Key Challenges

Structural reforms needed for further growth
Serious structural reforms are needed in order to restore vigor and momentum to Japan’s economy. Vital policy objectives in this regard include a reduction in protections and restrictions within the agricultural sector, liberalization of the labor-market regime, the provision of effective and results-oriented support for well-educated women, liberalization of the immigration regime (paired with corresponding integration policies), energy-policy enhancements, and better-targeted social policies. Some progress has already been made in these areas, for instance with regard to a program inviting more foreign workers to Japan. However, other developments have moved in the wrong direction. Given that Prime Minister Abe famously vowed to “let women shine,” it is embarrassing that the cabinet appointed in late 2019 included only two women.
Population is
Overall, the Abe government, which has held power since 2012, has not whole-heartedly pursued structural reforms. It is thus not surprising that the population is overall among the most pessimistic in the OECD world. The prime minister himself has been ensnared in two major scandals in recent times. Notably, the electoral success of the LDP-led government derives less from its own popularity and performance levels than from the calamitous state of the opposition, a condition that is bound to change at some point.
Recession offers chance for new reform agenda
As the review period closed, a global recession already appeared to be underway, with the U.S.-China trade conflict as a major driver. This may not seem the best time for a decisive reform agenda. However, if country is exposed to the pressure of a global economic cooling, possibly including financial turmoil, this could in fact provide a rare opportunity to push through a far-ranging reform agenda. Providing the groundwork for such a sea-changing policy reorientation could become Abe’s most valuable legacy.
Fiscal expansion will require justification
Should Japan’s domestic economy be seriously impacted by a global economic downturn, appropriate macroeconomic policies will have to be implemented. Given the country’s already ultra-low interest rates, monetary policy can play only a supportive role in this regard. A fiscal response will instead have to be the instrument of choice, despite the country’s record-high levels of public debt. It will thus be important to create a convincing narrative legitimizing further fiscal expansion. For example, this could be led by a forceful effort to rebuild the energy system in line with the Paris goals, or a major infrastructure initiative intended to exploit the full potential of digital and artificial intelligence (AI) solutions within and across borders.
Rethinking of energy policy underway
Continuing opposition to restarting nuclear reactors on the part of the public, regional governments and even courts should lead the government to strive for a more acceptable and effective energy policy in line with the 2015 Paris Agreement. Some rethinking in this regard seems underway in government circles, which is to be welcomed.
Socioeconomic reform must take precedence
If the economy does not recover, constitutional change will not create a more self-assured Japanese state. Thus, socioeconomic reform should take precedence. To achieve this goal, the government will need to strengthen alliances with interest groups that support the reform movement. This may include Japan’s globally oriented business sector and its more unconventional tech and startup companies.
Balancing act in international relations
Moves toward constitutional change will have a negative impact on Japan’s foreign relations, particularly within the region. The limited degree of popular support for this policy direction also indicates that little can be gained in substantive terms by the quest for constitutional reform. The government will also need to strike a balance between better relations with an increasingly powerful China and the need to safeguard sound relations with the United States, which has become a difficult but still indispensable security and economic partner. Relations with South Korea are worse than they have been for many years, or possibly even decades, though the two democracies are natural partners that share many challenges. Common strategic interests should guide their forward-looking relations.
Reliable allies critical
in this environment
In its pursuit of a liberal rules-based multilateral system, Japan needs reliable allies. In this respect, the EU, Australia, Canada, India, New Zealand, some Latin American countries and, indeed, South Korea appear to be suitable partners with similar values and interests. The country’s policymakers should thus seek to build on the progress achieved over the past few years, including the 2019 Strategic Partnership Agreement with the EU. Japan should be consistent when cooperating with its multilateral partners, seeking to act as a model of international collaboration. This should include credible action in pursuit of its Paris climate commitments, and an end to any circumvention of generally accepted rules such as the ban on whaling.
Stronger checks on government needed
Japan’s parliament does not currently provide effective governmental checks and balances. Parliamentarians need to make better use of their resources to develop alternative legislative initiatives. Courts, the media (including social media) and civil society movements should also seek to improve their capacities to monitor and provide checks on the government. The government itself should not view media criticism as an obstacle to the fulfillment of its ambitions, but rather as a necessary corrective. Such a perspective would also help Japan’s image as a multilateral leader pursuing liberal, rule-based and democratic values.
Bolder experimentation called for
The search for country-level solutions should be combined with policy experiments on a more fine-grained level. The special economic zones or so-called regulatory sandbox schemes introduced in recent years are welcome steps in this regard, but the strategy could be both bolder and broader.

Party Polarization

“Big-tent” parties dominate political stage
Given the demise of the Japan Socialist Party in the 1990s and the continued marginal parliamentary presence of the Japanese Communist Party, party polarization has not been an important issue in Japan for many years. Both the center-right Liberal Democratic Party (LDP) and its more recent rival, the Democratic Party of Japan, have been “big-tent parties,” with personal allegiances to individual leaders and intra-party factions playing a bigger role than policy-related differences in terms of structuring intra-party competition.
Main parties show
broad agreement
While the LDP has moved toward the right in recent years (as reflected in the composition of its leadership and the views held by its parliamentarians), the main parties still show substantial agreement on many policy issues. The one especially divisive issue that has come to the fore since the advent of the Abe government in 2012 has been constitutional reform. At its core, this turns on whether Article 9 of the country’s constitution, the so-called peace clause, should be changed or not. Given the LDP-led coalition’s supermajorities in both houses of parliament, there is today a rare window of opportunity for constitutional change. Yet it remains unclear whether the current LDP leadership can achieve its stated goal of constitutional change by 2020 given the coalition’s loss of its prior two-thirds majority in the 2019 upper house elections, the ambivalent position of its coalition partner Komeito, and the additional hurdle of a referendum following parliamentary approval.
Polarization not a
serious obstacle
As there is currently only one, admittedly important, salient issue for which party polarization plays a significant role, it cannot be said that party polarization generally presents a major obstacle for policymaking in today’s Japan. (Score: 8)
Kenneth Mori McElwain, The Anomalous Life of the Japanese Constitution, Nippon.com, 15 August 2017, https://www.nippon.com/en/in-depth/a05602/

Kenneth Mori McElwain, Constitutional Revision in the 2017 Election, in: Robert J. Pekkanen et al. (eds.), Japan Decides 2017: The Japanese General Election, Cham: Palgrave Macmillan 2018, 297-312

Tomohiro Osaki and Daisuke Kikuchi, Abe’s dream to revise Japan’s Constitution drifts farther from reach as long-running scandals chip away at support, The Japan Times, 3 May 2018, https://www.japantimes.co.jp/news/2018/05/03/national/politics-diplomacy/abes-dream-revise-japans-constitution-drifts-farther-reach-long-running-scandals-chip-away-support/
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