- Ishiba wins leadership race for Japan’s Liberal Democratic Party
- His approach to monetary policy is the opposite of previous Abenomics
- He seeks to reduce the budget deficit and raise rates and taxes
- However, analysts doubt he will be able to deviate significantly from the party’s vector
Shigeru Ishiba, who won the struggle for the post of the head of the Liberal Democratic Party of Japan, now has the opportunity to realize a different vision of the necessary political and economic initiatives.
He is a well-known critic of the so-called Abenomics, a series of initiatives introduced under Shinzo Abe, the key criticism of which was the negative interest rates of the Bank of Japan.
He sees the salvation of Japan’s economy in higher interest rates, taxes, and more attention to filling the national debt.
However, many note that the overall impact of Shinzo Abe’s political legacy remains very strong, and not everyone is convinced that he will be able to realize a dramatic change of course.
Shigeru Ishiba Vector and Criticism of Abenomics
Shigeru Ishiba is a prominent critic of the so-called Abenomics, Shinzo Abe’s economic policy of loose monetary policy, fiscal stimulus and tax-cutting reforms, and the Bank of Japan’s famous negative interest rates.
In his opinion, this is what is causing Japan’s economy to stagnate and create a government budget gap, and has generally failed to deliver the expected results, creating a volatile environment for investors.
He is in favor of tightening fiscal policy and raising taxes, which in his opinion should make up for the budget deficit, a more stable economic state of Japan, and as a result a more favorable environment for investors.
Part of his policy is to support the young population, which by the way is part of the big demographic problem in which Japan is one of the leaders in the world. Also, his policy is aimed at supporting the agricultural sector and rural areas of Japan, not only the inhabitants of modern approaches and technological infrastructure.
Reaction to the Shigeru Ishiba Victory and Doubts About His Initiatives
First of all, it is worth noting that some analysts consider the recent drop in the Nikkei 225 to have had Shigeru Ishiba among other reasons. Since his vector is not a typical one for attracting investments, it did give reasons to think so, although, of course, it is more a part of the full of factors.
Analysts also have doubts as to whether Shigeru Ishiba’s initiatives will actually materialize, as they believe that Shinzo Abe’s political legacy and faith in Shinzo’s course continue to have strength and broad party support.
“The legacy of Shinzo Abe is still enormous, and how to engage with that legacy and whether it’s time to course correct has become a defining question in the LDP race,” said Tobias Harris, founder and principal of Japan Foresight.
“Based on what he’s said in the past, he appears to be a leader with a new mindset and vision for the country,” said Sayuri Shirai, professor at Keio University and a former BOJ board member, adding that Ishiba and Takaichi had represented very different wings of the party.
In doing so, Shigeru Ishiba hinted that he would be radical to take drastic steps to raise rates to leave the economy favorable, and would follow Prime Minister Fumio Kishida’s approach to trying to pull Japan out of years of deflationary pressures.
“This concept of deflation is a continuation from Abenomics through Kishida’s term. As long as they continue to say this, it suggests that the BOJ will need to keep very low interest rates for a very long time,” Shirai added.
Conclusion
We have seen the head of the BOJ become a representative of a fundamentally different view of the economy, and a firm believer in a fundamentally different approach, despite being from the same political party.
Will he be able to bring radical change, how dramatically will he do it, and most importantly, is he right in his vision of where the problem with the Japanese economy lies?
We will see soon, stay tuned.
