We are better at producing reports that outline what needs to be done than at producing social leaders who are capable of doing it in Europe.
A large study of Europe’s monetary flaws and how to fix them was released on September 9 by one of Europe’s most admired leaders, Mario Draghi, a former president of the European Central Bank and a former prime minister of Italy. It will be a collection of sand as neither Germany nor France nor any other big European Union nation has a government powerful enough to tackle it.
Japan also has the custom of creating boards to make recommendations that are rarely put into action. The Council on New Form of Capitalism Realization, which was established shortly after he took office in 2021, is a perfect case.
It would be unfair to claim that this committee achieved little in its three years of operation, but that few, if any, regular people in Japan today claim to have a “new form of capitalism” or even that it is making a noticeable shift in that direction.
Prime Minister Kishida and his government’s people approval ratings have historically been highs, and he was forced to acknowledge that he should certainly seek re-election as president of the Liberal Democratic Party on September 27.
Japan is at least changing its leader, even though it shares our German habit of producing excellent but un-implemented tips. What does Shigeru Ishiba’s recently elected prime minister do now makes sense in this context.
Usually the jaded but well-justified reply is: not many. Although the social group, the long-ruling Liberal Democrats, and the environment in which it operates does change, faces changes. Nevertheless, there appear to be three reasons for the cynical belief that consistency will prevail over change this time.
Success is the first element that all social leaders require, and it can be compared to that one. We may be entering a stage where the winds prove brighter and more advantageous after more than two years in which the financial winds have been hostile to Japan and especially the common Japanese.
Higher energy prices and a falling japanese exchange rate, which defeated the ancient scourge of depreciation and replaced it with declining true incomes as prices increased more quickly than wages, made up the hostile winds.
The yen exchange rate is rising in value against the dollar, and the rate of price inflation is now easing. This is being reinforced as the US Federal Reserve Board begins a significant interest rate reduction to prevent a US economic recession, and the Bank of Japan has stated that it will soon raise its own interest rates.
This indicates that the interest rate gap between the dollar and the yen is likely to narrow, which in turn tends to promote a higher value for the yen.
The new prime minister’s first few weeks in office appear to be the one during which incomes last increase more quickly than prices, which is one reason why Ishiba’s decision to call a general election for the powerful Lower House of the Diet ( parliament ) on October 27 might prove to be a wise one.
Ishiba has, anyway, long been popular with voters. Despite having an LDP history, he has established himself as a bit of a maverick outside the party’s base, which will be somewhat diminished as a result of his role as prime minister and party leader the longer he is in office. Therefore, it is preferable to hold the election while he is a newcomer and has n’t had the opportunity to turn people off, especially now that the economic conditions are improving.
That leads to the second reason why some changes might occur: if the LDP wants to maintain its parliamentary majority and win the election, it will need to provide voters with fresh ideas evidence. And if it succeeds, the post-election government will have a mandate to implement them.
The LDP’s old guard understands that it needs to display clearly a willingness to change, according to the third and final reason. The field they oversaw made it clear that the next leader had to be either a new generation, a woman, or a maverick, despite the fact that the two former prime ministers, 84-year-old Taro Aso and 75-year-old Yoshihide Suga, were the kingmakers.
The party chose the 67-year-old maverick, probably because he is popular with voters and, despite that “maverick” image, is actually more mainstream than his main rival in the second round of voting, Sanae Takaichi.
What exactly should the new prime minister do?
There is n’t a policy tool that has a quick impact. However, as long as the direction is clear and credible, a new direction can be established for policies that will have an impact over a number of years.
From the point of view of ordinary citizens, the most important issues concern their employment, their incomes and their taxes. That is also true for the Japanese economy, which has historically been negatively impacted by low incomes, insecure employment, and high taxes.
Another way to describe this is that Japan has been using a labor-saving strategy for more than 25 years. To keep the competitiveness of Japanese businesses, wages have been decreased and jobs have been made insecure. But it has failed, for it has led to stagnant domestic demand, which discourages innovation, productivity enhancement and investment.
The new prime minister must have the duty of changing this negative cycle and reversing it with a positive one. An easy start can be achieved by taking simple steps like the repeal of tax laws that penalize married women who make more than a limited income.
A harder move would be to strengthen the enforcement of irregular workers ‘ rights while also facilitating regular workers ‘ transition to jobs by allowing contracts to offer pre-agreed compensation for termination of employment in order to lessen the scope of legal disputes. This would help, because it is opposed by labor unions and large businesses.
A virtuous cycle could emerge if Japan’s “new form of capitalism” could be one where people could use the labor shortage and benefit from people’s ability to move up in their careers more quickly than prices.
The basic “metabolism” of corporate Japan has already shown signs of changing, with more start-ups and risk-taking, but it needs further help. If it can be done, replacing a low-cost labor strategy with a high-wage one, then tax revenues will rise, which will make it easier to fund the defense construction plan that the new prime minister inherited from his predecessors Kishida and Abe, and make the transition to greener energy easier to implement.
Let us wish Prime Minister Ishiba the best of luck in his attempt to break the nation’s vicious cycle of stagnation and stagnation with a new, much more positive and virtuous one. Then, we Europäers might be able to pick up some skills about how to turn suggestions into actions.
Formerly editor-in-chief of The Economist,  , Bill Emmott , is currently chairman of the , Japan Society of the UK, the , International Institute for Strategic Studies , and the , International Trade Institute.
This is the updated English version of a column that was published by Mainichi Shimbun in Japan and on Substack Bill Emmott’s Global View. It is republished with permission.