Japan’s new Prime Minister Fumio Kishida won his first election on 31 October 2021 by achieving a majority of seats in Japan’s lower house. In early October, Kishida had just won his Liberal Democratic Party’s (LDP) leadership vote, competing with Taro Kono. Kono was the minister of regulatory reform in the former Yoshihide Suga cabinet and appealed to younger voters as an expected reformer of the stagnated economy.
By contrast, the 64-year old Kishida is a symbol of stability for the vested-interest supporters of the LDP. He is likely to heavily depend on the bureaucrats who have confidence in managing the economy, following the tradition of former prime minister Shinzo Abe.
Kishida accuses previous LDP leaders of being neo-liberalist and depending too much on market competition, while watching income disparity increase. He emphasises income distribution for the benefit of the middle-income class, rather than the low-income class. He intends to achieve it through tax incentive measures for corporate firms, contrary to the supply-side approach of increasing productivity through the regulatory reform of agriculture, communication and service industries.
Kishida has developed an idea he calls a ‘new kind of capitalism’, which provides the theoretical framework that guides his policy. Though its content is unclear, this new capitalism is likely to emphasise income distribution rather than profit-seeking. But this is not a good strategy given that Japanese companies are suffering from low profits and excessive elderly employment.
Kishida is likely to focus on populist issues, depending on fiscal measures rather than tax increases to finance the substantial current budget deficit. The only exception is a policy for raising the tax on financial assets. It was an essential measure to gain support for Kishida’s income distribution policy, as those with financial assets are the primary beneficiaries of Abenomics. …continue reading