Abe, Abenomics advocate, rails against LDP’s ‘dumb’ draft report
Former Prime Minister Shinzo Abe had a pressing question about a draft report in May on how to fix the economy.
“Who wrote that stupid proposal?” a clearly angry Abe asked his associates.
The draft was compiled by lawmakers from the ruling Liberal Democratic Party Headquarters for Promoting Fiscal Consolidation, which was established shortly after Prime Minister Fumio Kishida took office last fall.
Lawmakers had suggested measures to restore the country’s fiscal health, given the high level of public debt relative to gross domestic product.
Headquarters had developed the draft document in the hope that some of the wording would be reflected in the annual Basic Policies for Economic and Fiscal Management and Reform to be released in June.
Abe, however, viewed the contents of the draft as a personal attack on Abenomics, the main economic policy package during his more than seven years in office until August 2020.
After the proposals were discussed at a meeting on May 19, Abe phoned Takao Ochi, the headquarters’ general secretary.
“Do you intend to criticize Abenomics? the former prime minister asked Ochi, who is a member of the Abe-led LDP faction.
Ochi tried to appease Abe, but the faction leader fired back, “My associates tell me this is a criticism of Abenomics.”
Ochi said, “I’m a fan of Abenomics. And besides, I was twice first deputy minister in the Cabinet Office (which draws up the annual economic and budgetary policy document).
Although Abe agreed with Ochi’s point, Abe then asked his associates for the names of the authors of the project.
The draft said, “Although many economic policies have been implemented in recent years, the result is that Japan’s economic growth over the past 30 years is the lowest among major advanced economies.
He pointed out that the starting salary of the company’s employees remained almost unchanged from 30 years ago, and he said that an international comparison of personnel costs created a “cheap Japan”.
Abe was particularly angry at the reference to “cheap Japan,” sources said.
What followed was a concerted attack by Abe and others on LDP members calling for fiscal health to be rebuilt.
Abenomics involved an aggressive use of bold monetary easing, flexible fiscal spending, and a growth strategy designed to stimulate private sector investment.
A number of Abe faction members who attended the May 19 headquarters meeting raised concerns about the wording of the draft. The often heated discussions lasted about two hours, and no decision was made on wording that day.
In the next day’s session, a revised draft included more references to Abenomics, but that still didn’t appease critics.
Fukushiro Nukaga, a former finance minister who chairs the siege, met directly with Abe on May 23. Also in attendance were Taro Aso, another former finance minister who serves as the seat’s supreme adviser, and Shoji Nishida, an upper house member who leads the LDP’s seat for fiscal policy under the policies.
Abe is the supreme adviser to the second seat, which is pushing for aggressive spending.
A source said Abe presented Nukaga with another revision of several dozen lines.
“They wouldn’t allow any criticism of Abenomics,” said a lawmaker working to restore fiscal health.
Nukaga and Ochi released the final draft on May 26.
The document still called for seeking a surplus in the government’s primary balance, which would mean that tax and other revenues would cover programs ranging from social security to public works projects without having to issue new government bonds.
But major revisions have been made to the parts related to Abenomics.
The reference to “cheap Japan” was removed and a statement was added indicating that Abenomics had still not completed its course.
In the end, those who advocated fiscal health were forced to retreat.
The draft Basic Fiscal and Economic Policy Proposal presented to the Economic and Fiscal Policy Council on May 31 removed the fiscal year 2025 target for achieving a primary balance surplus, which had been included in earlier documents.
Abe began his second term as prime minister at the end of 2012. Central government bonds outstanding at the end of fiscal 2012 were 705 trillion yen ($5.4 trillion). At the end of fiscal 2021, the outstanding balance was 991 trillion yen.
(This article was written by Takashi Narazaki and Ayako Nakada.)