violation of Article 9 of the constitution, the provision that Abe would like to alter. These voters are less likely to support scrapping the bills; indeed, some of them may be mollified if Abe is successful in amending the constitution.

There is also a simple, practical answer that explains why opponents of the laws may not be in favor of efforts to repeal them. Many in Japan would like to avoid a divisive debate that could distract the government’s attention from other priorities.
Japan’s economy shrunk more than expected in the final quarter of 2015, and its stock market has been in turmoil since the beginning of this year. No matter how unenthusiastic the Japanese might be about Abe’s security bills and his attempts to change the constitution, they would prefer that the issue be relegated to a back burner. That way, the government can focus on what voters really care about: turning the economy around and saving the country’s social security programs.

The most important and often overlooked thing Japan can do to support the US pivot and the long-term strength of the US-Japan alliance is to fix its economy and, in turn, further deepen and broaden US-Japan economic ties. So says Dr Satu Limaye, Director of the East West Center in Washington DC. Success in that area, combined with further defence collaboration with the US and improved Japanese relations with its neighbours, will be what Limaye calls the ‘triple crown’ of the continued centrality of the US-Japan relationship to the US rebalance to Asia.

According to Limaye, Japan needs to become again an engine for economic growth in the region. Without successfully addressing its economic problems, ‘Japan won’t be able to afford to fund its defence programs or respond to its major demographic challenges’, which include an ageing and declining population.

While the state of Japan’s economy might not be as bad as some say, Japan does have serious economic problems. Entrenched deflation resulting in weakened demand, slow growth, government debt more than twice GDP and structural problems are all issues the Abe administration is seeking to address. Limaye hopes that Japan will find the solution to its economic troubles through Prime Minister Shinzo Abe’s ‘Abenomics’. Read more