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Area of Work: Regional Cooperation Integration

As Japanese Prime Minister Shinzo Abe starts his new term in office, his priority was captured in his new year message. “This year, we will once again make the economy the foremost priority, delivering the warm winds of economic recovery to every corner of the nation,” he said.

He has smartly captured his putatively irreplaceable game plan in the slogan, “This is the only way”. However, he faces key challenges to translate his vision into reality.

Like his  grandfather Nobusuke Kishi, the prime minister from 1957 to 1960, Abe is no stranger to pushing through unpopular policies that may ultimately bring positive results. Kishi set the tone of Japan’s strategic alliance with the US that initially stirred wide protests but in the end had momentous consequences. Abe now has the opportunity to revive the floundering economy by pushing reforms which include not only the popular monetary and fiscal stimulus, but also the tough acts of overhauling the economy with a consumption tax hike, corporate tax cuts, labour market restructuring and deregulation in sectors like agriculture.

On December 27, the government announced a fresh stimulus package to spur dynamism in the economy. By revamping the economy through a delicate calibration of the three levers of “Abenomics” – fiscal stimulus, monetary easing and structural reforms – Abe expects to pull his country towards a new growth path.

On the international front, Abe pledged in his New Year statement to expand the role of the Self- Defence Forces. His programme of a “proactive contribution to peace” aims to reconstruct Japan’s stature as a peaceful global power with an important strategic role. In the Asia-Pacific, Japan needs to work out a modus vivendi with China, which is playing a leading role in economic diplomacy in the region.

China is one of Japan’s largest trading partners and people-to-people relations show signs of warming. Last year saw the highest number of Chinese tourists visiting Japan. Regarding the island disputes that have edged close to flashpoints in recent years, newly released British government files indicate China and Japan have earlier precedents of mutual accommodation on the territories.

Rather than rubbing salt into old wounds by visiting the Yasukuni Shrine, Abe’s recent statement referring to Japan’s remorse over the Second World War and post-war contributions to peace signals a forward-looking approach. Chinese President Xi Jinping reinforced the approach when he said in a speech that “the Chinese and Japanese people shall learn from the past, look to the future, and work together to contribute to peace in the world”.

In November, Abe struck the right balance by shaking hands with Xi while firming up the country’s long-standing partnership with the US. Talks on a free trade agreement between Japan, China and South Korea, the proposed Regional Comprehensive Economic Partnership, and the Asia-Pacific Economic Cooperation forum could provide windows for further economic cooperation between the two nations.

On the social front, an important priority of Abenomics is to buoy wages to raise household spending. The national budget must accommodate welfare costs of the elderly, who constitute a quarter of the population and are a key bastion of support for Abe’s Liberal Democratic Party. Abe’s goal of increasing the workforce participation of women highlights social inclusion and women’s empowerment. This is a welcome course correction for Japan.

Abe has demonstrated boldness and vision but whether his promises will deliver remains to be seen. Careful but reform-oriented economic management, complemented by an enlightened foreign policy and social progression, are crucial to sustain the momentum.

Syed Munir Khasru is chairman of the international think tank, The Institute for Policy, Advocacy, and Governance (IPAG).

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