The Economist February 12th 2022 Asia 33T
he phrase“new capitalism” may not
arouse as much passion as “down
with capitalism”, but it would at the very
least seem to promise—the clue is in the
name—a fresh approach. When Kishida
Fumio first used the phrase last year in
his campaign to lead Japan’s ruling Liber
al Democratic Party (ldp), and thus the
country, its meaning was still unclear.
“Ask me in a few months—we’re sup
posed to figure it out,” one of the mem
bers of Mr Kishida’s New Capitalism
Realisation Council replied when Banyan
made discreet inquiries in October.
Mr Kishida has since sought to clarify
his signature initiative. He cannot be
accused of a lack of ambition: “We want
to lead the world’s economic thinking
with a ‘new capitalism’ originating in
Japan,” he told a conference in December.
Yet that thinking remains a mishmash of
old ideas and empty buzzwords. Mr
Kishida’s list of plans under the banner
includes raising wages, fostering start
ups, revitalising rural regions and reduc
ing carbon emissions. All sensible ideas,
but hardly unfamiliar.
Take wages, which have been stag
nant for decades. Mr Kishida is right to
say that raising them could help invig
orate the economy. There are many novel
things he might try, starting with sharply
boosting the average minimum wage,
which is low by richcountry standards,
at ¥930 ($8) per hour. He could enforce
Japan’s equalpayforequalwork laws.
Or he might make it easier for workers to
move between firms. Instead, Mr Kishida
has offered some publicsector employ
ees a oneoff raise and hectored private
firms to do the same, rewarding with
subsidies those that comply. Abe Shinzo,
prime minister from 2012 to 2020, em
ployed similar tools to little avail.
Another chronic problem is Japan’sshrinking pool of labour. A new approach
might involve letting in more foreign
workers. Instead, the prime minister has
stubbornly stuck to strict border policies
that have kept out almost all new arrivals
since the pandemic started, drawing
comparisons to the sakoku(“closed coun
try”) period of 16331853, when Japan large
ly shut itself off from the world. New
thinking on climate change might include
taxing carbon emissions and ditching
coal. Mr Kishida has resisted both steps in
deference to industry.
Old ideas animate his plans for
development, too. Mr Kishida’s “digital
gardencity nation”, a collection of invest
ments in digital infrastructure to revive
rural areas, is an update of the “garden
city” concept that Ohira Masayoshi, a
former prime minister, advocated in the
1970s. To help realise his plans, he will rely
on massive fiscal stimulus and relatively
loose monetary policy—or what Mr Abe
called the first two of the three arrows of
his “Abenomics”.
The biggest changes under Mr Kishida
have been rhetorical. He intones against“neoliberalism”—shorthand in Japan for
marketfriendly reforms to encourage
competition—for worsening inequality
and poverty. The word “reform” is virtu
ally absent from Mr Kishida’s lexicon.
Whereas Mr Abe began his term by pro
mising more shareholderfriendly cor
porate governance, the new prime min
ister talks about the importance of other
stakeholders in businesses, such as
workers and customers, evoking the
Edoera merchant philosophy of sanpo-
yoshi, or “threeway good” for buyers,
sellers and society.
Mr Kishida’s rhetoric reveals a mis
diagnosis of his country’s ills. Japan is
hardly a neoliberal bastion. It could be
more equal: based on market incomes,
its Gini coefficient, a measure of this, is
slightly worse than the average of the
oecd, a richcountry club. But after tax
and transfers, it has barely budged since
the 1990s. Growing inequality is less of a
problem than a lack of dynamism.
If there is coherence in Mr Kishida’s
“new capitalism”, it is as canny domestic
politics. Preaching against the evils of
neoliberalism deprives Japan’s opposi
tion of a useful talking point. Sniping at
Abenomics allows Mr Kishida to differ
entiate himself from his stillinfluential
predecessor. Hypercautious covid19
policies, however damaging to Japan’s
soft power, insulate Mr Kishida from the
accusations of indifference that helped
fell Suga Yoshihide, who followed Mr
Abe. Voters seem happy: Mr Kishida’s
approval ratings have stayed near 60%.
Barring a major pandemicrelated
setback, that puts him in a good position
to sail through upperhouse elections
due this summer. After that, Mr Kishida
will have three years before he needs to
face voters again. Plenty of time, then, to
come up with something new.Kishida Fumio’s “new capitalism” is many things, but it is not newBanyan Of the ages
University. Many domestic weapons sys
tems are now of similar quality to those
produced by America, South Korea’s main
ally, with which it has many technology
sharing arrangements. But they remain
cheaper, attracting customers in emerging
markets. More than half of exportsare sold
to other Asian countries, notably the Phil
ippines and Thailand.
Exporting more also makes sense for
South Korean defence companies, which
have long catered only to their own armed
forces. Producing larger quantities should
lower production costs per unit and help
defray the expense of development.
South Korea’s emerging role as an arms
export powerhouse has other benefits for
the government, too. Defence deals often
come with bilateral security agreements
and technology cooperation, making
them a useful tool of foreign policy. The
deal with Egypt came with a promise of
mutual military cooperation in the future.
Yet the new export industry also carries
certain risks. The government is not par
ticularly discriminating in its customers.
It suspended weapons sales to Myanmar
only several weeks after last year’s coup,following a public outcry. Egypt, Thailand
and the uaeare no beacons of liberal de
mocracy. But with the exception of Myan
mar, public criticism of the deals has so far
ranged from muted to nonexistent.
Simpler worries are emerging, too. A
fifth of the cost of an indigenously devel
oped fighter jet will supposedly be paid for
by Indonesia under a partnership agree
ment. But Indonesia is said to be behind on
its payments. It remains unclear how
much of the promisedcontribution South
Korea will actually receive.Not every ex
port deal is a good one.n