Party of Hope vows to reduce spending

‘YURINOMICS’::Tokyo Governor Yuriko Koike’s new party aims to tap into discontent among voters following five years of aggressive monetary and fiscal stimulus policies

Reuters, TOKYO

Sat, Oct 07, 2017 - Page 6

Tokyo Governor Yuriko Koike’s new party yesterday unveiled what it calls “Yurinomics” — policies to revitalize Japan’s economy while cutting reliance on the aggressive spending and monetary easing that are central to Japanese Prime Minister Shinzo Abe’s strategy.

Launched less than two week’s ago, Koike’s Party of Hope is to take on Abe’s ruling coalition in a national election called for Oct. 22.

It has made populist calls to freeze a scheduled sales tax hike in 2019 and phase out nuclear power, as part of an effort to set itself apart from the government on key issues, but the fresh approach on the economy was given its own catchy name.

“We’ll carry out ‘Yurinomics’ that brings out private-sector vitality, without relying excessively on monetary easing and fiscal spending,” the Party of Hope said at a policy launch.

“While maintaining the Bank of Japan’s massive monetary easing for the time being, the government and the BOJ [Bank of Japan] should work together to seek a smooth exit strategy,” it added.

Yurinomics is a piece of political branding to counter “Abenomics” — the name given to the aggressive monetary and fiscal stimulus measures and structural reforms that Abe has adopted since returning to power in December 2012.

Five years on, Abe’s government can point to some signs that his strategy is finally fostering stronger economic growth and defeating deflation.

Appointed by Abe, Bank of Japan Governor Haruhiko Kuroda still wants to give his money-printing ways more time to work, whereas the Party of Hope wants to debate a strategy for smoothly ending the massive quantitative easing.

Abe announced the snap election last week in the hope his Liberal Democratic Party (LDP)-led coalition would keep its majority in the Japanese House of Representatives, where it held a two-thirds “super majority” before the chamber was dissolved.

Pitched as a “reformist, conservative” alternative to Abe’s equally conservative LDP, Koike’s party has clouded the outlook amid signs voters are disillusioned with Abe after nearly five years in power.

“By putting monetary policy on the table, Koike’s platform could spur debate among a lot of lawmakers about the need to fix some of the things they think are wrong, and quantitative easing could be a candidate,” Mitsubishi UFJ Morgan Stanley Securities senior market economist Shuji Tonouchi said.

“Right now, the market impact is limited, because the chances of her party forming a government are low, but there are a lot of assumptions built into the markets that the yen will remain weak due to quantitative easing. We still don’t know for certain how voters will vote,” he said.

The new party said Yurinomics would focus on deregulation and tax firms’ massive internal reserves — worth about ¥300 trillion (US$2.65 trillion) to encourage them to put unused cash to better use.

It would also freeze the scheduled sales tax hike in 2019 and help low-income households with a “basic income” policy that regularly pays a set amount of money to all citizens.

While the Party of Hope’s conservative approach on defense and constitutional reform resembles that of Abe’s LDP, its economic policy has a more populist streak by focusing on distributing wealth to households, analysts said.

“Some of the economic policies seem unrealistic,” BNP Paribas Securities senior economist Hiroshi Shiraishi said.

“Basic income is being called for in some countries facing growing social inequality, so I’m not totally rejecting the idea, but without a secure source of revenue, it’s simply impossible,” he said.

Abe’s ruling coalition has pledged to proceed with the sales tax hike and use the revenues for childcare and education.

The prime minister also hopes to convince voters that his strategy has succeeded in reflating the economy.