Japanese Prime Minister Fumio Kishida’s $ 670 billion stimulus package has baffled many

Like many small business owners, Omiya doesn’t blame the pandemic for its latest woes, but a long history of failure to restart an economy that in the 1980s was the envy of the world. “Ah, the eighties. It was fun. The era of bubbles. We were so busy. It was so easy to make money back then. I don’t think Abenomics has been successful.

Sixth wave of concerns

It’s a similar message on the streets, where there is almost a certain degree of resignation about Japan’s economic situation rather than anger towards the government.

“I’m especially worried about the arrival of the sixth wave,” said an 82-year-old woman who runs a souvenir stand. Her little shop is filled with boxes of commemorative Coca-Cola bottles bearing the Olympic logo. The tourists who were to flock to Tokyo for the Games never came.

“The Tokyo government said we would get money if we shut down during the pandemic, but we haven’t received any money yet,” says the little woman, who offers us packages of dried seaweed from the shelves. as a gift, refusing to take payment. She says the store, where she’s been working for 60 years, has been in her family for nine generations – roughly 300 years. She worries that it will have to close soon. “We work hard and pay taxes and politicians use the money however they want.”

Kishida has pledged financial assistance to small businesses in Japan. As in Australia, the pandemic hit them hard, but there is no marked economic rebound on the horizon in Japan, where decades of stagnant wage growth, heavy debt and deflation meant there was already problems before the pandemic.

Fumio Kishida was sworn in as Prime Minister of Japan earlier this month. Fixing the economy is his biggest challenge. PA

Australia is also betting heavily on Japan’s economic health as it seeks to diversify away from China and encourage more foreign investment from its third largest trading partner.

Data released this week showed that the Japanese economy contracted faster than expected in the third quarter, shrinking 3% annualized in the three months leading up to the end of September. As in many countries, consumer confidence has been hit hard by repeated outbreaks of COVID-19, although current infection rates in Japan are extraordinarily low, and by disruptions to the global supply chain.

Rating agency Fitch says Japan’s public debt ratio jumped to 255% of GDP in 2020, from 231% a year earlier, making it one of the most heavily indebted developed economies. Much to blame is an aging population that drives up health care and social security costs. While the Abenomics pushed for growth and helped fight deflation to some extent, they did not solve three decades of stagnant wage growth.

The OECD claims that annual real wages in Japan have only increased by 4 percent over the past 30 years to reach US $ 39,000 ($ 54,000). It’s harder to get a feel for Japan’s economic woes in a city like Tokyo which on the surface appears to be rebounding after 18 months of repeated waves of COVID-19, although it hasn’t been as badly hit as many countries.

Things are more difficult outside the cities. “You get out of Tokyo, and it’s beyond the rescue,” says Melanie Brock, an Australian consultant living in Japan who advises companies investing in the country. “All of these stores are closed and closed, there is no tourism because of COVID, and you have people who need care without the staff.

“There is also this incredible acceptance that it is their lot and their prefecture has always struggled to get support.”

Assistance package

Kishida, who was sworn in as prime minister this month after his ruling coalition won a nationwide election, wants to address these issues with a multibillion-yen budget spending package due to be approved by cabinet on Friday. , according to Japanese media.

The centerpiece of the package is cash payments of 100,000 yen for children aged 18 and under and a grant of 2.5 million yen for businesses. However, there are so far no details on how the additional spending will be financed or what policies are designed to stimulate long-term growth.

“I don’t have much confidence in my future. I’m afraid I won’t be able to find a job if there is another pandemic. I still have a sense of crisis, ”says Isei Fukeei, a 17-year-old student. Although he is entitled to the 100,000 cash payment, he won’t spend it right away because his parents want him to save money for college.

Student Isei Fukeei is not optimistic about Japan’s economic future.

Others accept any help they can get. Ms Misaku, 70, who works in a maternity clothing store, says the cash payments will be of great help for her daughter, a single mother with two children. But ask her what she thinks of Kishida’s “New Capitalism” and she grimaces and puts her hands on her head in confusion. “No idea,” she said.

One bright spot for Japan is that its COVID-19 infection rates have dropped significantly since the Olympics, allowing most businesses to reopen and revive domestic tourism. It is still unclear when its borders will open to international travelers.

Economists are mixed on Kishida’s ability to manage the economy, which is still in need of manpower and other structural reforms. He was re-elected because the opposition had not offered a stable alternative. Some are harder than others.

“We’ll call it ‘Stupidanomics’ because it’s basically a copy of ‘Abenomics’,” said Noriko Hama, an outspoken economic commentator and professor at Doshisha University’s Graduate School of Business. Shukan Gendai newspaper this week.

“The phrase ‘the virtuous cycle of growth and distribution’ is what Mr Abe used in 2016. Prime Minister Kishida is only copying that, so there is nothing new in his policy. fundamental is growth It may sound different, but nothing has changed.

Abe, Japan’s longest-serving prime minister, has presided over a period of relative stability, and his signing “Abenomics” has focused on structural reform, deregulation and privatization.

Many in Japan now believe that the economic program has run its course. Kishida’s “new capitalism” promises to tackle rising inequalities, but real reform seems difficult.

Additional reports from Noriko Honda

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