TOKYO — Japan’s Shinzo Abe will put his prime ministership to the test Sunday in a snap parliamentary election that will give him four more years to try to put the economy right and pursue his goal of making Japan a “beautiful” country again.
Abe’s decision last month to dissolve the House of Representatives and call the election, two years early, was viewed at first as something of a rash move, with analysts saying the prime minister’s ruling Liberal Democratic Party could lose dozens of seats.
But an almost nonexistent opposition and a slow realization that “Abenomics” remains the best option for reviving the moribund economy means that the LDP could in fact return with an even bigger majority.
“Abe will surely win the election,” said Iwao Osaka, a political scientist at Rikkyo University in Tokyo.
The latest opinion polls show that the conservative LDP and its partner, Komeito, are poised for a landslide victory. Some newspapers, including the left-leaning Asahi Shimbun, are even predicting that the LDP could increase its presence in the 480-member lower house from 294 to as many as 317 seats, giving it the two-thirds supermajority it needs to govern alone. Turnout, however, is expected to be low.
“But the problem is after the big win,” Osaka said. “To tell the truth, the situation won't change dramatically. The economy will be weak as before.”
Abe called the election essentially as a referendum on his economic policies, after official statistics showed that Japan has tipped back into recession despite his efforts to stimulate growth with a much-eased monetary policy and a huge injection of government spending. Trickier structural reforms are planned.
Abe also postponed an unpopular proposed increase in the consumption tax, by two percentage points to 10 percent. The three-point increase in April, the first in 17 years, has been blamed for the sudden slowdown in growth.
Fiscal hawks in the powerful Finance Ministry said the increase was needed to help Japan balance its books. The national debt is more than twice the size of the economy, and the social security burden will only get heavier in this rapidly aging society.
Credit agencies have downgraded or threatened to downgrade Japan’s rating since the decision to delay the consumption tax increase, saying Japan needs to deal with its deficit. But at the same time, the stock market is at its highest point in seven years, while the yen is at a seven-year low against the U.S. dollar, which should theoretically boost exports.
People who say the return to recession shows that Abenomics has been a failure are “totally mistaken,” said Etsuro Honda, an outside economic adviser to Abe and Japan’s answer to Paul Krugman. He has been a leading proponent of Abe’s pro-growth policies and had argued against the second tax increase.
“Previous governments were not brave enough to conduct bold and aggressive policies,” Honda, an economics professor at Shizuoka University, said in an interview Thursday. He has popularized the English catchphrase “TINA” — “There is no alternative” — in the prime minister’s office, which is reflected in the LDP’s campaign slogan: “This road is the only road.”
Honda, whose position is diametrically opposed to the belt-tightening views in the Finance Ministry, is advising the prime minister to press ahead with more subsidies for ordinary Japanese after Sunday’s election. “I’m advising him to distribute more money directly to middle- and lower-income households,” he said.
The effects of Abenomics would be felt gradually, he said. A huge cash injection from the Bank of Japan at the end of October will take six to eight months to filter through to the real economy, he said, while the structural reforms could take 10 years to work.
“But there is no other way to get out of deflation,” Honda said. “The fundamental problem is with people’s mind-set.”
Indeed, after 15 years in a deflationary spiral, people in Japan are not used to prices going up. They suffered from “sticker shock” as the first consumption-tax increase took effect. Compounding that, real wages have been falling, making things seem even more expensive.
“Whenever I go to the cashier, I find the price on the bill so high that it makes me think there might be something wrong,” Kayoko Kamiya, a 43-year-old housewife said as she watched her young children at a playground in Shinagawa, a central district in Tokyo. “It may be because we have a bigger family, but still.”
But neither is she wild about the idea of delaying the tax hike and kicking Japan’s fiscal can down the road.
“Well, we are only shifting the burden to my children, so it’s tricky,” Kamiya said. “Raising the tax earlier would make things at least easier later. I feel unsure if it’s right that the current generation doesn’t take care of the debt."
Others were more sanguine about the economy’s prospects, although they weren’t necessarily ready to credit Abe.
Seiko Usuba, a 50-year-old cafe owner in Shinagawa, said she hadn’t felt any positive effects from Abenomics but expressed optimism that Japan’s economy was through the worst.
“I don’t know how much of it is due to Abenomics, though,” she said, closing up her cafe after the lunch rush. “Their words sound superficial, and I don’t know what’s behind those words. I don’t think I can trust Abe much after all.”
For Abe, the economy is critical not only for its own sake, but also because a happy electorate gives him scope to push through his foreign policy agenda, which includes controversial items such as lifting some post-war constraints on Japan’s military. It would also give him more freedom to press ahead with other unpopular plans, such as restarting the nuclear power plants shuttered in the wake of the 2011 Fukushima disaster.
Beyond the statistics, it is Abe’s willingness to take bold steps that sets him apart, said Jesper Koll, managing director of research at J.P. Morgan in Tokyo, who has lived in Japan for almost 30 years.
“The reason Abe is popular is because he’s a leader. He makes decisions,” Koll said, adding that Abe’s decisiveness is in stark contrast with prime ministers past. “He’s the only guy they can trust to ensure that Japan doesn’t become a colony of China.”
Yuki Oda contributed to this report.