Take a clue from AbeThe air in Japan has changed. Signs of optimism and energy are evident, and there is hope that Japan may finally shake off a lost-decades curse, says Dr. Park Jae-ha, deputy dean of the Tokyo-based Asian Development Bank Institute. But we’re not hearing such an upbeat prognosis from executives of our local companies. They say Korea Inc. is gradually losing its vitality.
Both governments are committed to stimulate their slow-moving and lethargic economies. The difference is that Tokyo has specific and clear goals. Hawkish conservative Prime Minister Shinzo Abe, who took office in December, is leading a hard-charging, all-out campaign to turn the tide for Japan’s moribund economy through aggressive monetary, fiscal and structural policies to cure the four ailments that dogged Asia’s second-largest economy.
The entire government - with even the Bank of Japan finally on its side - is marching determinedly toward the goal, said Park. So-called “Abenomics” is made up of a hefty stimulus package, easy liquidity and aggressive infrastructure spending. The aim is to reverse the trend in the strong yen and high tariffs, taxes and energy rates. The ultimate goal is to create the best environment for people and companies. No grandiose words or elaborations are necessary. The path and means are simple and clear-cut.
Pop the same question to our local businessmen about what our government is doing to help the economy, and they will answer they simply have no idea.
Of course, sentiments like optimism or confusion aren’t everything in an economy. A real economy does not necessarily improve simply because businessmen or consumers are feeling cheery. But confidence, nevertheless, is vital, especially when an economy is faring poorly. What the Abe government is pursing is simple. It prints more money and increases liquidity to spur inflation and make the local currency cheaper, which helps exporters gain an edge in price competitiveness in global markets.
Japan has used monetary easing before. In fact, that’s how it came to sit on the world’s largest public debt. Its monetary supplies last year doubled from 2001. Despite all the spending, however, the economy has been stubbornly mired in the doldrums. Many blame the government for a lack of consistency in policies and competence in carrying them out. When the economy showed signs of recovery upon being stimulated, the government would splash cold water on it by raising the sales tax. The public began to lose confidence in the government. The central bank eased money supply, but it hasn’t reached commercial banks to help spur consumer spending. There were few Japanese who wished to seek new loans.
Consumers will borrow upon expectations and confidence in the government’s capabilities to revive the economy. Without such hope, the average person won’t seek new loans or spend. The government spent trillions of dollars but failed to lift the economy. The Japanese were skeptical this time around as well. But the Abe government was vociferous about its intentions and resolute in its actions. For the first time, the head of Bank of Japan was replaced before he finished his term. People began to sense some difference. They began to have faith in the government and finally opened their wallets.
For the first time in many years, the moods in the two economies have been reversed. We were the ones who were passionate and eager. We quickly picked ourselves up and recovered from the Asian financial crisis of the 1990s and the global meltdown after 2008. But these days the economic situation is bad. Domestic demand is nearly dead due to sluggish private and corporate spending. Exports began to slow since the second quarter of last year.
Prospects are worsening. Overseas demand is slow in recovery, and the country’s exports are losing competitiveness against cheaper Japanese products. People are talking of a lost decade for Korea. The energy in the country is quickly receding. It should have been the role of the government and politicians to cheer and encourage people.
But our government and politicians are hardly fit for the role. First of all, they have no specific goal. The new president’s grand vision of a “creative economy” cannot be explained even by senior presidential secretaries and cabinet members. Policies are conflicting and muddled. One day the government promises strong regulations to bring more economic “justice” and the next day it talks of liberalization to stimulate corporate investment.
The government announced it would raise a supplementary budget to jump-start the economy. But the scale is just 17.5 trillion won ($15.76 billion) with 12 trillion won going to cover up a revenue shortfall due to worsening economic conditions. Government spending of 10 trillion won can raise the nominal economic growth by 0.6 percent. But the government has only about 5 trillion won to spend on stimulating the economy.
We beg the government: Set a specific goal, keep the rhetoric simple and pursue policies with consistency and determination. Leave the fuzzy vision of a “creative economy” for the future as a longer-term goal. The government has higher and urgent priorities than creativity. It should do better than the Abe government, which is screwing up so many other things that relate to Japan’s shameful past.
* The author is an editorial writer of the JoongAng Ilbo.
by Kim Young-ook