In September 2018, Shinzo Abe won a party election, thereby securing his third consecutive term as president of Japan’s Liberal Democratic Party and getting closer to becoming the longest-serving prime minister in the country’s postwar history. With his current administration now in its seventh year, Abe looks likely to continue implementing the economic policies he started in 2012, dubbed "Abenomics” and based upon “three arrows” of bold monetary policy, flexible fiscal policy, and structural reform to promote private investment.

Seven years in, with growth visible in many measures of the Japanese economy, has Abenomics truly succeeded? Are there, in fact, shortcomings that the administration needs to address before taking the proverbial victory lap, as Abe is considering the legacy he will leave behind? What are the most important challenges facing the Japanese economy in the near future?

These questions were the focus of an expert panel that APARC’s Japan Program recently hosted at Stanford. The event gathered five experts to go beyond the readily apparent successes of Abenomics in order to examine some of its potential shortfalls.

Takeo Hoshi, director of the Japan Program and moderator for the panel, opened the session by recounting many of the acheivements made by Abenomics: the country’s economy was experiencing its longest expansion in the postwar period—73 months and counting; real GDP was increasing; and the unmployment rate had fallen below 2.5%, with significant growth in female workforce participation.

And yet by other measures, Abenomics could be viewed as having missed several of its major goals. Inflation remains around 0.5%, and even after extending the target date from 2020 to 2025, it appears unlikely that the Japanese government can achieve primary balance. Additionally, and even though the government changed the way it calculated nominal GDP (leading to a possibly-inflated bump), the economy was still unlikely to reach the target goals of 600 trillion yen GDP along with 3% nominal growth and 2% real growth as set by Abenomics.

Joshua Hausman, assistant professor of public policy and of economics at the University of Michigan, discussed Abenomics targets for inflation. Hausman explained to the audience that Abenomics expressed goal of raising inflation was meant to achieve three benefits. First, GDP would see growth due to increased domestic spending ahead of inflation. Second, by raising nominal interest rates above 0%, the Bank of Japan would have more leeway to lower rates during a recession. And third, raising the rate of inflation would help erode Japan’s substantial government debt.

However, argued Hausman, while the Bank of Japan was hopeful that their actions would encourage businesses to raise prices, there has yet to be a significant change in the inflation figure. And while there has been growth in the GDP, the amount of change mirrors that of the period between 1993 and 2007, well before Abenomics. The Bank of Japan, concluded Hausman, desserves credit for what it has achieved, but should consider alternative courses of action.

Takatoshi Ito, professor of international and public affairs at Columbia University, noted that the Abe administration was also unlikely to achieve its goal of a primary balance in the next six years. Even after raising the consumption tax in 2014 (and with indications that another tax hike would occur in October of this year), the mark was unlikely to be achieved, because even as tax revenue were increasing, so too were expenditures made by the Abe government.

Another impact area of Abenomics, and focus of previous events by the Japan Program, is “womenomics,” or the economic policies’s influence on women’s presence and roles in the workforce. Nobuko Nagase, professor of labor economics and social policy at Ochanomizu University, Japan, shared several of the ways in which the administration appeared to be successfully addressing gender inequality in the economy. One big achievement has been the increase in the number of female university graduates who have children and are able to obtain better-paying jobs. Previously, as little as 30% of the female workforce in Japan remained employed following either marrage or a first child; the present figure has risen to 48%. And while across all management levels the growth of women has been relatively flat, among the middle and lowest tier management positions, there have been modest improvements in female representation.

Nagase noted, however, that there was still much to be done. Abenomics has not been successful in increasing the participation of fathers in childcare. Additionally, while both men and women had seen reductions in the long work hours for which Japan is notorious, improvement in narrowing the gender pay gap has been slow, especially in large-size firms. The most important challenges, said Nagase, are reforming the japanese labor practice of long-term employment and the seniority-based pay system, changing household models from full-time working husband and dependent housewives to double income households with children, and re-regulating labor rules to protect non-standard employees.

Panelist Steven Vogel, professor of Asian studies and of political science at the University of California, Berkeley, considered the extent to which the third arrow of Abenomics has hit the mark. He suggested that the Japanese government had succumbed to the ideological trap that regulations were a hindrance to the markets. Before Abe, explained Vogel, deregulation models had led to increases in non-regular work, expansion in inequality, and lower overall consumption. And while under Abe there was a continuation of appetite for deregulation—for example, the establishment of 10 dereguation zones over several cities—there is some evidence, albeit mixed, of it having a positive impact: profits are up, but capital investment and labor’s share of income are both down.

“Don’t expect huge economic impact from deregulation per se,” noted Vogel. Japan needs to improve its model of corporate governance, and it needs labor market reform, he concluded.

The panel was cohosted by the Japan Society for the Promotion of Science and the Japan Foundation Center for Global Partnership. For related information, as well as published reports, see the Japan Program’s research project The Political Economy of Japan under the Abe Government.

