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Dear Readers,

Japan is the world’s third largest economy, a fact often lost in all of the discussion about the US and China. But now that the US is actually pivoting towards Asia, Japan is likely to be in the spotlight on a host of global issues. This weekend’s parliamentary election in Japan assured support in the Diet for Prime Minister Fumio Kishida, who was quick to say that among his first priorities was a meeting with President Joe Biden as he headed to the COP26 meetings.

There is no doubt that concerns and tensions in the region are rising. In response, Japan is hiking its defense budget for 2022, which is ironic considering that Prime Minister Kishida’s family is from Hiroshima and he lost relatives to the atomic bombings in 1945. Serving as Minister of Defense for only seven days in 2017, he is the longest-serving (2012-2017) and perhaps most successful foreign minister in Japanese history.

Although the long-ruling LDP won a mandate on Sunday, as my podcast guest Richard Katz describes below, in an unprecedented election surprise Kishida’s number two, Party-Secretary Akira Amari lost his seat. If Kishida lives up to his reputation as a conciliator, he could appoint his competitor, conservative Sanae Takaichi to take Amari’s place, paving the way for Japan’s first female prime minister.

In the Osaka area the Japan Innovation Party did better than expected. Richard Katz is a long time observer of Japan’s economy and politics, and he has been well, cautious about Japan’s reinvigoration. Now however, he is enthusiastic about the prospects for Japanese growth and innovation. Just before Covid, he spent time in Japan conducting extensive research and has just completed a book on Japan’s new digital path. Rick has a keen sense of humor I am sure listeners will appreciate, and was an early EconVue contributor. I have posted his quick take on the election below, and some of his recent writings in Foreign Affairs among others. A more complete library is now available on his substack page, Japan Economy Watch and on EconVue.

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Recent Writings by Richard Katz

Key Initial Takeaways From Japan’s Election

1) The Liberal Democratic Party (LDP) did much better than expected, with a very sizeable majority (261) and an even bigger majority when its coalition partner is included: 291 seats out of 465. This gives Prime Minister Fumio Kishida strength within the party as someone who can bring victory, and the majority is large enough for him to claim a mandate for his policies.

2) The biggest winner was the Japan Innovation Party (JIP), a rightwing populist party that combines neoliberalist economics with nationalism at home and abroad. It quadrupled its seats from 10 to 40. However, the cognoscenti say that the party is still heavily-based in the Osaka region and has shown little ability to pick up lots of seats outside of that region.

3) The center-left Constitutional Democratic Party (CDP) was a serious loser that, unlike the JIP, it was unable to take advantage of discontent with the LDP. It lost several seats in the election.

4) Once again, low turnout was the key to the LDP victory. Unless people have a party to vote for, discontent with the LDP is expressed in low turnout. Only 55% of the eligible voters turned out, the third lowest since the current election system was put into place in the mid-1990s. Up to 30-40% of eligible voters are called “floating voters” in the sense that they don’t support any party. Many of them are very interested in politics but don’t vote when they feel they have no one to vote for. They came out strongly when they felt some force was offering real change, as in 2009 (69% turnout) when the opposition Democratic Party of Japan (DPJ) swept to power—the only time that the LDP was overthrown in an election. The CPD is the successor to the DPJ. Second only to the 2009 turnout was 2005 (67.5%) when reformist LDP Prime Minister Junichiro Koizumi purged from the party those who had voted against some of his reforms. The four lowest turnouts occurred from 2012 onward when the LDP returned to power under Shinzo Abe.

(Some of these numbers are initial counts, which could change by a seat or two.)

October 13, 2021 / Foreign Affairs

Why Nobody Invests in Japan

Tokyo’s failure to welcome foreign capital Is hobbling its economy.

August 2, 2021 / The Oriental Economist

Japan as 196th

How could Japan have come in 196th out of 196 countries, just behind North Korea? That’s what the 2019 data show for the ratio of inward foreign direct investment (FDI) to GDP despite years of efforts by Tokyo.

April 21, 2021 / Foreign Affairs

Japan’s Looming Climate Showdown

Tokyo Has a Chance to Break Its Coal Addiction—and Spark a Regional Energy Revolution

January 20, 2021 / The Oriental Economist

On Digitization, Think Bigger, Mr. Prime Minister

It’s a great first step. The digitization campaign announced by Prime Minister Yoshihide Suga will both save money and improve performance. Now, as the details of the plan are being worked out, PM Suga needs to think much bigger. His plan should be expanded in three ways.

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Lyric Hughes Hale
Editor-in-Chief
EconVue
Chicago
lyric@econvue.com
Twitter: @lyrichues
@HaleReport

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Hale Podcast-Episode 21-Richard Katz