Name: Eastworld Spotlight: The Abe Legacy and the future of a post-Abe Japan
Uploaded: 2020-09-03
Duration: 13 min 31 s
Description: WisdomTree Investments’s Jesper Koll on Japanese Prime Minister Shinzo Abe’s legacy, potential successor, and the future of the nation.

[MUSIC] CLAY CHANDLER: Welcome to another East World. Our guest today is Jesper Koll, senior advisor to Wisdom Tree Investments. Jesper is based in Tokyo, and is one of the best known observance of the Japanese economy in the West. Longtime resident of Japan. Well, he'll talk a little bit today about the surprise announcement last week that Japanese Prime Minister, Shinzo Abe, has decided to step down, and what implications that has for Japan and its economy. Jesper, welcome. Thanks for being with us. JESPER KOLL: Thank you for having me. CLAY CHANDLER: Were you caught off guard by this announcement last week, that Abe would resign? JESPER KOLL: Look, I mean, there's no question that the timing was a big surprise. Now, Prime Minister Abe himself had become a little bit of a lame duck over the last four or five months. And really, you're kind of hard pressed over the last four or five months, he seem to have lost his mojo; not just because of the complications of policy forced by the COVID, but really in terms of having forward looking visions. So yes it's a surprise, but after eight years-- after basically eight years in power, and we knew he was going to leave anyways at some point over the next 12 months. And it leaves the LDP, the ruling Liberal Democratic Party in a very interesting position, because after eight years of a very strong grip on power that Prime Minister Abe had, now it's back to the old world of smoky backroom dealings trying to pick a successor. CLAY CHANDLER: Talk about these successors in a minute. But I wonder if we could just look back on his legacy and what he's accomplished. Do you rate him as one of Japan's better prime ministers, more effective prime ministers? JESPER KOLL: Oh, absolutely. I think he's done a tremendous amount of good in Japan, not just by the stability and consistency of the grip of power, but by really coordinating policy very well. And you remember, Abenomics was about the three arrows And you think about that's monetary, fiscal, and structural policy, 1, 2, 3, but as you know in Japanese history and Japanese sort of mythology, the analogy of the three arrows is a very different. One arrow you can break, two arrows you can still break, but three arrows you cannot break anymore. And we know that Japan has a lot of-- has a myriad of structural issues and problems that it needs to get through. There is not one magic bullet, there is not one monetary policy, there is not one fiscal policy, there is not one regulatory policy that gets the thing going again, it's the coordination. And that's where Prime Minister Abe over the last eight years was unbelievably strong. His group of basically 12 core ministers, which he kept very, very consistently over the last eight years, ruled Japan with an iron grip extremely coordinated, whether it's the monetary and fiscal policy, or whether it is the regulatory policy, whether it's the coordination with the business community, even the coordination with the GPIF, the Government Pension Fund. Unbelievably powerful and well coordinated grip on power. CLAY CHANDLER: One of the tools that he used to do this obviously is creating this new personnel agency that's controlled through the prime minister's office. How effective do you think that was in getting some leverage over bureaucrats that traditionally in Japan have been quite powerful in making economic policy? JESPER KOLL: No, absolutely. You you've put your finger on the key accomplishment. In 2014, they set up this new personnel agency under the cabinet office, and they are responsible for the appointment of the 600 senior most bureaucrats in Japan. And this is actually where the Chief Cabinet Spokesman, Mr Suga, one of the likely successors, that's how he exercised this power. So all of a sudden, you don't have the legacy and the institutional history of METI, off the Ministry of Finance, of the Ministry of Health and Welfare, sort of on its own little autopilot juggernaut; all of a sudden you've got political directives. And I've actually been in the room when some of these bureaucrats got fired for not following the directives given by the prime minister's office. So huge change. The balance of power has definitely shifted to what's the prime minister's office, away from the bureaucracy. CLAY CHANDLER: Criticism of Abenomics has been that while. Monetary policy has been very loose and very effective, and that there's been a great deal of government spending to prop up the economy has Struggled, that both of those things were really designed to be temporary stock gaps and to remove some of the pain of doing this third thing, which was regulatory reform to make Japanese companies more competitive; and especially fixing the problem of the shrinking and aging labor force, getting more women into the labor force. How has he done on that third count? JESPER KOLL: Look, I think the answer is it's a work in progress. You mentioned womenomics, certainly, there's been an enormous amount of progress. If you look at the female participation rate in Japan, it's now surged above that of the United States. And even some of the Scandinavian countries. And as you know very well, having a genuine conversation about female empowerment before Prime Minister Abe was basically impossible in Japan. Now, even the most established and conservative companies are engaging in this. Structural reform, I mean, what is it that you should be doing? You need more innovation, you need more entrepreneurship, all these things are starting to happen. Even-- like when you look at some of the data, when you look at foreign labor, I mean, the number of foreign workers in Japan has basically doubled during Abe's tenure. It's still relatively low compared to some of the European or the United States countries, but the overall mind shift that has been engineered, I think is actually a very, very powerful