The Pandemic Depression
The Global Economy Will Never Be the Same
After serving a brief, undistinguished term as Japan’s prime minister in 2006–7, Shinzo Abe seemed destined for the political sidelines. Then, last December, he surged back into the limelight, retaking office in a landslide victory. The return to power of his Liberal Democratic Party (LDP) -- which has run Japan for 54 of the last 58 years, including most of the last two “lost decades” -- initially worried investors and pundits. But Abe immediately embarked on an ambitious campaign to revive Japan’s economy, and, some six months later, his efforts seem to be paying off. On the foreign policy front, however, Abe -- known in opposition as a conservative nationalist -- has sparked controversy by seeming to question Japan’s wartime record. In mid-May, as tensions were rising with Japan’s powerful neighbors, he spoke with Foreign Affairs managing editor Jonathan Tepperman in Tokyo.
This is your second tenure as prime minister. Your first was not so successful, but this time, everything seems different: your approval rating is over 70 percent, and the stock market is at a five-year high. What lessons did you learn from your past mistakes, and what are you doing differently this time? When I served as prime minister last time, I failed to prioritize my agenda. I was eager to complete everything at once, and ended my administration in failure.
After resigning, for six years I traveled across the nation simply to listen. Everywhere, I heard people suffering from having lost jobs due to lingering deflation and currency appreciation. Some had no hope for the future. So it followed naturally that my second administration should prioritize getting rid of deflation and turning around the Japanese economy.
Let’s say that I have set the priorities right this time to reflect the concerns of the people, and the results are increasingly noticeable, which may explain the high approval ratings.
I have also started to use social media networks like Facebook. Oftentimes, the legacy media only partially quote what politicians say. This has prevented the public from understanding my true intentions. So I am now sending messages through Facebook and other networks directly to the public.
So that way you get to bypass journalists? Sort of [laughs]. No, I attach importance to face-to-face interviews like this one, and I have never been media shy. My point was that what I actually mean sometimes gets lost when it is only partially -- even mistakenly -- quoted.
You’ve said that your economic agenda is your top priority. Abenomics has three “arrows”: a 10 trillion yen fiscal stimulus, inflation targeting, and structural reform. You’ve fired the first two arrows already. What will the third look like? The third arrow is about a growth strategy, which should be led by three key concepts: challenge, openness, and innovation. First, you need to envision what kind of Japan you wish to have. That is a Japan that cherishes those three concepts. Then, you get to see areas where you excel. Take health care, for instance. My country has good stock, which enables Japanese to live longer than most others. Why not use medical innovation, then, both to boost the economy and to contribute to the welfare of the rest of the world?
My recent trip to Russia and the Middle East assured me that there is much room out there for Japan’s medical industries. The same could be said for technologies to reduce carbon dioxide emissions, of which Japan has plenty. But to foster innovation, you must remain open.
But Japan has constraints on its economy that keep it from growing: high agricultural subsidies, overregulation, underutilization of women, a poor immigration policy. Past prime ministers have tried to deal with these problems and have run into a wall. What reforms will you focus on? Time is not on our side. Prolonged deflation and the resulting economic stagnation that has lasted for 15 years have kept my country almost standing still, while the rest of the world has gone far. This is the last chance for us, and the sense of urgency is therefore enormous. It’s shared more widely than ever before among my fellow lawmakers.
True, agriculture still matters, not only as an industry but also for keeping Japan’s social fabric well knit. But my approach is to make it stronger and export-oriented. Japanese farmlands are endowed with rich natural attractions. Let them simply be sold more to the world. Where necessary, we will cut red tape, for sure. More investment in core technologies is also important, as is foreign direct investment in Japan. We must do all this now, in one fell swoop.
As for openness, of special note is my decision on the TPP [Trans-Pacific Partnership]. Previous administrations were indecisive. I decided to enter into the TPP negotiations. Of course, the agricultural lobby is fiercely against it, and agricultural associations are among the biggest and most important supporters of the LDP. So we are working hard to bring them along. If we don’t change, there won’t be any future for Japanese agriculture, or for Japan’s regions and local communities.