An air of uncertainty remains prevalent in the Indo-Pacific region. The South China Sea continues to be in contention, with six governments exerting claims on overlapping areas. The threat of a full-blown trade war between China and the United States puts the stability of the regional (and global) economy in question. Meanwhile, the Korean peninsula appears to swing between the brink of conflict to the possibility of dramatic diplomatic breakthroughs. It was in the midst of this precarious period for the region that the third annual gathering of the U.S.-Japan Security and Defense Dialogue Series took place in Tokyo from January 30 to February 1.

The 2019 meeting was co-sponsored by the Sasakawa Peace Foundation and APARC’s U.S.-Asia Security Initiative (USASI). For the past three years, the series has convened senior Japanese and American policymakers, military leaders, scholars, and regional experts to discuss Japan's security strategy and the alliance between Japan and the United States. Support for the workshop came from the Carnegie Corporation of New York.

Since its inception in 2016, the dialogue series has provided a venue for in-depth discourse on contemporary Asia-Pacific security issues, and has helped build bridges between American and Asian academics, government and military officials, and other defense and security policy specialists. “We have continued to expand the range of attendees from the Japanese and U.S. government and military,” said USASI Director Karl Eikenberry. “This has ensured for our dialogue even greater policy relevance with each iteration.”

“The U.S.-Japan security dialogue is unique because it combines civilians and military officers, both retired and serving, which simply does not take place elsewhere,” observed Stanford Lecturer in International Policy Daniel Sneider, a regular participant. “It also avoids the sometimes-empty rhetoric about our alliance in favor of an operational, but strategically informed, approach that gets at not only what is being accomplished, but where the gaps exist in our alliance.”

Threats, Challenges, and the Appropriate Responses

L to R: Amb. Karl Eikenberry and Lt. General Noboru Yamaguchi (Workshop Co-Chairs)

The 2019 dialogue opened with a day of discussions on many of the challenges facing the U.S.-Japan security alliance, including an assessment of the latest security trends in the Indo-Pacific, as well as Japan’s new National Defense Program Guidelines (NDPG). Passed by the Japanese Cabinet only a month earlier, the NDPG was the focus of two sessions on day one, including a discussion of its implications for Indo-Pacific security, as well as a session on the guideline’s ramifications for concepts of Integrated Air and Missile Defense and Archipelagic Defense

“Unsurprisingly, the global rise of China—along with the U.S. and Japan’s separate and combined responses to PRC strategy in the Indo-Pacific Region—helped shape both our agenda and the selection of participants,” observed Eikenberry. “We were specifically interested in the implications for the maritime domain and certain operational aspects of the U.S.-Japan security alliance.”

The day one closing ceremony featured remarks from the U.S. Ambassador to Japan, the Honorable William Hagerty.

Developing Policy Recommendations, Meeting with Policymakers

L to R: Major Rodger Welding and Colonel Daniel Munter (United States Pacific Air Forces), and Lt. Colonel Yuka Nakazato, (Japan Air Self-Defense Force)

Days two and three were designed for small group sessions. Referred to as “Core Group”, its U.S. and Japanese members met the morning of January 31 to review the preceding day’s workshop and develop corresponding policy recommendations. The quality and depth of the conversations underscored just how great an impact the expanded range of participants had on the resulting policy.

“Participants weren't afraid to address sensitive, big-picture questions,” said Phillip Lipscy, a Center Fellow at the Freeman Spogli Institute for International Studies at Stanford, “like the slow growth of Japanese military spending in the face of increasing regional threats and the challenges posed by unpredictable US administration policies.”

“Even as an expert of Japanese politics, I found the dialogue extremely informative and stimulating,” shared Lipscy.

Sneider agreed as well. “One thing that stood out this year, in contrast to the previous years, was a greater willingness on the part of our Japanese colleagues to air their sense of unease about and even opposition to the direction of American foreign and security policy under the Trump administration,” he said. “In the past, the American participants were much more open about their criticism of their own government, the Japanese tended to be polite—not so much this year, which made for a lively exchange on many issues.”

In the afternoon, core U.S. participants again met with the US Ambassador, along with his embassy team, as well as with senior Cabinet Office officials from the government of Japan.

Field Testing Ideas

During the second annual gathering in 2018, the dialogue began including a visit by the core workshop participants to a combined U.S. military—Japanese Self Defense facility. As part of the 2019 dialogue, the Core Group spent their third and final day visiting Yokota Air Base, the headquarters of both United States Forces Japan and Japan Air Self Defense Force Air Defense Command.

“ “These visits allow us to better understand Alliance operational challenges in the field,” noted Eikenberry. “Just as importantly, it affords us an immediate opportunity to test out some of the very ideas discussed during the preceding days.”

Yokota Air Base, Japan

Chatham House Rules applied to the dialogue, but a workshop report is forthcoming.

View the reports from the first and second annual workshops.