one. CLAY CHANDLER: I want to come back to the election and this question of Prime Minister Abe's successors. There is a very crowded field now. I think it sounds like they are debating still whether to put this to a party wide election or whether to have this be decided by a much smaller group of members of parliament in the heads of the LDP chapters in the various prefectures. But do you have a sense of which process they'll take to choose a successor? JESPER KOLL: It's interesting, Clay. I think, first and foremost for the world, what's important is that actually the candidates are very similar. Of the current candidates who've raised their hands, if you ask me what's the difference in terms of the policy outlook, I mean, it really is splitting hair trying to come up with a difference. So it's about personality. It's not about policy. And I think that in the end, sort of a brokered convention type of outcome, r sort of classic LDP Japanese style is most likely. Now, the interesting thing is that, in my personal opinion, whoever is going to run the country is going to be relatively short lived, because there is a younger generation of LDP politicians. And for example, the current Defense Minister, Kono, who is Georgetown educated, is a very global person. He's definitely a contender. Not this time around, but the next time around. Really sort of leading Japan into the future, it's not the immediate successor, but the one afterwards the 2022-2023 guy, that's when Japan is going to get interesting again, because the generational change actually happens. CLAY CHANDLER: Can I ask you about these two or three front runner contenders for this interim tenure as you see it? We have emergence Suga, he's the chief cabinet secretary, has been, sort of Abe's right hand man. The other two, tell us a little bit about them. JESPER KOLL: So it's interesting. I mean, Suga is really the power politician, like I mentioned. Everybody is afraid of him because he exercises power and he gets things done. And Hishiba is a very interesting character, in the sense of that he's got very strong feelings about national defense. And you know he definitely is focused on defense spending. When you go to his office, you'll find there's at least 10 little model ships of the Yamato and the other sort of big ships of the Japanese Navy. He's very passionate about it. At the same time, Hishiba is a man of the rural districts. Every Friday, he leaves Tokyo and comes back only Tuesday mornings, and he spends time in the regional parts of Japan figuring out who does what to whom and why in each of the little villages, in each of the little districts. And so ironically, he is liked by the people in the regions because he looks after them, But the people here in Tokyo, the people who deal with the big business community, who deal with the financial community, who deal with the media, they don't really like him. They think he's a bit of a country bumpkin, so to speak. Right? CLAY CHANDLER: Right. JESPER KOLL: And then you've got Mr. Kishida who for intents and purposes, I don't really know that well. But for intents and purposes, he's always there. He wants to be considered a contender, but are hard pressed to figure out what he actually stands for or what he has been doing. And so he's sort of the youngest boy brother, so to speak. Right? The power politician, just to repeat, is Mr Suga. CLAY CHANDLER: We have a very important leadership election coming up in the United States in November. So there could be some pretty dramatic changes in the nature of the US-Japan relationship very quickly. What are the kind of scenarios you see for that? JESPER KOLL: It's very interesting, I mean, there's no question that Prime Minister Abe was a standout. I mean, literally, within 10 minutes of Trump being declared the winner, Prime Minister Abe rolled up his sleeves and made sure that he became the first foreign dignitary to visit with what was then the President-elect. And obviously the relationship between Abe and Trump has been a very, very strong one. In fact, John Bolton, whom you've seen as Abe piece, he says Abe was the only foreign dignitary who kept Trump accountable, which is kind of interesting. Right? And so that's obviously going to change either way. I think from a Japanese perspective, a victory of a Democratic candidate opens the door for greater multilateral activity. Right? And as you know, Japan has been pushing for a multilateral approach, particularly here in Asia. And so I think from that perspective, sort of a Democratic victory would be a little bit easier for the Japanese to handle rather than the sort of unilateral, slightly erratic and personality driven policy that you've got under the current president in the United States. CLAY CHANDLER: Well, that's quite interesting. It's also interesting that Abe was so proactive in visiting all the ASEAN countries early in his administration as well. JESPER KOLL: Yeah. And this is, again, when you look at the-- who should be succeeding Prime Minister Abe, I mean, one big part of his legacy is that, certainly, for the first six years of his reign, once a month, he was outside of Japan promoting Japan. Right? And he wasn't just sort of going for cocktail parties, he came armed with business people, they had an industrial policy, got more Japan, in particular, the ASEAN world, but also, Clay, in the Middle East, and as you know to some extent, even in Africa. CLAY CHANDLER: Jesper, we don't often get a chance to talk to people who can give us a detailed-- such a detailed briefing about the world's third largest economy. I think we often don't cover it enough. This has been fascinating, and I really want to thank you for sparing your time to share your insights. JESPER KOLL: No, thank you very much for having me. And prosperity to all. 

Eastworld Spotlight: The Abe Legacy and the future of a post-Abe Japan

International

How Shinzo Abe’s legacy will affect Japan's future.

The Abe Legacy and the future of a post-Abe Japan

WisdomTree Investments’s Jesper Koll on Japanese Prime Minister Shinzo Abe’s legacy, potential successor, and the future of the nation.