Shinzo Abe talks to The Economist
An interview with Japan's prime minister
AS HE campaigns for a snap general election due on December 14th, how does Japan's prime minister, Shinzo Abe, plan to put his widely expected victory to use? Will he move faster on economic reform, or concentrate his energies on efforts to change Japan’s war-renouncing constitution? How did he get on with China's President Xi Jinping when the two leaders met in Beijing last month? What are his plans for next year’s 70th anniversary of the end of the second world war. And could Japan’s relations with South Korea be on the mend?
Mr Abe met Dominic Ziegler, Asia editor of The Economist, and Tamzin Booth, our Tokyo bureau chief, in the former Kantei building in Tokyo. The residence’s history is entwined with that of Japan’s darkest period: in 1932, young military officers entered and shot to death the then prime minister, Tsuyoshi Inukai. Within four years the militarists were in charge.
The prompt for the interview was the upcoming election, but the conversation ranged widely: through structural reform in the labour market, the Trans-Pacific Partnership free-trade agreement, the rise of China and Japan's dispute with it over the Senkaku islands (known to the Chinese as the Diaoyu). It closed with an exploration of controversies surrounding Japan’s wartime past. Mr Abe struck a confident and relaxed tone, even on difficult subjects. He emphasised that his economic programme, known as Abenomics, was, and would remain, his priority. A full transcript, using the words of Mr Abe's interpreter and lightly edited for clarity, is available below.
The Economist: Recently you seem to have been a whirlwind of activity. You’ve done a lightning tour of the Asia-Pacific region, three major summits in three different cities. You broke the ice with President Xi Jinping in Beijing, and in Brisbane you had a trilateral meeting with the leaders of Australia and the United States. No sooner were you back than you declared the date for a snap election and you dissolved the Diet. It seems, and this has often struck us at The Economist, that you think of yourself as a man in a hurry, a man with a mission.
Shinzo Abe: We don’t have much time—that’s how I see it. The world is moving fast, in the context of a globalised economy. In East Asia, China is indeed rising, and many other countries around the world are trying to up their competitiveness.
In that context, two years ago Japan’s competitive position looked lost. Japan was about to fall off the world stage. Fertility rates are falling, and our population is ageing. We’re now seeing the absolute level of our population actually shrinking. That’s a very big challenge, and meanwhile Japan is confronted with a huge national debt. As I see it, Japan has to catch up, moving at the speed of the world, which is to say, very fast. And so we needed to speed up our reform of Japan as well.
Now, the 21 st century is the one in which Japan really must regain economic strength as well as competitiveness. We are a democratic country, we feel that we cherish the value of freedoms and the rule of law and so forth. And as a democratic country—and as a pacifist nation—we really would like to make a contribution to the region as well as the rest of the world. This is something that I really want to say as a clear message to the rest of the world. This is the firm determination I have, and I am going ahead with reforms, sometimes in the face of severe opposition, but I am determined to do it. In order to do it more resolutely, I decided to dissolve the lower house of the Diet so that we can have strength in holding a solid majority.
The Economist: Typically, journalists hear from politicians about domestic policy and about foreign policy—two different strands. But it seems that you see it as all one. Is that the case? Do you look at Japan’s being strong at home and strong abroad as a part of the same package?
Mr Abe: Well, from the time of my birth to when I reached my 30s, Japan was in its prime in terms of economic strength, growing very robustly, and with that background, Japan’s showing in the world was growing too. At the time, I thought this good trend would continue for a very long time to come, and I also thought that Japan would be a country of much greater importance to the world. But it didn’t turn out like that, because for the past 20 years, we’ve stagnated. During that time, we've seen the emergence of other strong global players. And so there is no way that we can separate our domestic policies from our diplomacy. We have to have a strong economy to have a strong diplomacy; and with strong diplomacy and a strong foreign policy, we can in turn ensure peace and stability in the region. And in the international community, our stronger influence will ensure smoother progress in [building relations and] getting things done.
To make sure Japan’s competitiveness improves, I have already visited 50 countries, helping Japan boost its infrastructure-related exports to the rest of the world. It used to be \3 trillion two years ago, but that figure has grown to \9 trillion—a threefold increase. So economic diplomacy is also important. Economic diplomacy and foreign diplomacy should be done as one, and that’s how I will continue.