The U.S.-Asia Security Initiative is part of Stanford University’s Walter H. Shorenstein Asia-Pacific Research Center (APARC). Led by former U.S. Ambassador and Lieutenant General (Retired) Karl Eikenberry, USASI seeks to further research, education, and policy relevant dialogues at Stanford University on contemporary Asia-Pacific security issues.

(L to R: Karl Eikenberry, Michael McFaul, Major Marcus Morgan (U.S. Army LNO to Japan Ground Self Defense Force Northern Army and Stanford University Center for East Asian Studies MA ’18), Phillip Lipscy, Daniel Sneider)

Why does cellist Yo-Yo Ma refer to the Silk Road as the ‘Internet of antiquity’? What is globalization? What is economic interdependence? What are diversity and inclusion? These are some of the questions that high school students from Yokohama Science Frontier High School (YSFH) considered during a visit to the San Francisco Bay Area in January 2019. Alumni of the U.S.-Japan Council’s TOMODACHI Emerging Leaders Program (ELP) and SPICE staff encouraged the students to critically consider the questions during their visits to Facebook, Apple, and Stanford University.

Prior to their arrival, YSFH students shared their goals for the trip. YSFH student Ken Horikoshi, who aspires to become a robotics engineer, noted, “I will need communication skills, skills of thinking deeply, and of course, knowledge about space or robotics to make my dreams come true. So, I’d like to make an effort to improve these skills.” With the students’ goals in mind, ELP Chair and SPICE’s Rylan Sekiguchi organized visits to Apple and Facebook and assisted with a one-day seminar at Stanford.

Derek Kenmotsu talks with students and teachers on Apple campus.

Mana Nakagawa gives students and teachers a tour around Facebook headquarters.

During the seminar at Stanford, SPICE staff introduced the YSFH students to SPICE lessons from Along the Silk Road to illustrate that globalization is not just a modern phenomenon. The staff noted that in some ways, the ancient Silk Road was the first real conduit of globalization, as it connected vast lands into a trade network that spread goods, beliefs, and technologies far from their areas of origin. ELP alumna Naomi Funahashi, instructor of SPICE’s online course on Japan, illustrated this by showing how musical instruments were carried along the Silk Road and gradually adapted to cultural and geographic features of local environments. She mentioned, for example, similarities and differences of lutes that can be found in Europe, China, Korea, and Japan. She also noted a description of the Silk Road by cellist Yo-Yo Ma, founder of Silkroad, who has described the Silk Road as the “Internet of antiquity”; expounding upon this notion, Sekiguchi and SPICE’s Jonas Edman noted that by studying about the Silk Road, we can gain historical insights into how the contemporary stage of globalization is changing our world and our lives.

A highlight of the seminar featured the YSFH students giving presentations on their science-related research to the SPICE staff and visiting scholars at Stanford from Japan. YSFH student Kazuhiro Okada’s presentation on his ambition to design underwater cities stretched the audience’s notions of globalization and interconnectedness. One commented, “It would be interesting if you could someday design a subway stop under the ocean between Aomori Prefecture and Hokkaido.”

The ELP identifies, cultivates, and empowers a new generation of leaders in the U.S.–Japan relationship. Chair Sekiguchi, other ELP alumni, and SPICE staff extended this mission to the generation behind them. YSFH teacher Nobuyo Uchimura described the experiences that they provided her students as very precious ones that expanded their learning beyond the confines of a classroom, and YSFH teacher Yukimasa Uekusa noted his desire to prioritize programs such as this into the future.

Stanford e-Japan is an online course that teaches Japanese high school students about American society and culture and U.S.–Japan relations. The course introduces students to both American and Japanese perspectives on many historical and contemporary issues. It is offered biannually by the Stanford Program on International and Cross-Cultural Education (SPICE). The Fall 2018 cohort was the seventh group of students to complete Stanford e-Japan.

In August 2019, three of the top students of the Fall 2018 Stanford e-Japan distance-learning course will be honored at an event at Stanford University. The three Stanford e-Japan Day honorees—Sakura Hayakawa (Katoh Gakuen Gyoshu Senior High School), Ryotaro Homma (Kaisei Senior High School), and Taiki Yamamoto (Ritsumeikan Uji Senior High School)—will be recognized for their coursework and exceptional research essays that focused respectively on “Importance of Youth Political Participation and Citizenship Education,” “The Abolition of the Electoral College: A Synthesis of the Positive Aspects,” and “The U.S.-Japan Alliance: Is a New Framework Necessary?”

Mayu Fujinami (Keio Girls Senior High School) and Tatsuya Sugiyama (Saitama Prefectural Urawa High School) received Honorable Mentions for their research papers on “The Importance of Paternity Leave for Gender Equality” and “Design Thinking: Lessons from the U.S.,” respectively.

Applications for the next session of Stanford e-Japan (Spring 2019) are currently being accepted through February 24, 2019. More information is available at stanfordejapan.org.

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