William Pesek is a Tokyo-based writer and author of “Japanization: What the World Can Learn from Japan’s Lost Decades.”
Leave it to Japan’s largest metropolis to morph shelter-in-place into a giant kabuki performance starring 8.3 million people.
Tokyo’s largely performative lockdown is also an apt metaphor for how Prime Minister Shinzo Abe is mismanaging an economy cratering by the day.
Japan staggered into 2020. Thanks in part to the U.S.-China trade war and an ill-timed tax hike, growth nose-dived 7.1 percent between October and December. This was well before covid-19 was a noticeable blip on Abe’s radar screen.
The fallout of the pandemic is now savaging exports, retail sales and corporate profits. Goldman Sachs reckons the economy will contract 25 percent in the current quarter, the most in modern memory. The bank predicts a 60 percent drop in exports, and that’s not a typo.
On April 7, Abe sought to put a floor under the third-biggest economy with $1 trillion worth of stimulus. The record jolt aims to provide cash handouts of $2,800 for needy households and aid to small businesses and allow a variety of tax and social-security deferments. At 20 percent of gross domestic product, Abe’s package exudes audacity — until you look closer.
Abe’s Liberal Democratic Party likes to add previous spending plans to new ones to score a bigger headline effect. This latest plan, for example, includes at least $240 billion announced in early December. Another problem: how means-testing for aid is colliding with Tokyo’s notorious bureaucracy. A speedy, generous stimulus this will not be.
Already, there are calls from opposition leaders and local governments for a bigger, faster and more easily accessible framework to reduce coronavirus damage. Abe is under pressure to repeal an October sales tax hike — to 10 percent from 8 percent — that economists warned against. Even better, why not scrap an earlier 2014 hike that caused a recession? That would drop consumption taxes back to 5 percent.
The coronavirus rescue also lacks new pledges to modernize the economy. Japan, after all, has been throwing ever bigger fiscal doses at the economy for 25 years now. In 2012, Abe won a popular mandate to shake up a rigid economy: loosen labor markets, catalyze innovation, cut red tape, empower women and attract foreign start-ups and talent. Like predecessors, Abe instead doubled down on public spending and central bank easing.
The same day Abe announced his uncreative economic plan, he unveiled his public emergency decree. Or as analyst Scott Seaman of Eurasia Group calls it, “lockdown lite.” It covers seven prefectures — Tokyo, Kanagawa, Saitama, Chiba, Osaka, Hyogo and Fukuoka — with about 56 million of Japan’s 126 million people. According to polls, the move is too little, too late.
With a recent surge in coronavirus cases taking the country’s total to the 5,600 mark, 70 percent of respondents to Mainichi newspaper agreed that Abe should have moved sooner. Though Japan has only a fraction of the U.S. caseload, its steepening curve and the relative paucity of testing have health officials fearing the worst. Kentaro Iwata, an infection control specialist at Kobe University, told CNN that Tokyo could be “the next New York City.”
Yet the vast majority of Japanese are still going to the office and taking crowded rush-hour trains. Japan Inc.’s traditions and rigidities are proving quite incompatible with teleworking booms abroad. Old habits die hard in paper-based Japan. Documents of all kinds require a physical stamp from an employee’s hanko, or personal seal.
Another roadblock is the outsize influence of Keidanren, Japan’s main business lobby and a major political contributor. Its power explains the epic foot-dragging over postponing the Summer Olympics until 2021.
These priorities have Abe sparring with Tokyo Gov. Yuriko Koike, who favors a broader clampdown to halt the spread of covid-19, in Japan’s version of President Trump’s daily tussle with New York Gov. Andrew Cuomo. The central government is more focused on limiting economic damage.
Abe also is involved in a Trumpian spat with prefectural leaders over who stomachs the costs of the emergency declaration. As clashes unfold, Japan is losing valuable time needed to stem the outbreak. And rather than get more serious about social distancing, Abe’s government is putting out lists of “businesses asked to continue operating” to maintain economic continuity.
Abe should dispense with the pandemic kabuki and call for a strict shelter-in-place policy. Though there are legal questions about enforceability, Abe could use the bully pulpit to urge Japanese — and companies — to comply. He should streamline the stimulus process and add more funding where necessary to restore vibrant growth. Otherwise, the economy could be in a state of emergency long after covid-19 leaves the theater.