The Economist: I’d like to ask about the personal views and experiences that inform your view of Japan and the world. During your years in the wilderness after your first term as prime minister, before you came back, what conclusions did you draw about Japan and the world? Was one of them that, in effect, China was eating Japan’s lunch, both economically and diplomatically?
Mr Abe: Between the end of my first government in 2007 and my return at the end of 2012, what happened was that China overtook Japan in terms of GDP. Well, that was not due to China; it was due to Japan, I would say. Had Japan successfully overcome deflation, for example, having a real growth rate of 3% and inflation of 1%, then we would have had nominal GDP growth of 4% for 20 years. I mean, Japan would not have been overtaken by China.
Well, anyway, China is a very young country economically. They were bound to overtake Japan in terms of GDP eventually. But we are not here to envy China’s growth or to look at their growth as a curse to Japan—no way. This should be taken as an opportunity for Japan to harness China’s growth. I have been putting a lot of emphasis on tourism, and we have already exceeded our goal this year of 10m foreign visitors. It’s going to be 13m this year. Chinese people are getting richer and richer, and more and more Chinese are visiting Japan as tourists. This year will be a record for the number of Chinese visitors to Japan.
The Economist: I was struck by how many Chinese were in Ginza yesterday afternoon...
Mr Abe: [Laughs]...They buy lots, and are valued customers.
The Economist: I’d like to come back to China in a minute, particularly your meeting with President Xi Jinping. But first we are all, as individuals, products of place and of our family’s history. How does where you come from shape your world view, shape what you do? I mean, you are from Yamaguchi, and I just wonder what you think about the history of Choshu—I mean, are you a Choshu revolutionary yourself? And you sat on the knee of your grandfather, Nobusuke Kishi, at the time of fierce anti-American protests, at the time of the signing of the security agreement with the United States [in 1960]. And later you were a private secretary to your father when he was foreign minister. Do you consider yourself in a line, carrying on a mission, something that needs to be accomplished?
Mr Abe: I am proud of being someone from Choshu [the historical name for the region now covered by Yamaguchi prefecture], because at that time—even then—people in Choshu had a panoramic perspective of the world, not simply looking inward, but looking outside of Japan to the world’s wider horizons. And they really had a sense of crisis that if things went on as they did, then the outside [Western] powers would colonise Japan. That was why they set out to bring down the Tokugawa shogunate.
Of course people at that time started out with the notion of wanting to keep foreigners out and [the Western threat at bay and] so forth. But at the same time they looked at the outside world and realised that in Japan modernisation simply had to take place. Big reform was a must for Japan, and that was why my Choshu forebears put their lives on the line to achieve that.
But what is right will not necessarily win majority support. And as you described, my grandfather, Nobusuke Kishi, went ahead in the face of huge opposition with Japan’s security pact with the United States. He believed strongly that the treaty would benefit stability and peace for the world as well as ensure economic prosperity for the world and Japan. At that time opposition to the treaty was very great, coming from the student movement as well as from the mass media. But my grandfather achieved what he intended to achieve, and right now most people hugely respect him for what he did.
And in terms of the economic policy that I have been pursuing, in regards to the monetary easing launched two years ago, almost everyone opposed it too.
The Economist: Let’s talk about your policies. After the election what will your priorities be? You are going into the election at a time when people question Abenomics. Many Japanese think that you are going to the country just to consolidate your power and hang on for longer. But what will you do with that power once you have it after the election?
Mr Abe: The mission given to me is to have Japan regain economic strength, overcome deflation and let the economy grow. There will now be much emphasis on carrying the growth strategy further. For instance, for decades nothing was done about deregulating the electricity market and reforming the agricultural co-operative [Japan Agriculture, JA]. But I aim to change those sectors. By gaining strength after the election—by winning the election—reforms will be accelerated—and they will include reforms related to medical care too. And I will of course resolutely forge ahead with labour-market reform—because time can’t wait…because we’re already seeing our population declining.
The Economist: What does labour-market reform mean? Does it mean making it easier to sack people, with severance pay, but also making it easier for companies to hire more people more permanently?
