We pay our respects to Abe-san whose leadership proved transformative

It would have been unthinkable not to dedicate this weekly to the late prime minister, Shinzo Abe whose life was tragically cut short by his assassination last Friday. To be sure, we have long been a critic of Abenomics, which was later dubbed Kuronomics which is a reference to BOJ’s governor, Kuroda-san and his ultra-loose monetary policy which had done much of the heavy lifting for Abe-san’s economic policies and it is still in operation today. 

Kuroda’s monetary policy experiment of quantitative easing was later adopted by other central banks to avoid Japanification of their economies during the global financial crisis. This has now left Japan in a massive debt trap with BOJ owning more than half of Japanese government bonds with no obvious exit strategy and the Japanese currency in tatters. Meanwhile, the inflationary forces are brewing fast which we think will ultimately force the governor out of office before his tenure ends next April. 

But beyond Abenomics and Mr Abe’s well documented slow response to the Covid crisis, he had done much which we as Japan stock market specialists have to be thankful for. He ultimately managed to put Japan’s capital markets back on the investment maps after two decades of their irrelevance.

He spearheaded legislative changes for improvements in corporate governance that led to unloading of cross-shareholdings that had kept Corporate Japan insulated from activist investors and had left shareholders returns at unacceptably low levels. He thus laid the foundation for corporate restructuring and big share buybacks we are seeing today. 

Mr Abe also loosened the grip of Japan’s bureaucracy on the economy, allowing policies to be more dictated by elected officials. He also strengthened and centralised the policy making apparatus and did away with consensus building among LDP factions that for years had diluted policies and had partly led to the two lost decades that Japan became infamous for.

More importantly, from a geopolitical perspective, he put Japan on the Pacific front line with a more assertive foreign policy that could stand up to China’s gradual empire building. Although he didn’t manage to officially change the country’s pacifist constitution, he raised defence spending and made Japan a vital strategic US ally in trying to contain China. 

For all his shortcomings in further restructuring the economy, falling short of improving wages and providing equal pay and opportunities for Japan’s female workforce, not to mention, his nationalist tendencies that at times irked other Asian nations, he was transformative and will go into history books for building a solid foundation for Japan to cope with the unfolding cold wars with Russia and China. May he rest in peace!