Editorial Board

Shinzo Abe's Momentous Gamble

Japan's economic future, and his own political legacy, may well depend on next month's elections.

A lot at stake.

Photographer: Akio Kon/Bloomberg via Getty Images

If, as seems likely, Shinzo Abe wins the snap election he's just called for next month, he could become Japan's longest-serving postwar prime minister. A better legacy would be as the man who reshaped the world's third-biggest economy.

Anything less wouldn't be worth the risk. Abe's approval ratings have rebounded lately and the opposition is in disarray, but most Japanese oppose Abe's decision to call elections more than a year early. Four in 10 say they're undecided about who to vote for, and many could shift loyalties to a new party formed by popular Tokyo Governor Yuriko Koike. If the ruling Liberal Democratic Party loses seats, even a victorious Abe could face internal rumblings about his leadership. With nuclear tensions rising on the Korean Peninsula, the last thing the region needs is a Japan consumed by political dysfunction.

Abe came into office pledging first and foremost to transform the economy. He's made some progress -- bringing more women into the Japanese workforce, improving corporate governance, negotiating (and now, keeping alive) the Trans-Pacific Partnership trade agreement and welcoming more migrant workers into Japan's famously closed society. The economy has expanded for six quarters; at 2.8 percent, unemployment is the lowest among G-7 nations.

Yet the task is unfinished: Wages and consumption remain stagnant, and most new jobs are part-time positions that don't pay as well or offer the same benefits as full-time work. Growth is expected to slow in 2019 as the infrastructure boost for the 2020 Olympics wanes, while the Bank of Japan will soon face pressure to wind down its massive quantitative easing program.

Expectations that Abe might push through more dramatic structural reforms -- the so-called third arrow of his economic revival agenda -- have waned. His main focus now seems to be restoring Japan's status as a "normal" country, in part by strengthening the military and revising the country's pacifist constitution. Certainly, that's an appropriate -- and, given North Korea's provocations, necessary -- debate for Japan to have. Abe is justified in seeking to bolster the country's missile defenses. His strengthening of strategic ties with the U.S. and India should pay long-term dividends.

Nevertheless, Abe would do well to remember that nations are only as strong as their economic foundations. His pledge to spend new tax revenues on social programs, including education and child and elder care, may win him votes at the expense of shoring up the country's fiscal position.

If Abe wins next month's election, he needs to use it as a mandate to strengthen and accelerate his program for making Japan's economy more open, innovative and nimble. Japan's future -- and his legacy -- may well depend on it.

    --Editors: Nisid Hajari, Michael Newman.

    To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net .

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