McLARTY FIRST TAKE: Japan's PM Abe reshuffles cabinet but not policies

McLARTY FIRST TAKE: Japan’s PM Abe reshuffles cabinet but not policies

September 11, 2019

KEY POINTS

Japan’s PM Abe announced a new cabinet September 11 that introduced some fresh faces but signaled no major policy shifts.
Most notably, Former Foreign Minister Kono moved to Defense, with Motegi named as his replacement. Motegi is expected to keep the US-Japan trade portfolio until completion of the first phase of the bilateral negotiations is announced at a Trump-Abe meeting on the margins of the UN General Assembly later this month.
Abe is on track to remain as PM until September, 2021. Some in Japan see in Abe’s selections an effort to bolster his conservative backers and neutralize potential obstacles as he looks toward achieving his long-sought goal of amending Japan’s post-war constitution.

Japan’s PM Abe announced a new cabinet September 11 that introduced some fresh faces but signaled no major policy shifts. One reason Abe is on the verge of becoming Japan’s longest serving Prime Minister is that he has kept the reins of government within a relatively small circle of proven, competent lieutenants.

Former Foreign Minister Kono moved to Defense, where this articulate English-speaker will likely give Japanese defense policies higher global profile. Replacing Kono is former Economic Revitalization Minister, and lead US-Japan trade negotiator, Motegi. While neither appointment signals policy changes, Motegi will be a bit less encumbered than Kono should Abe decide the time has come, in the months ahead, to explore whether mending ties with South Korea is possible during President Moon’s tenure. According to government trade officials, Motegi will keep the US-Japan trade portfolio until completion of the first phase of the bilateral negotiations is announced at a Trump-Abe meeting on the margins of the UN General Assembly later this month.

Meanwhile, Yasutoshi Nishimura – a former lawmaker with experience on TPP/CPTPP issues – was named to replace Motegi as Economic Revitalization Minister. His portfolio will likely include domestic economic and fiscal policy and CPTPP. If there is a second phase of US-Japan negotiations, figuring out the scope and timing of and negotiating a broader agreement may also fall under his purview.

Abe also brought former Health, Labor and Welfare Minister Kato back for a second stint in that position in order to ensure the major reforms his administration is planning to reduce Japan’s spiraling social security and healthcare costs are overseen by a politically astute Abe loyalist. Kato’s reappointment is not necessarily welcome news for US pharmaceutical companies who had limited access to Kato as his ministry forced price cuts on some of their most successful treatments during his previous tenure.

Although Abe kept the most important portfolios in well-tested hands, like all Japanese prime ministers he was under pressure to give other party veterans a turn in the ministerial spotlight.

Among the new faces who could play roles in Japan’s external business relations are new METI Minister Sugawara, whose Ministry has point on the recently-implemented export restrictions on South Korea, and new Interior and Communications Minister Takaichi, whose ministry will manage national IT policy as successful US internet ‘platformer’ companies face new scrutiny over their major Japan market shares (she is also one of only two women on Abe’s new team). Abe also replaced Land, Infrastructure and Transportation Minister Ishii with another veteran leader from Buddhist lay party Komeito, the LDP’s long-time coalition partner. This will likely ensure that plans to authorize the first three casino-based ‘integrated resort’ projects, for which US companies are top contenders, move ahead smoothly over the coming year (the left-leaning Komeito support reassures the public that casinos will operate under strict guidelines).

The only novel addition to this cabinet was the appointment of one of the youngest cabinet members ever, former Prime Minister Koizumi’s son and Diet seat successor, Shinjiro Koizumi, as Environment Minister. Koizumi has maintained a well-calculated distance from Abe until now, including voting for Abe’s opponent in the last party presidential election. This has given Shinjiro something of a rebel rock star image, and he is often mentioned (including in public most opinion polls) as the LDP’s most promising future prime minister. However, it appears that the younger Koizumi has decided that, at age 38, he needs to start demonstrating serious government managerial chops. By bringing him into the fold, Abe is hoping to neutralize his independence; Abe is also extracting a price, because as Environment Minister, Koizumi will have to find ways to square his (and, more famously, his father’s) anti-nuclear power views with Abe’s long-term objective of restarting as many of Japan’s idled nuclear power plants as possible.

As is also traditional, Abe made some new appointments in his LDP party executive leadership. However, he resisted calls to jettison grizzled veteran Secretary General Nikai, who played a key role in ensuring Abe got his current third three-year term as LDP President and has already floated the notion of Abe’s getting a fourth. Abe also subtly undercut one of his chief potential rivals, LDP policy council chief Kishida, by simply reappointing him to the same position.

Abe is on track to remain as PM until September 2021. While this cabinet could enjoy relatively smooth sailing in the run-up to the feel-good moment everyone in Japan expects at the 2020 Olympics, the government has been preparing the public in recent weeks for some tough decisions on social security spending that will likely cost all Japanese taxpayers more, above and beyond the scheduled October increase in the consumption (VAT) tax to 10%.

Nevertheless, some in Japan see in Abe’s selections an effort to bolster his conservative backers and neutralize potential obstacles as he looks toward achieving his long-sought goal of amending Japan’s post-war constitution. Pursuit of this white whale of Japanese conservative politics has distracted Abe at earlier points in his current prime ministership, leading to neglect of the pro-growth economic policies that got him re-elected as PM in the first place. Abe and his new team could face some difficult political decisions in the coming months about how much this new cabinet can afford to take on.

US-Japan mini-deal

In the more immediate term, Trump and Abe are set to formally sign a narrow deal covering agriculture, industrial tariffs, and digital trade for which they had announced an agreement “on core principles” at the G-7 summit in France. Speaking at a news conference after the cabinet reshuffle, Motegi said both sides would make the utmost effort to prepare a “win-win” deal for signature by the end of this month. The Trump administration’s objectives remain securing TPP-level agricultural market access, ambitious digital standards, and access for key industrial products.