Japanese Capitalism and Distributive Politics: Impact of the 2008 Global FinancialCrisis and Prospects of Abenomics

Abstract

The 2008 global financial crisis and the fall of the Liberal Democratic Party from power in 2009 generated strong political and economic momentum for change in Japanese capitalism. Yet, change — either in the direction of the US model of liberal market economy or a European model of welfare state — has been relatively limited in important aspects of Japanese capitalism such as corporate governance, state intervention, and lifetime employment system. One major factor that contributes to this lack of change is the importance of distributive politics in Japan. If divisions within the Liberal Democratic Party obstructed significant reform in the 1990s and 2000s, in recent years, strengthening party competition between the major parties has made reforming Japanese capitalism less likely. Strong competition has pushed major parties to rely heavily on government spending, constraining the incumbent government’s ability to introduce new policy tools that could potentially alter Japanese capitalism. Even ‘Abenomics’, ambitious as it may seem, is unlikely to have a profound effect on the nature and structure of Japanese capitalism. The resiliency of Japanese capitalism is largely a byproduct of Japan’s unchanging politics.