Japanese Prime Minister Shinzo Abe now has what he wants. Winning yesterday’s election gives his Liberal Democratic Party firm control of both houses of the Japanese parliament. Japan’s broad Topix and Nikkei 225 Index, up 41 per cent and 40 per cent respectively in the year to date, may greet the LDP’s upper house election win with further cheer. The PM has promised to help business by embarking on a legislative campaign to loosen rules for business and cut Japan’s 35.6 per cent corporate tax rate.
These measures, if implemented, look like a surefire way to please investors. Like his counterparts in the US and Europe, Abe’s choice as Bank of Japan governor Haruhiko Kuroda has stoked stock market gains by embarking on a US$1.4 trillion expansion of the monetary base. After his victory, Abe told Japan’s NHK Television: “this is a powerful message telling me to proceed with my economic policies. I want to make sure people feel the effects of the economic recovery as soon as possible”.
Such well-meaning phrases cannot hide the malaise that has largely over taken corporate Japan. Self satisfied after their stunning economic success the keiretsu rested on their laurels since the 1980s. When they woke up more than a decade later they had lost market share, revenue and profits to rivals in China, South Korea and Taiwan. Kuroda may have helped Japanese companies by making them more competitive internationally by helping to weaken the yen but fewer people are buying Japanese electronics. South Korea’s Samsung Electronics in size and product is even more ubiquitous globally than Sony was in its long-ago hey day. Sharp was reduced to asking Taiwan’s Hon Hai for money. Japanese ship builders which once ruled the waves, are now far behind their Chinese and South Korean rivals whose auto manufacturers are intent on brushing aside Toyota and Honda.
Until the world once again begins talking about Japanese industry in the way it does now about South Korea, Taiwan and China, Abe’s heralded reforms will be all for naught.