Japan’s recent economic upturn was not the real thing. It was driven by market sentiment excited at the easy money policies of the Japanese central bank and the expectation of Mr Abe carrying out major structural reforms once he secured a majority in both houses of parliament. These economic decisions will not be easy. The most immediate one will be the raising of the national sales tax from 5 to 8%.
This is likely to dampen consumer demand, but is seen as a test of Mr Abe’s commitment to keeping a check on the country’s burgeoning public debt. However, the real test of ‘Abenomics’ will be sweeping changes to the country’s inefficient service sector and protected farm economy. These will be unpopular as they will initially cause unemployment and trauma. They already are: polls show that specific economic reforms remain unpopular with the public. Which is why the Japanese prime minister needs to grab these particular bulls by the horns now, when he has political capital to throw away.
If Mr Abe is able to turn around Japan, the consequences for Asia will be enormous. The decline of Japan, still the world’s third richest economy and Asia’s most technologically advanced country, has been an assumption that has fed into a geopolitical view of an Asia that will inevitably be dominated by China. Though Japan will never match China again, even if it arrests its present downward trajectory, global power equations will be changed.
This will only be enhanced if Mr Abe pursues his other objective of doubling Japan’s defence budget and adopting a more assertive foreign policy. If Japan’s sun begins to rise again, there will be obvious benefits to India. And not only because Mr Abe is a fervent believer in committing Japanese resources to building up India economically and constructing a strategic bridge between Tokyo and New Delhi.
A multipolar world has always been an Indian foreign policy objective. A multipolar Asia is an even more important and immediate national interest — and this will only be possible if Mr Abe is able to turn Japan around.