Dictatorial Economic Interventionism

If a housewife in Japan wants more salary from his husband, she should not ask it to his boss, but to the Prime Minister. The Prime Minister Shinzo Abe on Tuesday asked economic leaders to raise workers’ salary. It is highly unusual for a prime minister to intervene in independent activities of enterprises. Hastened by the requirement of showing actual achievements, Abe is more and more involved in economic dictatorship.

“I want companies with better record to raise salary of workers,” told Abe in the meeting with top leaders of three major organizations; the Japan Business Federation, the Japan Chamber of Commerce and Industry, and the Japan Association of Corporate Executives. The answers of top leaders were something normal, such as “it depends on economic situation.”

In the annual negotiation of payments this spring, the labor unions ask to raise overall amount of workers’ salary, while employers are generally reluctant to it before confirming actual growth of their companies’ record. From a political viewpoint, however, the leading LDP needs to show actual effect of Abenomics. It is the most obvious evidence of policy success, if voters acknowledge the increase of their income. Abe wants it before the election of the House of Councillors this July. In addition, it is necessary for the economic recovery to stimulate consumption, even if the stock market rallies.

Business leaders welcome Abe’s positive efforts to get rid of deflation. Abe therefore is highly convinced in his economic handlings. But employers are still skeptical to the actual effect of his policy on economics. Political pressure from the prime minister may lead employers to incorrect decisions on their management.

Abe seems to recognize his intervention in monetary policy as successful so far. Setting two percent target of commodity price’s growth gets positive response from the market. Having pressure from politics, the Bank of Japan agreed with Abe administration to unlimitedly provide with monetary liquidity until it get the achievement. But isn’t it an interventionism?

Skepticisms against Abenomics are mainly coming from outside Japan. Among the European countries and others such as South Korea and Russia, there are growing sensitivities against cheap yen. In the meeting of budget ministers and chairmen of central banks of Group 20 in Moscow this weekend, it is likely for the parties to agree with having self-regulation on cheap currency policy. The wind of world economy is blowing against Abenomics, pushing Japan to isolation.