Sunday’s upper house election is a very significant victory for Japanese Prime Minister Shinzo Abe and his Liberal Democratic Party. With this win and an improved performance of the Japanese economy in the first half of this year, the government can finally look forward to a bout of political stability. Japan needs it: Mr. Abe is the 10th prime minister since the turn of the century.
But it remains to be seen whether the LDP will allow Mr. Abe to use the credit and credibility that these wins have provided and continue his radical departure from Japan’s and Japan Inc.’s business-as-usual style. In many ways, his vision runs directly across the priorities of the interest groups that have traditionally been the strength of a more conservative party.
While many Canadians experience Japan through its cuisine and manufactured products, it remains remarkably self-contained in many ways. The share of its exports to GDP is the lowest among the G8 plus China. Its foreign direct investment stock is 4 per cent of GDP: Everyone else is well into the double digits. Among Asian nations, only North Koreans speak less English than the Japanese.
Mr. Abe wants to transform Japan. He believes that two decades have been lost to preserving dysfunctional social and economic systems while the rest of the world has globalized. He believes that profound social change must be part of Japan’s transformation. Women must become full participants in society. Education must be internationalized, with foreign language training from grade school onward, and with universities that can compete with the world’s best. Foreign talent must be welcomed and become part of the Japanese social fabric.
The economic agenda is equally ambitious because only a truly open Japan can sustain growth. Mr. Abe wants to make starting a business easier. He wants to adjust the tax regime to encourage the broad availability of risk capital. He proposes to establish a business environment as open as that of the United States, Britain and the other leading economies. He wants to increase competition within Japan’s oligopolistic structures by liberalizing trade through agreements such as the Trans-Pacific Partnership and new bilateral agreements. And he wants to double foreign direct investment by the end of the decade.
Easy to say, hard to do. One can be certain that as Mr. Abe basks in victory, those both within and outside his party opposed to achieving any and all of these reforms will begin working in earnest to sabotage or ring them in. They and their allies in the bureaucracy know that the real game is in the details of the regulations that have to be amended or eliminated to begin to achieve Mr. Abe’s goals. His challenge is to turn electoral victory into irresistible political momentum and authority.
Canada has a direct interest in Mr. Abe’s success. Citizens of a more confident Japan will be more engaged investors, consumers and tourists. The Canada-Japan Economic Partnership Agreement, now in negotiation, will deliver its benefits to Canada if Japan is further committed to openness, including sensitive areas such as agriculture and services. There are new markets to be developed in areas of Canadian expertise: Electric power production and distribution; alternative energy technologies; pharmaceuticals; and elder-care products and services – all identified by Mr. Abe as priority sectors for foreign investment and trade. Mr. Abe wants every Japanese student who wishes to study abroad be able to do so: They should come to our top-flight universities and colleges.
Canadians may not be help Mr. Abe fight his political battles at home, but the government of Canada can use its diplomatic assets and skills to encourage a more positive geopolitical environment in Northeast Asia, where Japanese, Chinese and Korean interests increasingly clash. The new Japanese government’s domestic policies will come to naught if the focus is on the day-to-day management of a fractious regional environment. Canada should do everything in its power to encourage regional political and security dialogues, trade and investment liberalization and the multiplication of civil society contacts.
With that kind of international support and through its own efforts, Japan may indeed be back.
Joseph Caron is a distinguished fellow with the Asia Pacific Foundation of Canada and former ambassador to Japan, China and high commissioner to India.