Paper short abstract:

In this paper, I argue that while Abenomics has yielded rich political dividends, its economic policies have been mired in ambiguity and fallen short of its stated objectives. I then examine and explain this discrepancy from a broad comparative historical framework.

Paper long abstract:

Is Japan back? With great fanfare, Abe Shinzo and the LDP surged back into the political spotlight by ousting the incumbent Democratic Party from power in December 2012. Under the banner of "Abenomics", his administration laid out a tripartite policy platform that promised to restore economic dynamism and end Japan's prolonged period of deflation. Over the following four years, Abe's cabinet approval rating has remained high, and the LDP's subsequent electoral victories in the 2013 Upper House and 2014 Lower House elections have insured that his party could pursue Abenomics unhampered by a "twisted" Diet. While these turn of events may suggest, as Abe proclaimed, that "Japan is back", there is considerable debate about what this return signifies, and whether Abenomics has delivered on its promises.

In this paper, I argue that while Abe's electoral victories represent the return of LDP dominance, the economic policies that the Abe administration has adopted have been mired in ambiguity and fallen far short of its stated objectives. In terms of the first two arrows of Abenomics, I demonstrate that there is a wide discrepancy between the Abe administration's stated claim of utilizing both fiscal and monetary policy to stimulate the economy, and the actual macroeconomic policies that it has adopted. While the government has indeed implemented a wide array of conventional and unconventional forms of expansionary monetary policies, the fiscal policy measures it has adopted have either fallen short of its stated claims, or even proven to be contractionary. Accordingly, while these measures, for the moment, may have helped to build up Japan's financial markets, its impact on the real economy has been weak. Moreover, from a broader comparative historical perspective, I further argue that Abenomics does not represent a bold departure from previous policies, but rather a continuation of a neoliberal trend that Japan has followed over the last three decades, and as such, it will continue to contribute to the growing level of social stratification and risk in Japan. In the concluding section of this paper, I seek to draw out the broader comparative and implications of these findings.

Paper short abstract:

Abenomics is introduced as an instructive case study of overcoming the reluctance of elected politicians to introduce far-reaching (economic) policy changes. Political entrepreneurs can overcome such barriers through innovative ideas and persuasion, while the policy output may remain doubtful.

Paper long abstract:

It is a well-known lesson of the political economy of reform that in democracies elected politicians are reluctant to introduce far-reaching (economic) policy changes. As the first round of such changes will involve hardships for many affected voters, there are issues like time inconsistency and information deficits/asymmetry, a status quo bias, path dependence and the possibility of a war of attrition between interest groups. Recent scholarship has pointed out that amidst uncertainty in preferences, constraints and choices, political entrepreneurs can overcome the inefficiencies of the political process through innovative ideas, while protecting their power and rents. The goal is to create persuasion, which is based on a path-dependent process, related to widespread beliefs ("causal stories") and desires.

This analytical framework is applied to the introduction and progress of Abenomics, the economic policy program started in Japan in late 2012 by a newly elected government, with changes introduced in later years. The ingenuity is that it combined risky but - in the short-term - promising measures (monetary and fiscal stimuli) with a longer-term vision (reforms), at the same time supplying an excuse for a competitive devaluation, legitimising financial repression and involving potential scapegoats (like possibly uncooperative corporate wage policies). Evidence of the PR-inspired persuasion strategy and of the controversial "causal stories" involved are discussed in the presentation. As persuasion is so important, and not necessarily a compelling commitment, only the appearance of reform may occur.

In this context, it seems a somewhat understudied topic of the entrepreneurial solution to the dilemma of serious policy change, to discuss what happens after the early honeymoon-phase of an initially persuasive strategy of policy change, once disappointments start to appear. The Abe-led government is interesting in that respect as well, as it has already survived four years, actually strengthening its electoral basis, although several economic objectives have clearly been missed. It is argued that a number of external factors - both political and economic - were extremely helpful for this development.

Paper short abstract:

A turning-point to the Japan's trade policy was when the Japanese government decided to join the Trans Pacific Partnership (TPP). This treaty can be an important factor to change the Japanese economy, and it has seen as one of the economic policy pillars that has been called Abenomics.

Paper long abstract:

The Japanese government has denominated Economic Partnership Agreements (EPAs) the FTAs, as these agreements may include other stipulations besides trade in goods, as trade in services, investment, labor mobility, intellectual propriety rights, procurements, business facilitation, government aid, and technical assistance. With this long list of stipulations, Japan has had the possibility to negotiate different agreements with several configurations according to the trade partner. Hence, the coverage of the Japanese EPAs varies one from another, depending on the partner country.

Japan has already signed 15 EPAs, one agreement which negotiations have concluded, and six agreements are still under negotiation. Japan has already signed EPA with Singapore, Mexico, Malaysia, Chile, Thailand, Indonesia, Brunei, ASEAN, Philippines, Switzerland, Vietnam, India, Peru, Australia, and Mongolia. Hence, most of the EPAs have been signed with small economies.

However, there was a turning-point to this policy: when the Japanese government decided to join the Trans Pacific Partnership (TPP), despite of the opposition from some Japan's domestic economic sectors. The TPP is categorized as a mega agreement due to the number of economies involved (12), and the quantity of issues in negotiation. The TPP can be an important factor to change the Japanese economy, and it has seen as one of the economic policy pivotal pillars that has been implemented since 2013, called Abenomics. The TPP is part of the one of the three arrows, inside the structural reforms arrow.

In 2015, Japan and 11 countries, among them the United States that led the negotiation process, concluded the negotiation of the Trans Pacific Partnership (TPP). In mid-November, 2016, the Japan's House of Representatives ratified the treaty even with the withdraw possibility of the United States from the TPP.

Specifically, the paper intends to answer the following question:

- What have the consequences been of the TPP on the Japan domestic political economy?