You’ve launched a major stimulus program that has been successful so far. But aren’t you worried about Japan’s debt, which is already at 220 to 230 percent of GDP? Japan is facing an extremely rapid decline in birthrates, and Japan’s national income has lost as much as 50 trillion yen due to prolonged deflation. Put those together, and you get a much smaller tax base. That is why we are facing a very difficult financial situation, and that was the core concern that led my government to launch the “three arrow” recovery plan.
The bond repurchase and interest payments aside, the government’s current spending must meet its annual tax revenue. To achieve that balance remains our first priority, and we have made an international pledge to do so. By fiscal year 2015, we are going to halve our primary-balance deficit, and by 2020, we will achieve balance. To do so, we have to increase tax revenue. We also need to end the deflationary cycle. And we have to achieve economic growth.
We also need to improve the efficiency of government expenditures. We have decided to increase the consumption tax rate, which is important to sustain our social security services. I know that the current situation is difficult, and the world economy will have ups and downs. But that is the mandate I was given, and we are elbowing our way through.
It sometimes seems like there are two different Shinzo Abes: the nationalist or conservative Abe, who does controversial things, such as support history textbook revision, question the comfort women issue, or question the legitimacy of the Allied war crimes tribunal, and the pragmatic Abe, who reaches out to China and South Korea and who has been careful not to escalate tensions over the Senkaku Islands. In recent weeks, both have been on display: first, you seemed to question in the Diet whether Japan was the aggressor in World War II, and then, a week later, you acknowledged the suffering that Japan caused during the war. Which is the real Abe, and how should people interpret the shifts between the two? As I said at the outset, I have had my remarks only partially or mistakenly quoted by the mainstream media. Let me set the record straight. Throughout my first and current terms as prime minister, I have expressed a number of times the deep remorse that I share for the tremendous damage and suffering Japan caused in the past to the people of many countries, particularly in Asia. I have explicitly said that, yet it made few headlines.
Do you accept that Japan was the aggressor when it invaded China, when it invaded Korea, and when it attacked the United States in World War II? I have never said that Japan has not committed aggression. Yet at the same time, how best, or not, to define “aggression” is none of my business. That’s what historians ought to work on. I have been saying that our work is to discuss what kind of world we should create in the future.
It always seems to cause problems when you talk about history, so why not just avoid it? And let me ask a related question: In order to put these issues aside, can you promise that as prime minister, you will not visit Yasukuni Shrine in either your official or your private capacity? I never raised the issue of history myself. During [recent] deliberations in the Diet, I faced questions from other members, and I had to answer them. When doing so, I kept saying that the issue is one for historians, since otherwise you could politicize it or turn it into a diplomatic issue.
About the Yasukuni Shrine, let me humbly urge you to think about your own place to pay homage to the war dead, Arlington National Cemetery, in the United States. The presidents of the United States go there, and as Japan’s prime minister, I have visited. Professor Kevin Doak of Georgetown University points out that visiting the cemetery does not mean endorsing slavery, even though Confederate soldiers are buried there. I am of a view that we can make a similar argument about Yasukuni, which enshrines the souls of those who lost their lives in the service of their country.
But with all due respect, there are 13 Class A war criminals buried at Yasukuni, which is why it makes China and South Korea crazy when Japanese prime ministers go there. Wouldn’t it be easier just to promise not to go? I think it’s quite natural for a Japanese leader to offer prayer for those who sacrificed their lives for their country, and I think this is no different from what other world leaders do.
After Yasukuni enshrined the souls of the Class A criminals, China and South Korea did not make any claims about visits there for some years. Then suddenly, they started opposing the visits. So I will not say whether I will visit or refrain from visiting the shrine.
You said in January that there is no room for negotiation over the Senkaku Islands. If you take such an inflexible position and China takes such an inflexible position, there will be no progress. So what is the solution? Seven years ago, as prime minister, I chose China as the first destination for an official visit. On that occasion, I agreed with the Chinese leaders that both countries would strive for a mutually beneficial relationship based on common strategic interests. I conveyed to the Chinese that Japan and China enjoy an inseparable relationship, especially in terms of economic ties. And I believe that it is wrong to close down all aspects of the bilateral relationship because of a single issue -- it would not be a smart move. That is why I always keep the door open for dialogue. I think China should come back to the starting point of the mutually beneficial relationship the two countries agreed on.