Mr Abe: We have a problem in Japan with regards to women in the labour force. Women are very competent and promising, but their abilities have not been exercised at their full potential yet. We also need to see labour move smoothly from mature or traditional industries already in decline to growth industries. Japan has a problem so far as flexibility in the labour market is concerned. So we have to make labour mobility smoother, and we are willing to provide support to speed up the process. And also in order to have more women in work, we have to make working hours for women more flexible. We need to push ahead with making work patterns more diverse.
The Economist: The growth strategies: the hardest parts are the changes that affect people’s daily lives, perhaps more than things like the Government Pension Investment Fund. I’m thinking about changes to medical care and the labour market, and farming. Do you sense that Japanese, whether young or old, in cities or in the countryside, have an appetite for difficult changes that will affect their lives?
Mr Abe: With regards to the Government Pension Investment Fund, portfolio management has long been conditioned for investing in deflationary conditions. But we need to break out of that [mindset] and make it more fitting for the positive inflationary era that is our reform. Of course, we have to make sure that pensions will be paid to beneficiaries, and that risks are low.
And looking at the area of medical care, there is much waste. This needs to be eliminated. We have to build an e-receipt system, and a database for making rational decisions about the provision of medical care. More analysis can be done on that. There is a room left for eliminating further waste, and we need to identify that. We have to maintain a high quality of health care. But I’m trying to challenge the issue of [medical professionals] encouraging high medical-care expenses.
The Economist: The Trans-Pacific Partnership [the TPP free-trade framework being negotiated among 12 Asia-Pacific countries]: it’s possible that trade is just about the only bipartisan issue in Washington now that there is a Republican Congress. So the chances of fast-track Trade Promotion Authority for President Obama seem to have increased. That means there is no excuse for Japan not to sign a deal, right?
Mr Abe: I believe that I am the strongest leader among those countries participating in the TPP negotiations, and given that, we will see an early conclusion to them. At the summit last year and as well as the summit this year, I issued strong instructions to negotiators to be flexible. And that is why an early conclusion will be realised. This is a strong determination…
I believe that negotiation is entirely easy now, and is reaching its final stage. And also Japan’s negotiations with America are also reaching their final stage. We are really now looking at that moment when each country is required to show flexibility.
The Economist: Let’s turn to China. It was of course a significant moment when you met President Xi Jinping for the first time at the APEC summit in Beijing. I have to say the expression on his face was extraordinary: as if there were a foul smell in the room. What was your feeling at the time you saw his expression?
Mr Abe: Well, my basic stance whenever I greet anyone is always to make sure that I have a smile on my face and as host to shake hands with my guest…But each leader has his own background connected to their home situation, so when I met President Xi, even though his expression was like that, I could understand why he wore it.
The Economist: So you are saying that his sour expression was for domestic consumption…
Mr Abe: Well, I don’t know what to say about that…But the second time around I’m sure that we can be more charming towards each other.
The Economist: So how are you going to improve relations now? Does it not very much depend on China? Out of interest, have you seen fewer incursions by Chinese vessels in the waters around the Senkaku islands. That’s presumably the test isn’t it?
Mr Abe: Of course we agreed on our four principled items this time. But as for our basic stance, we haven’t changed it in any way.
As for the [number and] movement of Chinese national vessels around the waters of the Senkaku islands—that has not changed. What is important is that we now have a maritime communication mechanism which will help us to avoid unforeseen circumstances, accidents or incidents. We have high expectations of this becoming operational.
The Economist: And how much do you—well, you are a realist—how much do you expect other aspects of the relationship to improve?
Mr Abe: Look at the South China Sea and the East China Sea: there are issues out there, for example, China versus the Philippines, and Vietnam, and so forth. So China will not easily change its behaviour at sea, its maritime behaviour. But what is important is that the international community has to work together with China to make rules jointly. And I made three principled proposals at the Shangri-La Dialogue saying that if claims are to be made, then they should be based on international law. Neither intimidation nor coercion should be used. Disputes should be resolved based on international law. So what the international community has to do is to co-operate together to make a more conducive environment, and China has to play its part in that.
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