The man behind Japan’s bold, new Abenomics revolution is coming to meet the cautious Stephen Harper. Shinzo Abe will fly into Ottawa leading a country that’s just been awarded the Olympics and is suddenly feeling upbeat.
For the first time, Mr. Abe, Japan’s dynamic Prime Minister, will visit Canada for one-on-one talks with Mr. Harper on Monday and Tuesday. It will also be the first time since Mr. Harper’s earliest days in power, more than seven years ago, that Canada’s Prime Minister has been able to welcome a Japanese counterpart who is really, firmly, in charge.
They both want to talk about trade deals and Japan’s potentially voracious appetite for Canada’s natural gas. And there’s a bigger picture of how Mr. Abe’s bold plans might fit Mr. Harper’s goals, even if they disagree on a lot of the economics.
Mr. Abe is trying to lift the country out of decades of doldrums, partly by using easy-money, big-spending economic policies. Mr. Harper has preached austerity to debt-laden countries such as Japan. In one sense, if Mr. Abe turns out to be right, Mr. Harper will be proved wrong. But Mr. Harper should hope Mr. Abe succeeds.
The Canadian Prime Minister has stressed the need to build economic ties to Asia. Mr. Abe’s project for Japan, the world’s third-largest economy, is to rediscover its dynamism by opening it to the world.
Japan has been suffering deflation and economic stagnation for two decades. It has a rapidly aging society. Its politics have been vacillating. Japan has had seven prime ministers – including Mr. Abe’s first, unsuccessful stint – since Junichiro Koizumi left office in 2006, and none had been able to impose his own will and a clear set of policies.
Mr. Abe, laying out a clear path, has changed the mood. “He’s articulating a vision of a once more dynamic Japan, an outward-looking Japan, instead of the inward-looking country that it’s become,” said Joseph Caron, the former Canadian ambassador to Japan. Mr. Caron said he noticed, on a trip to Japan during the past two weeks, “there’s definitely an upbeat mood.”
Abenomics seems to have sparked the optimism. It starts with a monetary policy that pumps money into the economy to try to stop deflation and cause modest inflation, triggering investment, consumption and – because of a falling yen – more exports. And it adds in big government spending to goose economic activity further.
All that is anathema to Mr. Harper, who only accepted stimulus spending as part of a brief, post-crisis global effort, and ever since, has been lecturing debtors, such as the EU and Japan on the risks.
But there’s another part to Abenomics, the hard part, and Mr. Harper must like it. It’s the plan to restructure the economy to liberalize agriculture and some industrial sectors, removing protections and subsidies to make them more competitive.
Those reforms would have immediate benefits for Canadian agriculture, which could export more to Japan but finds barriers to selling goods like flour and canola oil, Mr. Caron said.
One goal is to tie Japan into the new 12-nation Pacific Rim free-trade bloc in the Trans-Pacific Partnership (TPP) – trade talks that Japan entered earlier this year. That’s not also a lever for reforms, where trade rules will be used to justify domestic reforms. “It’s quite clear that they see this as a vehicle for internationalizing the economy,” Mr. Caron said.
And as it happens, Canada has its own, bilateral free-trade talks with Japan right now. Although Mr. Harper will want to emphasize that when Mr. Abe visits, the truth is that the TPP is a much more pressing priority for Japan right now. But a bilateral Canadian trade deal can end up providing advantages to Canada that aren’t available to TPP countries, even if it takes a little longer.
One question hanging over that, Mr. Caron notes, is whether Canada “can close a deal.” Mr. Harper, who hasn’t signed off on a big trade deal yet, could use some of Mr. Abe’s boldness. And Mr. Abe, despite his popularity, will face a lot of resistance to his reform agenda, and may never get it through.
It’s another question whether Abenomics really lifts Japan to boom times. Even if it doesn’t, it could change the way Japan deals with the world, and that could mean a lot for Canada.
Campbell Clark writes about foreign affairs from Ottawa