Politics Reinvented: Abe-Koike Rivalry To Bring Supply-Side Reforms

Japan’s upcoming election is poised to usher in a new era of policy competition and political accountability. Structural reform in general, supply-side reform in particular, is poised to accelerate if, as we suspect, Tokyo Governor Yuriko Koike catapults herself into the never-imagined-before position of being both in power and in opposition: in power because she will continue to be the ruling governor of Tokyo and in opposition because she will be the leader of the second largest party in parliament (assuming current opinion polls are correct in their predictions). Given Governor Koike’s long-standing credentials as a pro-business, pro-entrepreneur and pro-consumer-led-growth policy maker and the fact that Tokyo is Japan’s most important economic region (accounting for slightly more than one-third of gross domestic product [GDP]), the post-election government will immediately come under attack for obstructing local growth initiatives and not delivering structural reform. It is this coming tension of national rules and regulations against local ambitions and “animal spirits” that is, in our view, the key dynamic to watch in Japanese politics and policy-making from here.

Of course, it remains to be seen exactly how this new dynamic will play out. Here, the power balance in parliament will be important. The weaker the Liberal Democratic Party (LDP), the greater the supply-side reform ambitions will get. Note that Governor Koike’s in-parliament party leader is likely to be the ex-leader of the Democratic Party, Seiji Maehara, who has impeccable deregulation credentials: As minister of transport in the first Democratic Party government, it was Maehara who opened Tokyo’s Haneda Airport to international flights. He accomplished in a couple of weeks what LDP leaders had not been able to do for decades because of vested interest loyalties to Narita. Arguably, the Haneda opening was the start of Japan’s reintegration with Asia and the world with enormous positive economic multipliers. The fact that both Koike and Maehara insisted on ousting old-style politicians and closet socialists from their party’s merger bodes well for the coming supply-side agenda of the new opposition, in our view.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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