EDITORIAL

Mandate to refocus on Japan's economy

The image of an unassailable chief was brought down to earth when Japanese Prime Minister Shinzo Abe called for early elections. Although his party is expected to remain in control, with the possible loss of only a few seats, what Mr Abe's move signals is the prospect that things could get worse down the road. That might allow the Democrats and other rivals an opportunity to gather enough support over time to oust his Liberal Democratic Party.

Mr Abe could have saved the country 70 billion yen (S$772 million) in election expenditure had he got it right earlier, when his party swept the Upper House elections in July last year, giving the ruling coalition full control of both houses of Parliament. Alas, Mr Abe turned instead to pursuing his pet political objectives, such as giving more power to the military. In the process, he lost touch with the economy. Alarmingly, Mr Abe also reneged on a pledge to rein in government spending and cut wasteful expenditure.

Over 40 per cent of Japan's annual budget remains financed by new government bonds. Japan's public debt already twice exceeds its gross domestic product, the worst ratio among developed countries. There is always the danger that long-term interest rates will rise if financial markets lose confidence in Japanese government bonds, complicating Japan's fiscal rehabilitation. The Greek debt crisis of 2012 - the result of what happens when debt balloons out of all proportion to economic output - should have been fresh in Mr Abe's mind.

He had raised expectations worldwide last year with his "Japan is back" slogan and his use of ultra-loose monetary policy - to successfully pump up the stock market and to soften the yen to make Japanese exports more competitive overseas. But his suite of strategies, dubbed Abenomics, has been getting some bad press of late, especially in the West.

Mr Abe is now seeking a fresh mandate to tweak his Abenomics formula to eradicate deflation and to tackle tough issues ahead, such as restarting nuclear power plants. For everyone's sake, the Japanese people ought to give him another chance to make good his vow to revitalise the economy, whose recovery is crucial for the region and the world.

Next time, however, Mr Abe must act more boldly. His promised "third arrow" of growth-oriented, structural reforms must come complete with targets and timetables. And Japan's labour woes will need more than his much-touted women empowerment policy. Immigration and labour reforms should be implemented nationwide instead. To make the most out of the elections, Mr Abe should inject fresh optimism that Japan, like him, can spring back adroitly.