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Japan Decides: Abenomics and the Constitution

Jul. 8, 2016

Assessing Abenomics
Kyoko Fujita

Japan's Upper House election takes place this Sunday, and a key issue in the election is how to evaluate Prime Minister Shinzo Abe's economic policy, known as "Abenomics."

The Japanese Diet consists of the Upper and Lower Houses. Lower House members get a 4-year term and face a snap election if the prime minister decides to go to the polls.

On the other hand, Upper House lawmakers get a 6-year term. Half of the 242 seats are at stake every 3 years. The longer term in the Upper House means lawmakers are able to focus on debating policies.

The key pillars of Abenomics are increased fiscal spending, aggressive monetary easing and a "growth strategy" designed to promote structural reform.

Some opposition parties counter that Abe's policies have failed. They say Abenomics is expanding the gap between the rich and the poor.

Naturally, Japanese businesses have their own outlook.

Managers at one auto-parts maker have been enjoying higher sales for 3 consecutive years.

The company sells suspension parts and brake pedals to the United States, China and other countries. Orders grew in tandem with a strong car market. Sales jumped by 25 percent in the year after Abe took office in late 2012. The managers say tax relief is also a big help.

The government has been giving a tax cut for new capital spending. The administration also lowered the corporate tax rate for major companies by more than 7 percentage points, and plans to cut it further.

So, executives decided to install more automation. They say extremely low interest rates helped spur the investment. The company's share price climbed sharply as the Nikkei rose. And its stock holdings in other companies in related industries have risen as well, boosting the firm's asset prices.

"I think Abenomics had a huge positive impact on our business. During the prolonged deflation era, we haven't been confident enough to go ahead with capital spending or wage hikes. But Abenomics eased such worries," said Akihiko Shido, chairman and CEO of Yorozu.

Some company managers say Abe’s economic approach is paying off. But others are disappointed.

One fishcake-maker in northern Japan has been in business for nearly 100 years. Managers say they were hoping Abenomics would help boost the local economy. But last December, the company went into the red for the first time in 2 decades.

Executives say Abe's policy has failed to lift consumer sentiment, and that has dampened sales. Increased material costs and higher wages are also dealing a blow.

Monetary easing endorsed by Abe's administration initially led to a weaker yen. One result has been higher prices for imported materials. The price of Alaskan Pollack, an ingredient in fishcakes, has risen by about 30 percent.

Managers also say the local economy remains lackluster. They say they had to give raises to employees to stop them from seeking work in big cities.

The company's president says he had to raise the price of his leading product by 5 percent. But he stresses that the hike still falls short of covering his rising costs.

"We’re facing many disadvantages. Abe says he will revive local economies and I lay hopes on that. But I must say he is not spelling out effective steps in our region yet," says Hiroshi Numata, president of Maruishi Numata Shoten.

Now sentiment among managers seems to be getting gloomier. They face uncertainty that has spread throughout the global economy.

Abe says his policies are working, and he is calling on voters for their support to follow through with his agenda. The election should uncover some clues as to whether the public is willing to go along with his plan.

Debating the Constitution
Tomoko Kamata

Another issue at the heart of the election has to do with Japan's Constitution. It was created in the aftermath of World War 2, and enshrines the core national values of popular sovereignty, basic human rights and pacifism.

So far, it has never been changed. But there are some who say it needs to adapt to a changing international environment.

Others strongly disagree. They say any amendment could damage the central principle of pacifism.

Before the campaign started, Japanese Prime Minister Shinzo Abe had repeatedly shown his willingness to amend the Constitution.

Abe sent a message earlier this year to a group that wants it revised.

"Creating a Constitution with our own hands that's appropriate for a new era, I will do my utmost to spread that idea," Abe said.

People who are in favor of a revision say the current constitution was drafted by the Allied Powers that occupied Japan after the war.

"The Constitution hasn't changed for 70 years. Its interpretations have changed to cope with many things but it's getting tougher," says one man.

But there are people who say no change is needed. They say Article 9, which stipulates the renunciation of war is a major reason Japan hasn't fought in decades.

"No other industrialized country has a constitution renouncing war. I want to protect it as a treasure for the world," said one woman.

Last year, the Diet passed new national security laws. The legislation enables Japan to use force when a country it's close with comes under attack.

Protesters claim that violates Article 9 so it's unconstitutional.

One of the reasons the Constitution has never been changed is because no party that's wanted to do so has won enough seats in the Diet to start official procedures.

A constitutional amendment needs two-thirds or more approval in both chambers of the Diet. After that, it's put to a national referendum. If a majority votes for it, it's approved.

Abe's ruling coalition already has a two-thirds majority in the Lower House.

He suggested in January he wants to muster two-thirds in the Upper House by cooperating with other lawmakers who agree.

LDP's coalition partner Komeito says changes should be made by adding new articles. But its leader says more debate in the Diet is needed.

Two other parties say changes are necessary.

Four opposition parties, including the biggest -- the Democratic Party -- say they oppose any changes by Abe's administration.

The LDP and its coalition partner Komeito have barely raised the amendment issue in this campaign. Instead, their key pledges have been on economic policy.

Abe had said he wanted to start discussing details of an amendment in the Diet after the election. Some opposition parties have been critical of that.

"If we allow the parties that want to change the constitution to get two-thirds of the seats, they're certain to push the changes through, especially to Article 9," said Katsuya Okada, Democratic Party president.

One constitutional expert says the outcome of the election is attracting attention around the world.

"For the first time that in certainly in recent memory, the conservative or in proponent of the constitution revision are close to achieving the necessary two-thirds in both Lower House and Upper House of parliament. So the desire is, I think, has always been there, but the opportunity that's come about, or that may come with by this election, is a rare one," says Kenneth McElwain, an associate professor at the University of Tokyo.

The ruling parties say the Constitution is not a campaign issue. Many opposition parties say it is. And the voters' choices could create a turning point for this decades-long debate.