As for the Senkaku Islands, Japan incorporated them back in 1895, after taking measures in accordance with international law. And it was not until 1971 that China made its territorial claims over the islands. The Senkaku Islands are an integral part of Japanese territory, based on both history and international law. Only after keeping silent for 76 years, and after the United Nations referred to the possible existence of natural resources underneath the adjacent seabed, did China start making their territorial claims, rather abruptly.
Since 2008, the Chinese side has been dispatching official or naval vessels to intrude into Japanese territorial waters. The phenomenon is older and more deeply rooted than may meet the eye. There is no question that we have to address the issue in the most professional manner, and I have instructed the whole of my government to respond to the situation in the calmest manner possible. And we are [still] saying that we will always keep the door open for dialogue.
But what are you willing to do to resolve the problem? Cui Tiankai, the new Chinese ambassador to the United States, told me recently that the best thing would be to just ignore the sovereignty issue and return to the status quo where China and Japan agree to disagree. That Chinese claim means Japan should admit that there exists an issue of territorial sovereignty to be resolved. We can never let this argument take place. The Chinese side has been using a similar argument against Vietnam and the Philippines to gain control over islands in the South China Sea. And recently, on May 8, China’s People’s Daily published an article questioning the status of Okinawa itself.
We have never agreed with the Chinese to shelve the issue of the Senkaku Islands. To say that we have in the past is a complete lie by the Chinese.
Given the rise of China and its more aggressive behavior, are you still confident in the U.S. security relationship, or do you feel that Japan needs to be doing more to protect itself? And is this why you’re interested in revising Japan’s constitution? Of course, I have full confidence in the Japanese-U.S. alliance -- one hundred percent. After the Great East Japan Earthquake of 2011, the United States dispatched a total of 20,000 military personnel; even under difficult circumstances, the United States offered to cooperate in Japan’s reconstruction efforts. That is a true reflection of our relationship. And we fully welcome and happily support the strategic rebalancing by the United States toward Asia.
But at the same time, Japan is also willing to fulfill its responsibilities. Over the past ten years, my country has continued to cut its defense budget. China, on the other hand, has increased its military spending 30-fold in the last 23 years. Therefore, this year, for the first time in 11 years, my government chose to slightly increase the defense budget. That is a sign of Japan’s willingness to fulfill its own responsibility.
With regard to the issue of the right to collective self-defense, imagine that U.S. vessels on the high seas were being attacked and an armed ship, say an Aegis-type destroyer, from Japan, America’s treaty ally, was just passing by. The arrangement we currently have in Japan does not allow the destroyer to make any response whatsoever. That is insane.
So do you want to change Article 9 [the pacifist clause in Japan’s constitution] to address this? To amend the constitution requires overcoming a high hurdle: we would have to get the approval of at least two-thirds of the members of the Japanese parliament and later a simple majority in a national referendum.
Yet the fact remains that Japan is the only country in the world that does not call its defense organizations a military. That is absurd, when the government is spending a total of 5 trillion yen [a year] for self-defense.
I think that our constitution should stipulate that our Self-Defense Forces are military forces (as it currently does not) and should also stipulate the long-established principles of civilian control and pacifism. Even if we reactivated the right to have a collective self-defense or amended Article 9 of the constitution, that would only put Japan in the same position as other countries around the globe. We should address this issue in a restrained manner. Even if we amended the constitution and were able to exercise the right to collective self-defense, we would still be in a more limited position than the Canadians.
So to be clear, do you want to change the constitution to make collective self-defense easier? I would like to see the constitution amended, and my party has already published a draft proposal for the amendment of the constitution, including Article 9.
Why does the majority of the Japanese public still oppose constitutional revision? More than 50 percent of Japanese nationals support the idea of changing the constitution [in general], while less than 50 percent support the amendment of Article 9. But polls also indicate that once told the rationale in more detail, they turn in favor of amendment.
So you think they just don’t understand the issue? Only 30 percent of the people support enabling the right to use force for collective self-defense. But when we present a specific case involving, for instance, a missile launch by North Korea, and we explain to the public that Japan could shoot down missiles targeting Japan, but not missiles targeting the U.S. island of Guam, even though Japan has the ability to do so, then more than 60 percent of the public acknowledges that this is not right.
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