After two official terms and nine years in office, Shinzo Abe is stepping down as Prime Minister of Japan. He is replaced by 71-year-old Yoshihide Suga, formally the Chief Cabinet Secretary but informally, Abe's right-hand man. The question becomes, will Suga try and reinvigorate Japan's Economy using new methods, or will it be another term of Abenomics, without the Abe?
Born as a farmer's son, Suga has been touted as a "behind the scenes" deal maker, highly demanding and not afraid to side-line individuals who do not perform or are not aligned with his thinking. Suga pushed his administrative reforms through Japan's often strong bureaucracy, sometimes using heavy hand tactics. This contrasts with Shinzo Abe, who was a son of a political dynasty, who was groomed to be in office from a young age.
Being Abe's right-hand man, its not surprising that political analysts predict little change to how the Japanese Economy is run. Kazuto Suzuki, a vice-dean and professor of International Politics at Hokkaido University, stated that "Suga is expected to be an "Abe Substitute," which helps us better understand to what the future holds with Suga at the helm. Furthermore, Etushi Tanifuji, a political science professor at Waseda University, stated that "Suga does not have a grand vision for Japan and is more of a problem solver, which worked for him as chief Cabinet Secretary but could be problematic as Prime Minister." Etushi also states that Suga is not the type of politician to have an "ideology" that "they act with.. as their guiding light" like other politicians do.
Possibly. CNN states that he was an essential ally to Abe's efforts enacting his series of economic policies – famously known as "Abenomics." The question arises whether we will see Suga deviate away Abenomics in pursuit of "Suganomics," whatever that may be – or will we see Abenomics 2.0? Suga has not released any official policies that he promises to enact, primarily because he did not really have to win any voters as he was voted in by his party. However, we can try to analyse what will happen if there is a continuation in "Abenomics" in this post Coronavirus world.
Abenomics consists of three parts, or three "arrows" – aggressive monetary policy, fiscal stimulus, and policy reform. Abenomics was an attempt to reinvigorate Japan's Economy from a slump after a real estate and stock market burst in the early 1990s, leading to two decades of no nominal growth in the Economy.
In general, Abenomics was successful in deterring deflation. However, it has not been able to spur inflation back up. Throw in the Coronavirus pandemic, and that goal is all but unachievable.
The current issue with Abenomics is that it struggled to spur inflation during a period of expansion in the Economy. With the Coronavirus forcing central banks and government to prop their respective economies back up, Japan doesn't have much monetary room left to give due to most of it being spent on Abenomics.
Abenomics + Coronavirus has put Japan between a rock and a hard place. Propping up the Economy will essentially spur a period of Abenomics on steroids. However, that only brings Japan back to a Pre-Coronavirus situation – which was not the best place to be in.
We can only hope that Suga comes in and attempts to spur Japan's Economy by implementing contrarian policies. However, Suga's role may merely be a formality rather than a symbol of a brighter future.
Anish Lal, did some amazing analysis on the USD/JPY and the potential moves it may make during Suga's term. You can watch it here.
Prime Minister of Japan, Shinzo Abe is set resign to after worsening health conditions.
Shinzo Abe, 65 years old, has been battling Ulcerative Colitis, a chronic digestive condition that also forced him to step down as Prime Minister in 2006-2007. During the announcement, the Japanese TOPIX pulled back with the Japanese Yen strengthening against the U.S. dollar by 0.5%.
When Abe took the role of Prime Minister, he quickly started economic reforms, which promptly coined the term “Abenomics” by economists. His economics was an attempt to help pull the country out of the GDP slump Japan were in. Before Abe was nominated in 2012, Japan's nominal GDP was the same in 1991. Deflation was also on the rise due to the increase in the aging population not willing to spend money. After a year he was elected, the stock market rose 55% alongside an approval rating of 70% at the time.
Abenomics focused on looser monetary policy, fiscal stimulus, and structural reform – most famously, implementing negative interest rates alongside quantitative easing. Immediate effects were seen, with a weakening in the Japanese Yen boosting exports and an increase in the stock market alongside a decrease in unemployment. Between 2012 and 2016, the Japanese Yen depreciated against the U.S. dollar by 50%.
It is uncertain who will take Abe’s spot. Shigeru Ishiba, the former defense minister, is regarded as the best pick from voters as he has backed economic policies more populist that Abe’s when Japan is seeing a rise in a populist movement. Other potential candidates include Finance Minister and Deputy Prime Minister Taro Aso, and Chief Cabinet Secretary Yoshihide Suga can take over Abe’s role.
With the Coronavirus creeping back up in Japan, Shinzo Abe’s resignation comes at a time where political insatiability will come as a burden to a full recovery of an already declining economy from the Pandemic.