Japan has a new head of government, it is Yoshihide Suga

After the resignation of Japan’s Prime Minister Shinzo Abe due to illness, his LDP party has now appointed his successor. It is Yoshihide Suga, Abe’s long-time secretary of the cabinet and close confidant, who has now also been confirmed in parliament as the new head of government. We expect him to stick to the broad outlines of the previous expansive economic policy of the „Abenomics“, of which he is, after all, the co-architect, during the remainder of the current legislative period, which normally lasts another full year. Finance Minister Aso is likely to remain in office, thus ensuring continuity in financial policy. Cooperation and economic policy coordination with the central bank should also remain unthreatened and central bank chairman Kuroda should remain in office.

The governing coalition of the liberal democratic LDP and its junior partner Komeito has a two-thirds majority in the lower house of parliament. As a result, hardly any problems are likely to arise for the further execution of the government’s work. The opposition is still very divided and plays hardly any role politically at present. The new government under Suga therefore has a very good chance of being confirmed in the next elections to the lower house of parliament.
The question is to what extent Suga will succeed not only in continuing Abenomics in name, but also in finally bringing the element of structural reform, which has been neglected up to now, to bear more strongly. The main issues at stake are the liberalization and flexibilization of labor markets, the further opening of the country to workers from abroad, the raising of overall economic productivity through the timely implementation of technological innovations and the removal of other structural obstacles to growth. Suga has already announced that he intends to advance the country’s digitization and seeks to reform the fragmented regional banking system.

The new head of government should not lack assertiveness. After all, he has an intimate knowledge of the Japanese bureaucracy and is able to use it to achieve his goals. If under his leadership Japan manages not only to defeat the corona pandemic in the country in the short term, but also to increase the longer-term growth potential and actual growth rates with structural reforms, Japan would have a chance to begin the fiscal consolidation that is necessary in the long term.


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