Professor Yashiro, one of Japan's leading economists, will look at the results of Abenomics (a term coined to describe Japan's economic policy while Shinzo Abe was premier) and Prime Minister Kishida's plans for what he calls a "New Capitalism."

1. The Results of Abenomics and
Kishida's New Capitalism
October 17th 2022
Naohiro Yashiro
n-yashiro@swu.ac.jp
Showa Women’s University

2. Outline
① First Abe regime (2006.9-2007.9)
Council on Economic and Fiscal Policy (CEFP)
② Second Abe regime (2012.12-2020.9)
Abenomics and the Three Arrows
③ Kishida regime (2021.10- )
New Capitalism and succession of Abenomics

3. First Abe regime as the successor
of the Koizumi reform
• Abe as the chief cabinet secretary of Koizumi;
• Succeeding the policy of structural reform
supported mainly by non-LDP voters;
• Accident of miss recording of Public Pension;
• Scandal and suicide of the Minister of
Agriculture Matsuoka Toshikatsu;
• Sudden resignation due to ulcerative colitis

4. Council on Economic and Fiscal Policy
• CEFP Membership
• Prime Minister
• Chief Cabinet Secretary
• Minister of Economy
• Finance, Trade&Industry,
General Affairs, Governor
of the Bank of Japan
• Ad hoc ministers invited
• 4 Private sector experts
• Minister of Economic
Policy in Koizumi and
Abe 1st were politically
appointed economists
• Heizo Takenaka and
Hiroko Ota

5. Major role of CEFP
• Officially, an advisory board to Prime Minister
• De facto decision-making body on economic
and structural policies;
• On average, held every week, one hour and
half
• Meeting records published in 4 business days;
• Clear direction by the Prime Minister at the
end of the meeting;
• Transparent process for economic policy
formation.

6. Throwing a high-end ball drafting
•
• Private experts prepare
the ambitious drafting
or a higher-end ball;
• Opponent ministers
push down the ball to
the lower end;
• After compromising, the
ball could still maintain
the lower end in the
strike zone.

7. Major agenda in the First Abe Regime
• Ceiling on the expanding government budget
• “Labor Market Big Ban” (employment reform)
• Reforming the public pension system;
• Decentralization of the government function;
• Market Testing of the public employment offices
• Open Sky Policy (International use of Haneda)

8. People’s support declined due to the
factors not responsible for Abe
The black and red line indicates the supporting ratio
of the cabinet and LDP

9. Major features of the Second Abe Regime
• No more the successor of Koizumi
• Higher priority on his own political agenda
leaving the structural reform issues;
• Macroeconomic stimulus rather than
improving the supply-side policies;
• No politically appointed economist as
economic minister;
• Assign the economic ministers the side jobs,
Amari (TPP) and Nishimura (Covid-19).

10. Abenomics as a copy of Reaganomics

11. Evaluation of Abenomics
• “Three Arrows” for recovering Japan
① Expansionary monetary policy A
② Fiscal expansion & mid-term consolidation B
③ Growth strategy (structural policy) E

12. Abe’s leadership in TPP and QUAD
• Trans-Pacific Partnership (TPP, also known as
TPP11), signed in 2018.
• Linking the US and its Canadian and Mexican
NAFTA partners with Japan, Australia, New Zealand,
and some Southeast Asian economies.
• Under Abe’s leadership, the Japanese government
made a significant effort to rescue part of the TPP
by negotiating the CPTPP, hoping the US might
return.
• QUAD as Japan, USA, Australia, and India

13. Accounting for 40% of the World GDP
and 10% of the population

14. Economic impacts of Abenomics
Comparison of Economic Indicators in the Abe Period
2012 2020 Increase
Nominal GDP(trillion yen) 500 558 58
Exchenge rate(yen/dollar) 85 105 20
Nikkei index 8664 23475 14811
Enployment(million) 62.8 67.2 4.4
Unemployment rate (%) 4.3 2.8 -1.5
Nominal wage(Year 2020=100) 98.8 101.6 2.8
Firm current profits(trillion yen) 48.5 71.5 23
Tax revenue(trillion yen) 43.9 58.4 14.5

15. Long-term stagnation of Japan’s economy
0
5,000
10,000
15,000
20,000
25,000
30,000
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
GDP（billion dollar, source IMF)
United States Japan China

16. Cheep Japan
925
771
710
657
612
490
483
390
0 200 400 600 800 1000
Suizerland
Sweden
USA
Euro
UK
China
Korea
Japan
Source: Economist
Big Mac price (Yen, 2022)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
70
80
90
100
110
120
130
140
150
Source; IMF
Exchange rates and US-Japan
interest rate gap
Exchange rate
US-Japan interest rate gap

17. Major structural Reform Agenda
• Rapidly declining and aging population
• Flexibility in the labor markets;
• Pension reform (raising the eligibility age);
• Reforming agriculture on rice price cartel;
• Digital innovation and administrative reform

