What does Amari’s resignation mean for Abenomics?

Author: Aurelia George Mulgan, UNSW Canberra

Another Japanese minister bites the dust with Akira Amari’s resignation from the Shinzo Abe cabinet on 28 January. Yet this time, there may be more repercussions than usual for the government.

Former Japanese economic minister Akira Amari during a nationally televised news conference in Tokyo, 28 January 2016. (Photo: AAP).

Ironically, Amari was previously chairman of the ruling Liberal Democratic Party’s Political Ethics Hearing Committee. Now he and his secretaries are at the centre of a continuing corruption scandal over revelations about money for favours.

The whole episode has tarnished the substantial contribution that Amari made to the Abe administration and particularly to the implementation of its key economic and trade policies. Amari held a raft of ministerial positions — as minister of state for economic and fiscal policy, minister in charge of economic revitalisation, total reform of social security and tax, and the Trans-Pacific Partnership (TPP) — and was a master at coordinating these policies.

Amari was one of the prime minister’s inner circle along with Chief Cabinet Secretary Yoshihide Suga and Deputy Prime Minister and Minister of Finance Taro Aso. With Amari’s resignation, Abe has lost a trusted colleague and sworn friend with two rare and especially prized attributes. First, Amari had almost unmatched policy expertise in areas vital to the administration’s prospects and not even Aso could compete with him in terms of expertise on the economy. He was absolutely central to the process of running the Abe administration. Second, Amari showed total loyalty to his boss. Although a seasoned Diet member — having been elected 11 times — he held no ambitions for higher office and hence presented no threat to Abe’s prime ministership.

At the same time, Amari was a true believer in ‘Abenomics’ and, arguably, singlehandedly delivered the TPP for Japan. He was Abe’s trusted voice in negotiations with the power and competence to cut through at times conflicting ministry interests. This enabled him to match the United States Trade Representative Michael Froman in terms of power and authority on the international negotiating stage. And like Abe, Amari was convinced that the TPP was a vital cog in the Abenomics wheel.

Experts disagree on just how significant Amari’s departure is for Abe’s management of the economy, and what it will mean politically for the Abe administration. Certainly there are some question marks over his replacement — Nobuteru Ishihara. While he is also close to the prime minister, Ishihara may or may not join Abe’s inner circle.

In terms of policy competence, Ishihara has held a swathe of government and party positions, is a believer in small government, and supports regulatory and other economic reforms. If permitted by Abe to pursue such goals with vigour, he could make a valuable contribution to the economic reform goals of the administration. On the other hand, there are question marks over his ability to promote Abenomics and manage the Council on Economic and Fiscal Policy as the new Minister of State for Economic and Fiscal Policy.

This is an especially bad time for Abe’s signature economic doctrine. The Abenomics arrows have largely flopped or run out of steam. Although some commentators have praised the Abe administration’s ability to accomplish structural reform by overcoming vested interests, its abilities on this score have actually been quite low.

Undeterred, Abe has continued to substitute goals for achievements. With Round 1 of Abenomics undercooked, Abe’s answer has been to launch Round 2 with a new set of goals. The aim is to buoy international investors and the Japanese voting public with the same rising expectations that have sustained the Abe administration, and the Japanese stock market, so successfully in the past.

This is where the absence of the flagbearer of Abenomics may be felt most keenly. The immediate problem is securing approval of the TPP legislation by the Diet. Although Ishihara is hastily preparing, his lack of expertise on the TPP will show up when he is forced to answer testing questions in the Diet, even though passage of the TPP-related legislation is assured by the government’s majorities in both houses.

Officials across the key ministries and agencies are expressing concern about the loss of Amari’s skill in policy coordination — not only with the economic and finance ministries, but also with the Kantei — and they have no faith that Ishihara can step into Amari’s shoes. The lack of Amari’s skill in policy coordination will be particularly felt on the issue of implementing another hike in the consumption tax, with Amari always siding with the Kantei in prioritising economic growth.

 

In his absence, this leaves Aso in greater ascendancy in the debate and not surprisingly biased towards the Finance Ministry. As the ministry emphasises fiscal discipline, Amari’s absence could change the dynamic balance in the administration in favour of austerity. Ishihara’s initial statements also appear to support this approach.

Aurelia George Mulgan is a Professor at the University of New South Wales, Canberra.

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