Two months after the earthquake, Japan-watchers are beginning to make their predications about the country’s recovery. Bill Emmott, former Tokyo correspondent for The Economist, recently visited the Tohoku region to investigate the prospects for himself. He was struck by the speed at which some disaster victims returned to work and carried on with their lives.
In contrast, the disaster has highlighted the slow pace of Japanese politics. Major spending for the reconstruction effort will require cross-party support but Emmott doubts that Prime Minister Kan has the authority to build consensus.
“I could imagine a grand coalition under a different leader or after another general election,” he said. With the next election scheduled for August 2013, Japanese politicians are in no rush to compromise for the good of the electorate.
Fortunately, the electorate is willing to make sacrifices. Opinion polls respondents say that they will accept higher taxes to finance reconstruction but Emmott fears that tax hikes will discourage consumer spending and hinder the recovery. He recommends a ‘deferred tax,’ where the government issues bonds now and raises taxes in a year or so.
At the same time, Emmott says: “an environment where people are willing to pay higher taxes could be one where established workers would be willing to have reform to their labour rights.”
His previous work has indicated that Japan’s employment situation – whereby veteran employees notch up high wages on permanent contracts, while new entrants to the labour market struggle to find even low-paid temporary work – is a barrier to growth. The reconstruction effort could provide a premise for labour law reforms but Emmott suspects that this will not be a priority.
Despite the political obstacles, Emmott is optimistic about Japan’s economic future. “Even gradual reforms will give Japan a chance to revive itself,” he remarks.