© Reuters. FILE PHOTO: Fumio Kishida, Japan’s ruling Liberal Democratic Party (LDP) lawmaker and former foreign minister, announces his candidacy for the party’s presidential election at a news conference in Tokyo, Japan, August 26, 2021. REUTERS/Issei Kato
(Reuters) – Candidates who could become Japan’s next premier have begun to emerge following the announcement last week by Prime Minister Yoshihide Suga that he was stepping down as leader of the Liberal Democrat Party.
The LDP will vote on Sept. 29 for a new leader, and Suga’s successor will take the party into a general election that must be held by Nov. 28. Below are the key economic policy views of the candidates.
A former foreign minister with experience as a banker, Kishida had previously said if he were to become leader, fiscal consolidation would be a major pillar of policy.
He has also voiced doubts over the Bank of Japan’s (BOJ) prolonged ultra-loose monetary policy, saying in 2018 stimulus cannot last forever.
With the economy suffering from the COVID-19 pandemic, Kishida told a news conference laying out his economic policy on Wednesday that the BOJ must maintain its 2% inflation target and ultra-loose monetary policy.
He told a magazine on Monday that Japan needed a fiscal stimulus package of more than 30 trillion yen ($272 billion).
Kishida’s economic stance differs somewhat from that of Suga, who carried over much of his predecessor Shinzo Abe’s “Abenomics” reflationary policies.
Kishida said Japan cannot solve structural problems just by propping up growth, distancing himself from Abenomics that sought to fix tattered finances by achieving high growth and boosting tax revenues.
Kishida also stressed the need to distribute more wealth to households, in contrast to the focus of Abenomics on boosting corporate profits in the hope the benefits will eventually trickle down to wage-earners.
“There’s no doubt Abenomics has brought a major achievement on growth but in terms of distribution of wealth, trickle-down has not yet happened,” he said.
A former internal affairs minister and a close associate of Abe, Takaichi has said she would carry over a remodelled version of “Abenomics” including bold monetary easing.
Takaichi, referring to her economic vision as “Sanaenomics”, told a news conference Japan should freeze a goal for achieving a primary budget surplus, excluding new bond sales and debt-servicing costs, until inflation hits the central bank’s 2% target, so that both fiscal and monetary policies are kept expansionary.
“Sanaenomics has three pillars of bold monetary easing, fiscal spending and crisis-control investment,” Takaichi said. “We’ll mobilise all of them to achieve the 2% inflation target.”
While calling for a swift compilation and enactment of an extra budget to fund economic stimulus, Takaichi said there was no need to lower the sales tax rate from 10%.
She said earlier Japan should issue more government bonds to fund investment in growth areas because it does not need to worry about defaulting on its debt given current low borrowing costs and the central bank’s ability to keep printing money.
Having served as minister in charge of administrative reform and deregulation, Kono has called for cutting wasteful spending on areas including Japan’s ballooning medical fees. On his website, he also proposes accepting foreign workers to address a chronic labour shortage caused by a rapidly ageing population.
As head of a ruling party panel on administrative reform in 2017, Kono urged the BOJ to communicate more clearly an exit strategy from ultra-loose policy. He said the longer the BOJ keeps expanding its balance sheet, “the more difficult it would be to exit”.
At a news conference on Friday unveiling his policy platform, Kono said it would be “difficult” to achieve the BOJ’s inflation target, urging the central bank to keep in dialogue with markets. Specific monetary policy should be left up to the BOJ to decide.
Kono said Abenomics helped boost corporate profits, it had not yet benefited workers’ wages, adding that the focus should be on supporting individual citizens rather than corporations. He suggested the sales tax rate should remain at 10%. Kono signalled his readiness issue more bonds to create stimulus, but stopped short of giving an amount.
A former defence minister and a rival of Abe, Ishiba has been a vocal critic of Abenomics, saying the policies made stock-holders rich by propping up share prices but brought few benefits to workers.
He has also criticised the BOJ’s ultra-low interest rates for hurting regional banks and called for bigger public works spending to remedy growing inequality.
In an interview with Reuters last year, Ishiba said Japan’s fiscal and monetary stimulus measures had become so big that rolling them back could destabilise the economy.
He keeps a distance from advocates of big spending. In the interview, Ishiba voiced caution over cutting the sales tax or offering blanket payouts, saying any aid must be targeted to households and small firms hit hardest by the pandemic.
($1 = 110.2800 yen)