Japanese PM focuses on economy after election win

Japan’s ruling Liberal Democratic Party has won the majority of seats in nationwide elections, handing prime minister Fumio Kishida a mandate to stay in power.

Mr Kishida’s declaration that his country should revitalise its economy through “new capitalism” has left many observers puzzled over what he has in mind.

He said he believes a more equal distribution of wealth is needed to prevent the world’s third largest economy from sinking into stagnation.

Although this sounds radical, many analysts say Japan’s new leader does not stand for drastic change.

“With this definite support from the people, I will dedicate myself to working on policies and parliamentary efforts,” said Mr Kishida, who was chosen as the head of the governing party just a month earlier after Yoshihide Suga resigned.

The Liberal Democrats prevailed over weaker opposition parties despite widespread unhappiness – until a recent drop in cases – with the government’s handling of the coronavirus pandemic, perennial corruption scandals and a failure to deliver on promises for sweeping reforms intended to speed up growth.

Under former prime minister Shinzo Abe, who stayed in office from late 2012-mid-2020, the economy limped along with massive help from the central bank’s ultra-cheap credit and government spending.

Mr Abe’s successor, Mr Suga, stuck with that “Abenomics” program.

Now, Japan is waiting to see what “Kishidanomics” will bring.

“Kishidanomics remains a complete mystery to me,” said Kinuko Kuwabara, a free-lancer in Shizuoka Prefecture, central Japan.

“Maybe Kishida himself isn’t sure what he plans to do,” said Hideo Kumano, executive chief economist at Dai-Ichi Life Research Institute.

“All we have are slogans. It’s unclear how much you can really believe them and how they can be realised.”

Topping Kishida’s to-do list is another big dose of government spending to help Japan recover from the Covid-19 shock.

The economy grew at a seasonally adjusted annual rate of 1.9% in the April-June quarter, a tepid pace considering the severity of the pandemic downturn in 2020.

Although the disparity of wealth is greater statistically in the US than in Japan, Americans have access to more generous social welfare programmes, according to OECD data.

That means poverty is a growing problem in Japan, especially among single mothers struggling to make a living wage.

Mr Kishida backtracked from talk of raising taxes after a few days of stock market sell-offs, saying a higher capital gains tax — which would help redress Japan’s highly regressive tax regime — would have to wait until the economy was growing at a much stronger pace.

He now says he hopes to drive growth by slashing corporate taxes – which Mr Abe also did – in the classic “trickle down” strategy of encouraging companies to raise wages.

That approach has fallen flat, however, as companies hoarded their earnings.

Instead, a growing share of workers are employed part-time or on contracts that do not provide full benefits. The tax system, meanwhile, penalises families with two full-time incomes.