Japan’s Latest Leader Needs To Change Course Or Face An Early Exit

Japan’s latest prime minister has only been on the job for 135 days. For many in this country of 126 million, though, Yoshihide Suga is rapidly wearing out his welcome.

Not that most expected an explosion of fresh thinking and reformist vigor from a man who served for eight years as chief cabinet secretary to Japan’s last premier, Shinzo Abe. They did think, however, that Suga would put his technocratic skills to use containing Covid-19, stabilizing the economy and implementing a couple of his own policy initiatives.

Instead, Suga has seemed largely absent as Japan’s challenges mount. These included a second wave of coronavirus infections overwhelming hospitals, and the likely cancellation of the Olympics set to begin in July.

Now, something else has gone missing: Suga’s public support. A recent Mainichi newspaper poll put his cabinet’s approval rating at 33%, exactly half that after he took power on Sept. 16. He’s already in the danger zone for Japanese leaders, suggesting we may soon see the end of his days in power.

This means the political capital Suga needs to roll out bold new stimulus is dwindling. With support rates comparable to Donald Trump in the last days of his presidency, Suga has little scope to implement even modest structural reforms. And it follows that Suga is likely to be just another short-timer in Japan’s top job.

Even if Suga holds on for eight months until the next election—an increasingly big “if”—his premiership will have signaled a return to the pre-Abe political revolving door cycle.

When Abe stepped down four-and-a-half months ago, he was Japan’s longest-serving leader. The previous six governments each lasted about a year. Abe’s determination to survive seven-plus years in office stemmed from concerns leaders came and went too quickly to accomplish big things.

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Despite his lengthy tenure, Abe’s reform legacy is a modest one. He mostly outsourced economic management to the Bank of Japan. Rather than loosen labor markets, cut bureaucracy, recalibrate tax incentives toward startups and empower women, Abe bet it all on quantitative easing moves that cheered stock investors.

It fell to Suga, Abe’s loyal lieutenant all those years, to do the heavy lifting on reforms. Suga has been maddeningly laid back about disrupting the status quo. He’s made no real headway on pledges to digitalize an obsessively paper-based government, slash mobile phone fees or upgrade regional banks.

Suga might’ve been able to spin his inaction as Covid-19-related if he flattened the infection curve. He can’t, as Japan’s cases surge and imperil the 2020 Tokyo Olympics, an event already delayed by a year.

The hemming-and-hawing over the Games is doing its own damage to Suga’s no-nonsense reputation. So is the glacial rollout of a vaccine program to prepare Tokyo for the 1 million-plus visitors it thinks it will host six months from now.

Suga’s weakness should be of global concern. Even after 20 years of battling deflation, Japan has the third-biggest economy. It’s the printer of a top-three currency, home to some of the globe’s biggest stock markets and public pension funds and boasts a vast assortment of dominant multinational companies.

Yet Suga’s lame-duck status augurs poorly for Japan’s ability to contribute growth to a pandemic-traumatized globe. Abe’s failure to get under the economy’s hood was apparent from how quickly Japan stumbled in 2020.

Japan also demonstrates the epic disconnect between the plight of households and stock valuations. Gross domestic product is plumbing 30-year lows while the Nikkei Stock Average hits 30-year highs. This speaks to the funhouse mirror the global economy became in the coronavirus era.

This divergence suggests Tokyo’s debt load will continue expanding apace as deflationary pressures return. The 1% annualized drop in core consumer prices in December was the biggest in 10 years. A reminder of how little Abe, with Suga at his side, accomplished.

It’s a reminder, too, that the roughly $3 trillion Tokyo is throwing at its Covid-stunned economy is just the beginning. This means projections that Japan’s debt-to-GDP ratio will rise to 250% may prove too optimistic.

Might Suga step up efforts to weaken the yen to give exporting giants a boost? That would be an early test for his working relationship with Joe Biden’s new White House.

Suga is Biden’s chief ally in Asia as the new U.S. leader sorts through the wreckage, both economic and geopolitical, that Trump left behind. In their first phone call this week, the ways in which China now dominates the Asia-Pacific was Topic A.

Will Suga still be around at the one-year mark of Biden’s presidency? That will depend much on how quickly Suga can save his flagging premiership.

An obvious priority is a more assertive Covid-19 response: increased testing; better contact tracing; a faster deployment of vaccines. Japan has yet to roll out the kinds of contact-tracing smartphone apps being used in China, South Korea, Taiwan and elsewhere.

Suga must accelerate moves to remake a $5 trillion economy falling behind China. It’s a hot-potato issue that previous leaders failed to adequately handle. At the very least, Japan must use tax tweaks and regulations to make space for a startup boom. One factoid worth noting: Indonesia is beating far more advanced Japan in the race to produce tech “unicorns.”

Tokyo must find the courage to say what 80% of Japanese already know: the Tokyo Olympics is off. The idea of bringing waves of athletes, corporate executives and spectators from around the globe to one of humankind’s most densely populated cities during a pandemic is beyond irresistible.

The question, too, is whether Suga’s premiership is beyond repair. That’s up to him and his ability to win back public opinion. Yet Suga’s team might want to start updating their resumes.

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