Japan PM’s latest crisis may be the wake-up call he needs

In a fresh scandal to hit Shinzo Abe, the prime minister prepares to face the diet.


In a "remarkable volte-face", Japan's prime minister Shinzo Abe has agreed to be questioned in the Diet over a cronyism scandal involving the government's decision to award a contract to build a veterinary school to one of his close friends, says Walter Sim in The Straits Times. Abe's change of heart comes amid growing public mistrust towards him and his Liberal Democratic Party (LDP), says Robin Harding in the Financial Times.

In the past few months a "stream of scandals and unpopular laws", combined with "slow progress" on his promised economic reforms, have seen his popularity ratings drop to a record low, halving to around 33% in a matter of months. The latest scandal is Abe's biggest crisis since he took office in 2012, says Sim, and follows a "rout" of his party in the Tokyo elections this month, when the LDP won just 23 of 127 seats, down from 57. Abe has since vowed to make "every effort" to regain public trust (though the public are not convinced), and he is planning a cabinet reshuffle in August.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

The weakening of his position has led to a "resurgence of factional manoeuvring" within the LDP, says Harding. Foreign minister Fumio Kishida, widely seen as Abe's likely successor, has voiced doubts about his leadership. Abe's second three-year term runs out in autumn 2018 and a general election must be held by December 2018 at the latest. Some doubt Abe will survive that long, but given the weakness of the opposition and his "strong parliamentary majority", he may be "able to ride out a period of unpopularity".

What is bad news for Abe "could be good news for Japan if it forces him to refocus his attention on the economy", says The Wall Street Journal. If he were to reform Japan's labour laws instead of pursuing an "unpopular" constitutional revision, it would give an "immediate boost to business confidence". One of the reasons companies aren't raising wages, despite low unemployment, is that their payrolls are swollen due to strict rules on lay-offs. "Allowing companies to hire and fire more freely would be initially unpopular, but it would deliver the economic payoff that Abe needs to salvage his premiership".




How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019

Brace yourself – the global economy might be healthier than it looks

Investors have been worried about a global recession since the start of the year. But the latest indicators suggest things might not be so bad. John S…
2 Apr 2019
Global Economy

The charts that matter: reverse corona-panic takes hold

Investors seem to have decided that the coronavirus panic was just yet another buying opportunity. John Stepek looks at how the week's events affect t…
8 Feb 2020
China's economy

The coronavirus makes China’s economic balancing act even harder

2020 should be the year when China straightens out its heavily indebted economy. But the coronavirus could throw a spanner in that plan, says John Ste…
6 Feb 2020

Most Popular


Here’s why the Federal Reserve might print more money before 2020 is out

The Federal Reserve wants to allow US inflation to run “hot” for a while. But that’s just an excuse to keep interest rates low – and possibly print mo…
10 Feb 2020
House prices

Is the jump in house prices just a Brexit bounce, or is it more durable?

UK house prices rose sharply in January. Some of that is down to the end of Brexit uncertainty – but not all. There is a real risk that prices will ke…
7 Feb 2020

Winners and losers from a hard Brexit

Our exit from the EU is likely to be of the hard variety, says Matthew Lynn. Investors should back the industries that will flourish
9 Feb 2020

The rare earth metal that won't be a secret for long

SPONSORED CONTENT – You can’t keep a good thing hidden forever; now is the time to consider Pensana Rare Earths and the rare earth metals NdPr.
31 Jan 2020