Fumio Kishida’s first year in PM office: Is Abenomics to end or stay?

Abstract

The article addresses the experience of Fumio Kishida’s first year as Prime Minister of the Japanese government with respect to its economic policy vision and implementation. The latter is presented by comparing it to the policy pursued over the past ten years by PM Kishida’s predecessors in the office, on the one hand, and to the commitments he announced during the 2021 election campaign, on the other. The paper notes that, in its basic moments, the economic policy of the cabinet of the new leader of the ruling Liberal Democratic Party continues the course previously maintained by the team of then-PM Shinzō Abe, known as Abenomics. This manifests itself in the specifics of the use of basic tools of macroeconomic policy, monetary and tax instruments to be named first, as well as in choosing priorities for the policy stimulating consumption and economic activity. The continuity of the course can be particularly illustrated by loose monetary policy; positive view of the depreciation of Japanese national currency; moderately expansionary fiscal policy relying on domestic borrowing; preference given to the interests of the corporate sector. Legacy inherited from previous administrations also includes the government striving to revitalize private demand; promoting investment in R&D, venture and innovating enterprises with particular stress on regional economies. Kishida’s particular emphasis on invigorating redistributive mechanisms and increasing labor share in national income has not yet led to material decisions and actions by the government. Nor did Kishida make progress with his commitment to expand the ring of beneficiaries of the capitalist market system, as part of his idea of “new capitalism”.In recent months, the attention of the government and its economic team has been largely focused on overcoming the consequences of the disruption of transnational chain lines in production, trade, and logistics, as a result of the coronavirus pandemic and rising geopolitical tensions. In addressing this issue, they prioritized subsidizing businesses and households to partially offset energy and food price hikes; securing diversification or localization of critical links of trade and production chains, as well as the exclusion of politically undesirable or unstable locations from them. At this stage, however, the actions of the government are limited to setting relevant goals and plans to provide finance for programs with effectiveness yet to be proved.