Key Challenges

Leading economy
despite major problems
Japan provides a high standard of living and safe living conditions for more than 120 million people. Despite major problems such as a rapidly aging population and an inadequate integration of women into its workforce, it has remained one of the leading economies in the world, and its rate of per capita economic growth is in line with that in the United States or the European Union. Notably, however, disposable incomes have risen little in recent years, and real consumption per capita has been flat. In a country that was once hailed as the epitome of equitable growth, a new precariat has emerged, with 40% of the labor force working in nonregular positions.
Structural reforms necessary for stability
If stability is to be achieved, the Abenomics program’s short-term expansionary measures must be followed by serious structural reforms. Vital policy objectives include the significant reduction of protectionist agricultural provisions, the creation of a more liberal labor-market regime, the provision of effective support for well-educated women, the establishment of a more liberal immigration policy with corresponding integration policies, the development of a convincing energy policy in line with the 2015 Paris Agreement, and the introduction of better-targeted social-policy reforms.
Key reforms delayed
by elections
Some progress has been made, for instance in the area of free-trade promotion, but more has to be achieved, and swiftly. For example, labor-policy reform bills were delayed during the review period because of the snap elections in 2017, while even the draft measures appeared to place insufficient priority on distributional outcomes.
Nuclear policy should
be rethought
The resistance to restarting nuclear reactors among the public, regional governments and even the court system should lead the government to rethink its strategy and seek a more acceptable energy policy that conforms with the 2015 Paris Agreement goals.
Window for genuine progress closing
The window in which genuine progress can be made is closing, as macroeconomic stimulus has its limits. The administration has pushed the central bank further toward activist policy, promised to increase government expenditures, and earmarked expected consumption-tax increases for further public spending instead of debt reduction, all moves that increase the danger that the public finances will be pushed into unsustainability.
Tricky security, regional-relations balancing act
In the field of foreign and security policy, it will be very tricky for the LDP to balance its assertive reformulation of security laws and possible further moves toward constitutional change with these policies’ potential negative effects on (regional) foreign relations. The limited popular support for this policy direction will only further exacerbate these hurdles. While Japan has enjoyed a good start with the current U.S. president, and while the dangers of even more protectionism globally seem somewhat reduced, this does not diminish concerns about other challenges such as the specter of a nuclear arms race in the region and increasing tensions with a resurgent China.
Majorities bolster
vested interests
The ruling coalition’s comfortable supermajorities in both chambers of parliament provide the government with both opportunity and challenges. They seem to give the government the necessary leverage to push through reforms, but also strengthen the position of parliamentary vested interests that oppose a disruption of the comfortable status quo.
Economic reform should remain primary goal
It will be risky for the government to pursue its two major priorities, economic and constitutional reform, at the same time, since the recent past indicates that the coalition’s remaining political capital may not suffice to accomplish both. Without a return to a strong economy, constitutional change will not create a more self-assured Japanese state. Thus, socioeconomic reform should take precedence. In this regard, the government will need to strengthen alliances with interest groups that support the reform movement. This may include Japan’s globally-oriented business sector, which has little interest in seeing its home market further weakened.
Oversight functions should be strengthened
Courts, the media (including social media) and civil society movements should seek to improve their capacities to monitor and oversee the government. The government should not view media criticism as an obstacle to the fulfillment of its ambitions, but as a corrective in an open and democratic society that works to improve the fit between government plans and popular aspirations and concerns.
As of this date, the parliament does not provide effective governmental checks and balances. Parliamentarians need to make better use of their resources to develop alternative legislative initiatives.
Local policy experiments promising
The difficult search for country-level solutions should be combined with policy experiments at other levels. The post-2014 introduction of new special economic zones is a welcome step, but this strategy should be both bolder and broader.
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