A New Japan?

Former Japanese Prime Minister Shinzo Abe triumphantly returned to power this week, five years after a humiliating resignation from office. His Liberal Democratic Party (LDP), which ruled Japan for over half a century before losing the Lower House to the Democratic Party of Japan (DPJ) in 2009, won a landslide victory that gives it a supermajority in the Japanese parliament. Yet the vote appears more to be a punishment for the failures of the DPJ than a reflection of deep support for the LDP. Given voter dissatisfaction with all of Japan's political parties, Abe and the LDP have a small window to convince the public that they have the answers to what ails Japan. Abe needs to hit the ground running. In particular, there are three things he should focus on:

One: Economy, economy, economy
Japan's voters are concerned most with the state of the economy and their personal finances. After two decades of economic stagnation, and a country that has sunk back into recession this year, the lesson of the elections of 2009 and 2012 is that the electorate will punish politicians who do not deliver on their promises to revive Japan's economy. The overriding issue that Abe must focus on is domestic growth. One reason for his failure last time in office was that he seemed to be a return to the "old" LDP after the reformist years of the wildly popular Junichiro Koizumi. So far, he appears to be heading down the same road by proposing greater stimulus spending combined with monetary easing.

Abe could make a dramatic break with the past and declare himself a new style politician by boldly embracing reform. Japan needs much more deregulation, greater foreign direct investment, an encouraging attitude towards entrepreneurship, and an embrace of free trade. A recent UN report also indicated that greater participation by women in the Japanese labor force could increase GDP by up to eight percentage points.

One way that Abe might make a break with the past is by convening a high level, bipartisan group of economic experts on a blue ribbon commission. This grand coalition of economic thinkers could come up with some dramatic proposals for kickstarting Japan's economy. This would both show Abe's seriousness, highlight his understanding that the economy is the number one issue for Japanese voters, and even come up with some good ideas.
Two: Alliance Management
The Democratic Party of Japan wounded itself unnecessarily in its first months in office by undermining a 2006 agreement with the United States on relocating a Marine Corps Air Station within Okinawa. It then spent several years attempting to patch up the differences, while making no real progress on the issue. By 2012, the Noda administration had made some significant moves towards increasing Japan's military strength, including the decision to purchase the F-35, a revision of a ban on arms exports, and continued ballistic-missile-defense activities. Yet, the defense budget continued to decline during the DPJ years, and the party never attempted to tackle the ban on collective self-defense or to propose more burden sharing with the provision of public goods in Asia.

Washington will be expecting the LDP and Abe to revert to the working relationship established during the Koizumi years. There are indications that Abe is leaning in this direction, and is ready to try and revise the Constitution to allow for collective self-defense. But Abe will have to come up with a more coherent vision of Japan's role in Asia and the world if he is to convince Washington and others that Tokyo has a stake in maintaining stability and protecting the current international system. While this does not have to be directly related to the alliance, any greater role that Japan plays abroad will probably strengthen the sense of a working partnership between Washington and Tokyo. In particular, Abe could continue to promote the idea of cooperation among democracies and liberal states, which was something he emphasized his last time in office. This then could be part of a larger alliance initiative to encourage further liberalization throughout Asia.
Three: Dealing with China
Sino-Japanese relations have been roiled since the summer over the Senkaku islands issue. The Noda administration's decision to nationalize three of the disputed islands led to months of anti-Japanese demonstrations in China, a significant drop in trade and an ongoing game of chicken in the skies and waters around the islands. Japanese Coast Guard ships had responded to near-daily incursions by Chinese vessels, and Tokyo is worried that Beijing is attempting to undercut Japan's claim to exercise administrative control over the islands.
Abe must come up with a credible way to assert Japan sovereignty over the islands, as well as maintain administrative control. Yet he cannot sacrifice broader Sino-Japanese relations, and risk either conflict or a collapse in trade. While such possibilities may seem remote, tensions between Beijing and Tokyo remain extremely high, and an accident or miscalculation could have unforeseen consequences. Thus, Abe needs to propose some type of initiative to stabilize Sino-Japanese relations, while not compromising on the islands issue. This may prove to be impossible, but it is in both Beijing and Tokyo's best interest to step back from the emotions of the day and consider their relationship in a broader light. Since China so far appears not to be taking the lead in this manner, Abe could play the statesman's role, and make a case for resetting relations so as to deepen economic, cultural and political ties.

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