The assassination of former Japanese Prime Minister Shinzo Abe ahead of elections on Sunday has shaken Japan to its core. In a country that averages 10 deaths by gun per year and buying a gun requires a massive struggle with bureaucracy, Abe’s murder while campaigning on behalf of a junior party candidate has been particularly shocking.
As the world’s third-largest economy grieves the loss of its longest-serving prime minister, it is his legacy on foreign policy and in defining Japan’s position in the global order of the 21st century in particular that takes center stage.
Yet when Abe took office for the second time in 2012, it was his economic plan that was at the heart of his policy agenda. Declaring that “Japan is back!” to a packed audience at a Washington, D.C., think tank months after his appointment, Abe outlined his economic revitalization plan that came to be known as “Abenomics”.
By pushing for greater public spending, pursuing monetary easing, and pressing for structural reform, the three-point plan was expected to jump-start Japan’s sluggish economy. Like Margaret Thatcher and her push to get the ailing British economy back on its feet in the 1980s, Abe’s goal was greater competitiveness for Japan, even if it meant politically unpopular policies.
But Abenomics was not the wind for change that Thatcherism had been for Britain.
His most successful, lasting economic plan actually did not stem from Abenomics. Rather, it came from his ability to champion free trade not only to Japanese voters but also to other countries, despite growing unilateralism both in the United States and Britain.
When the Trump administration pulled out of the Trans-Pacific Partnership (TPP) free-trade agreement in 2017, it was Japan under Abe’s leadership that made sure the 10 other countries remained. He championed its successor, the Comprehensive and Progressive Trans-Pacific Partnership, which continues to be the central framework around which like-minded countries across Asia and beyond rally for fair trade and commitment to the rule of law.
What’s more, it was under Abe’s leadership that Japan signed bilateral trade deals with both Britain and the European Union, thereby solidifying the country’s position as a champion of fair trade.
But while Japan’s economic diplomacy gained momentum under Abe’s leadership, his impact on the domestic economy after eight years in office remains debatable.
The three so-called arrows that were the foundation of the plan may have been to tackle corporate inertia and boost efficiencies, but increasing public spending was hardly the way forward to reform. Rather, it was more a page off the traditional playbook of economic stimulus championed by his conservative Liberal Democratic Party.
With monetary policy, the Abe government pursued quantitative easing to increase liquidity, and the Bank of Japan also pursued an aggressive asset purchase program. In 2016, the central bank also began to pursue negative interest rates as a means to stimulate investments. But by 2018, it became clear that the policies had limited impact in increasing the attractiveness of Japanese assets. The goal to increase the inflation rate to a targeted 2% also remained elusive — until now, and it remains low compared with price increases seen elsewhere.
Efforts for structural reform, too, were lackluster. While signing on to free-trade deals meant opening the agricultural sector still further, efforts to encourage entrepreneurship, jump-start innovation, and bolster diversity in the workplace fell short.
While Abe can be credited for shedding light on key issues that could boost Japanese competitiveness, including encouraging more women in the workforce and at the executive level, the rhetoric fizzled without taking root.
In reflecting on Abe’s legacy, his supporters will undoubtedly focus on the lasting influence of his vision for a Japan as a global power in the 21st century that could rally like-minded nations to counterbalance threats to the liberal order and act as a stabilizing force in a tumultuous region.
But unlike Thatcher, Abe’s namesake economic policy will not be seen to have heralded an upswing in Japan’s economic competitive edge.
Shihoko Goto is Director for Geoeconomics and Indo-Pacific Enterprise as well as Deputy Director for Asia with the Wilson Center, a Washington DC-based think tank.