18. Shrinking of domestic markets
and the population of age 20-64

19. An increasing and aging of the elderly
• The elderly accounts
for close to 40% in
2060;
• Needs for the “Age-
free Society” in
Japan;
• A growing number
of frail elderly
implies potential
“Silver markets.”
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
2055
2060
2065
Japan's elderly(1000, %)
Age 65～74 Age 75 above
above 65 above 75

20. Abe’s Labor Market Reform
• Council on Reforming the Work-style (2016-18）
• Setting legal ceiling on overtime hours worked;
• Urging wage increase to Keidanren;
• The law for equal pay for equal work between
regular and non-regular workers;
• The definition of “equal work” with non-
regular employees is for those with the same
years of experience in the firm.
• Shifting the burden of proof to the employer

21. The wage gap between regular and
non-regular workers (large firms,2021)
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
～１９ ２０～２４ ２５～２９ ３０～３４ ３５～３９ ４０～４４ ４５～４９ ５０～５４ ５５～５９
Age-wage profile of gender and employment status
(annual wage, 1000 yen)
Male regular Female regular Male nonregular Fenale nonregular

22. An increasing number of non-regular
employees due to a stagnating economy
10
15
20
25
30
35
40
0
10
20
30
40
50
60
70
1990 1995 2000 2005 2010 2015 2021
Source：Labour Force Survey
Regular and non-regular employees（million）
Regular Non-regular Unemployed Ratio of non-regular(％）

23. Income composition of the rice farmers
(fulltime farmers account for 22%)

24. Lack of the Social Security Reform
Life expectancy Pension eligibility
Femal e M
al e age Year
Japan 87. 5 81. 3 65 2025
Denmar k 81. 2 77. 1 67
I t al y 85. 4 81. 0 71 2067
Canada 84. 3 80. 2 65
Fr ance 85. 4 79. 4 66 2023
UK 82. 9 79. 4 68 2024
Ger many 83. 6 78. 7 67 2029
USA 81. 3 76. 3 67 2027
（Source）OECD Pension at a glance 2019

25. Widening social security deficit
0
20
40
60
80
100
120
140
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
兆円
出所）社会保障・人口問題研究所「社会保障費用統計」、財務省
社会保障給付と負担の推移
社会保障給付費 社会保険料 社会保障収支 公債発行額

26. Japan’s expansionary monetary policy
(Central banks’ assets to GDP)

27. Expansionary fiscal policy
0
50
100
150
200
250
300
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Government gross financial liabilities(% of GDP)
Japan United Kingdom United States Euro area 17
Source; OECD

28. Assessment of Abenomics
• Expansionary monetary policy has been
influential on the Yen depreciation, but not
in stimulating economic activities;
• It has worked for accommodating the fiscal
policy financing the deficits by keeping
interest rates low;
• Populistic policies with various direct cash
payments moving toward left-wing policies.
• METI bureaucrats provide short-sighted
ideas to Abe, avoiding structural reforms.

29. Kishida’s “New Capitalism”
• Improving the “quality” of capitalism
• Taxing on capital income initially;
• “Digitalized Garden City” as a major concept;
• Increasing jobs in the local area by digitalization;
• Transportation, education, and healthcare;
• Green policy with zero emissions by 2030;
• “Re-skilling” of middle/senior human capital;

30. Re-skilling of the Japanese workers
• Skill formation, mainly on-
the-job training from the
senior to junior workers;
• Subsidies of 100 million
yen in 5 years to the skill
formation in the firm;
• Subisidy to digital skills
should be to individuals,
not the firm.
Japan

31. Kishida at the crossroads
• Bureaucracy-led
arbitrary policies;
• Succession of the
Abenomics
• Subsidies for gasoline
and electricity;
• Cash transfer to the
public
• Subsidy to the individual
acquirement of digital
numbers;
• Economist advisors with
utilizing the CEFP
• Exit from expansionary
monetary & fiscal policies;
• Gradually shifting to
carbon taxes
• Direct transfer to the low-
income households
• Enforcement of using
digital numbers with the
consent of people;

32. Health insurance cards to be integrated
with “my number ID cards by 2024
• Digital ID is a passport
to the creation of a new
digital society.
• Aiming for all citizens to
obtain ID cards by the
end of March next year.
• But only 56 percent had
applied for a card now.

33. Kishida’s investment in human capital
(Recent speech at the Nikkei Summit on October 12)
• Exiting from the seniority-base wage system
and introducing the occupation-based ones;
• Re-skilling and mobility in the labor force
across firms and industries
• Subsidies to the firms for doing these reforms
• No accompanying reforms in the labor markets

34. Necessary reforms in the labor markets
• The current definition of “equal work” with
non-regular employees is for those with the
same years of experience in the firm;
• Shifting the burden of proof of equal
treatment on the firms, not the employees;
• Setting a new law on monetary compensation
for laying-off the employees in European
countries.

35. Political calendar in 2023
• Hiroshima Summit on May 19-21
• LDP Leadership Election on November
• Local uniform elections on September