Yurinomics vs Abenomics: Japan election's taxing issue

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The portmanteau Abenomics resonated around the world following the election of Shinzo Abe as Japanese prime minister in 2012, reflecting his "three arrows" economic policy.

On Friday, it met a new rival: Yurinomics. Ahead of a lower house election on October 22, the new Party of Hope, led by Tokyo Governor Yuriko Koike, outlined an economic platform that distances itself from the aggressive stimulus program of Abe.

Tokyo Governor Yuriko Koike (2nd L), head of Japan's Party of Hope, unveil the party's election campaign pledges in Tokyo, Japan on October 6, 2017. /Reuters Photo

While Abenomics is focused on muscular monetary policy, flexible fiscal policy and structural reform, the Party of Hope said it would concentrate on deregulation to create jobs, increase capital expenditure and revitalize the stock market.

Sales tax wedge

The Abenomics strategy was described as a "success" by the International Monetary Fund (IMF) in June 2017 -- the Japanese economy has enjoyed six straight quarters of growth and unemployment is below three percent.

But the IMF also suggested that instead of implementing a two-point rise in the sales tax from eight percent in 2019, regular incremental rises of 0.5 or one percentage points until the rate reaches 15 percent should be considered.

Japan's Prime Minister Shinzo Abe (3rd L) and his party's lawmakers raise their fists as they pledge to win in the upcoming lower house election, in Tokyo, Japan on September 28, 2017. /Reuters Photo

Koike’s new party has sought to set out a distinctive policy on the scheduled increase – a key wedge issue in an election being fought by two sides with broadly similar policy agendas.

The Party of Hope on Friday reiterated its promise to freeze plans to increase the sales tax from eight percent to 10 percent, arguing that the proposed hike would hurt private consumption and could push the economy towards recession.

Election campaign leaflets are laid out before a news conference by Tokyo Governor Yuriko Koike, head of Japan's Party of Hope, in Tokyo, Japan on October 6, 2017. /Reuters Photo

Abe has pledged to spend revenues from the increase on an education and childcare package, although doubts were raised over his commitment to the policy on Friday when Japan's top government spokesman said the country must create an environment to cope with the rise.

"Japan is no longer in deflation, so we need to take policies to ensure a virtuous economic cycle kicks off," Chief Cabinet Secretary Yoshihide Suga told a news conference. "We need to ensure the economy does not suffer a downturn when the tax rate is increased in 2019."

Koike's party has also vowed to end nuclear power by 2030 amid public safety worries after the 2011 Fukushima nuclear disaster, again finding a wedge over Abe’s ruling coalition.

What is Yurinomics?

Yurinomics aims to revitalize the economy and cut reliance on fiscal spending and monetary easing while building on Abe’s strategy, the Party of Hope said on Friday.

Tokyo Governor Yuriko Koike unveils the Party of Hope's ‍election campaign pledges in Tokyo, Japan on October 6, 2017. /Reuters Photo

"We'll carry out 'Yurinomics' that brings out private sector vitality, without relying excessively on monetary easing and fiscal spending," the party said.

Koike's party will also consider taxing big firms' massive internal reserves - worth around 300 trillion yen (2.66 trillion US dollars) - to fill a revenue shortfall and encourage them to put unused cash to better use.

Abe announced the snap election last week in the hope his Liberal Democratic Party-led coalition would keep its majority in parliament's lower house, where it held a two-thirds "super majority" before the chamber was dissolved.

People hold placards denouncing Prime Minister Shinzo Abe's administration during a rally in Tokyo, Japan on October 5, 2017. /Reuters Photo

However, Koike's new party - launched last week as a "reformist, conservative" alternative to Abe's equally conservative LDP - has clouded the outlook amid signs voters are disillusioned with Abe after nearly five years in power.

Koike herself, however, insisted again on Friday that she would not be a candidate. It is not clear who the Tokyo governor would back as prime minister after the election.

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Source(s): Reuters