Fumio Kishida, who has just assumed the premiership in Japan, proposed the realization of a "new capitalism" in his first economic policy address. According to Kishida, the neoliberalism that Japanese society has adopted in the past has resulted in a deep divide. Hence, he called for "new capitalism" through means such as the "virtuous circle of growth and distribution" and creating a new post-pandemic society. As was expected by ANBOUND not long ago, this new policy shows that the new Japanese government has made adjustments and amendments to the nearly a decade-old Abenomics.
This adjustment, of course, does not mean that Abenomics did not work. Impacted by the 2008 financial crisis, Japan promoted the economic policies of Abenomics, which effectively pushed the Japanese economy back on the growth track, and resulted in the gradual recovery of the Japanese capital market.
Abenomics has "three arrows", namely aggressive monetary policy, fiscal consolidation, and growth strategy. The third “arrow”, related to economic structural reform, however, has always been a vague concept, and there is no effective policy framework. Unsurprisingly, this in turn caused problems in Japan’s economic structure. The issue of unbalanced wealth distribution has not been effectively resolved, and to a certain extent, the economic growth and inflation targets have been delayed. As Kishida said, after implementing the Abenomics policy for nearly nine years, in order to ensure a virtuous cycle of growth and distribution, it is necessary to revise the current neoliberalism. Kishida pointed out that the “new capitalism” is to focus on both growth and distribution. In the pandemic era, financial controls are loose and the wealth of the rich grows rapidly, yet the general population do not benefit much from it. Therefore, “new capitalism” is a strategy for the redistribution of income among the people.
When it comes to the economic policy framework, the dual aspects of development and distribution are included. First of all, there are four pillars of economic growth: 1. Expanding investment in scientific and technological research and development, and setting up a 10 trillion science fund; 2. Larger-scale tax policies that provide tax support for companies investing in the future; 3. Promoting clean energy policies, including a series of future energy growth policies that encompass the restart of nuclear power plants; 4. Promoting the development of the digital economy, including the establishment of a digital promotion committee, the national promotion of 5G, and the national promotion of remote office autonomous driving. Secondly, we see another set of four pillars of economic distribution: 1. Increasing the supervision of enterprises, strengthening the disclosure of company non-financial information, and encouraging enterprises to adopt measures that benefit employees, shareholders, and business partners as a strategy to promote corporate profits and labor distribution balance; 2. Expanding middle-class income, and strengthening subsidies for housing and education expenses for child-rearing families; 3. Substantially increasing the income of health workers, teachers, etc., and at the same time establishing an "income evaluation committee" to openly and fairly assess the industries that need to increase their incomes; 4. Establishing real and equal communication relationships between the government and the enterprises and jointly resolving any problems that arise.
There is the historical predecessor to Kishida's new capitalist policy. Some Japanese media have mentioned that Kishida's concept of new capitalism may be derived from the Japanese Industrialist Shibusawa Eiichi's idea that morality and economic activity were inseparable. It requires not only the pursuit of the interests of enterprises and capital but also the importance of public interests and social ethics, thereby enriching the significance of capitalism. In the 1960s, the then Japanese Prime Minister Hayato Ikeda put forward the Income Doubling Plan, which placed the Japanese economy on the track of rapid growth. Kishida too proposed the Reiwa Era's Income Doubling Plan, which also imitated the previous experience of Japan's economic boom. From this point of view, the concept of new capitalism is more like an attempt to return to "new Keynesianism" under the reflection of neoliberal policies.
Such a proposition also conforms to the current trend of the world to reflect on the abuses of neoliberalism. As the French economist Thomas Piketty mentioned in his magnum opus Capital in the Twenty-First Century, after decades of neoliberal economic policies, global inequality has become more serious in recent decades. After 2008, the long-term development trend of low-interest rates, low inflation, and low growth brought about by the quantitative easing policies adopted by various countries has made the distribution of wealth more imbalanced, while the division of social classes and the economic division between countries are worsening. For example, the Biden administration of the United States is now attempting to promote a "welfare" policy to ease social divisions and contradictions. Similar to Kishida's "new capitalist" policy, it also began to emphasize the importance of the balance of distribution under the premise of development, thus bringing new demands in promoting economic recovery and growth. On the Chinese side, it also proposed the long-term development goal of "common prosperity", sharing a similar target as the "New Keynesian" economic policy. This not only means the continuous expansion of government fiscal expenditures but also signifies that the government is playing an increasing role in economic growth and industrial development.
Researchers at ANBOUND believe that Kishida’s new capitalist policy does not mean complete abandonment of Abenomics. Rather, it is more like a response and adjustment in the face of the new economic situation. In a sense, the new capitalist policy is more like Abenomics’ “third arrow”, where Its policy foundation is still based on the monetary and fiscal expansions of Abenomics. Countries are experiencing huge changes in economic structure, where economic factors such as labor, capital, technology, and the government will only increasingly become more and more complicated. Whether the Japanese government’s “new capitalist” policy can push the Japanese economy to recover from the pandemic and return to the track of long-term sustainable growth in the future remains a huge challenge, and its policy effects remain to be observed.
Final analysis conclusion:
The Japanese government’s new capitalist policy framework pays greater attention to the balance of growth and distribution. This is an adjustment and revision based on the Abenomics policy in recent years, and it is also a reflection on the increase of inequality globally. Finally, it is also an attempt to return to the “New Keynesianism”.
