"Self-contained Player of the Match" Can't Declare the Aftermath of Ishiba's General Election?

- Ishiba, a 'non-mainstream politician' in the 5th term of the fourth round, seeks to lay the foundation for support within the party in the general election

- "It became a winning move, self-serving move" The ruling coalition party falls short of the majority, and is set to bring down Ishiba in earnest

- Post-Abenomics + Kishida Succession 'Ishibanomics' will be difficult to realize

- Japan's central bank attributed to the government? BOJ loses self-deprecation after 2013 joint statement

■ Broadcast: YTN Radio FM 94.5 (09:00-10:00)
■ Host: Reporter Cho Tae-hyun
■ Air date: October 28, 2024 (Monday)
■ Talk: Lee Chang-min, Professor of Convergence Japan Regional Studies at Hankuk University of Foreign Studies

- 'Same Bed, Different Dreams' With BOJ, When Will the Japanese Government Declare the Escape of Deflation
- Again? Encarry fears again for the booming U.S. economy

* The text below may differ from the actual broadcast content, so please check the broadcast for more accurate information.

◆ Reporter Cho Tae-hyun (hereinafter referred to as Cho Tae-hyun): The House of Representatives election was held in Japan yesterday. In Korea, it's like a general election. The result was a crushing defeat for the ruling party. But why was this election held? It was an election held by Prime Minister Ishiba's choice. Japan can dissolve the National Assembly and hold a general election under the Prime Minister's authority, and Prime Minister Ishiba made this choice. The result was a crushing defeat. Let's talk with experts about how this situation will affect the Japanese economy. I'm connected to Lee Chang-min, a professor of convergence Japanese regional studies at Hankuk University of Foreign Studies. Is the professor out?

◇ Lee Chang-min, Professor of Convergence Japan Regional Studies at Hankuk University of Foreign Studies (hereinafter, Lee Chang-min): Hello, I'm Lee Chang-min of Hankuk University of Foreign Studies.

◆ Cho Tae-hyun: If you look at the title of the newspaper that came out last night, they analyze it a lot like, 'Ishiba's winning move became a self-destructive move.' What should be considered as the background of Prime Minister Ishiba's forced to throw such a winning move this time?

◇ Lee Chang-min: Prime Minister Ishiba unsuccessfully challenged four presidential elections in his 38-year political career. This time, he became the prime minister in the fifth term of four games because he was a non-mainstream politician who did not belong to a faction. So, even though the popularity of the public is always high, the walls of real politics were very high because the party's support base was weak, but last year, as the political funding problem arose, there was a factional dissolution from the beginning of this year. In the end, it was an election held without factions, so I was able to win this time. At first, the presidential election was a three-way race. Former Environmental Minister Shinjiro Koizumi, followed by former Economic and Security Minister Takaichi Sanae. Next was former Secretary General Shigeru Ishiba. Originally, Shinji Koizumi's environmental awards were very advantageous, but as debates continued, Koizumi's lack of experience and study were revealed, and in the case of Takaichi Sanae, the color of hard-line conservatives was very heavy, so other fellow lawmakers felt very burdened. In the end, Prime Minister Ishiba was chosen while choosing Chaak as an erasure method. So in a way, it can be called a father-in-law. As a result, there are not many members of the Liberal Democratic Party who can be called Ishiba's person. So, we still have no choice but to look at the old Abe faction or the Aso faction, and in the end, Prime Minister Ishiba needed to disband the House of Representatives and strengthen his support base within the party through a general election.

◆ Cho Tae-hyun: Okay. The Liberal Democratic Party is in a very difficult situation. There's also a slush fund scandal. It was a situation where 60% of the lawmakers who were involved in this election failed, so couldn't we expect that there was a little difficult situation due to the economic problems?

◇ Lee Chang-min: The situation itself was not actually in favor of Prime Minister Ishiba. Perhaps that's why the popularity of Ishiba was not so high in the polls right after he took office. According to an Asahi Shimbun poll, only 46% said they supported it, but even then it continued to fall. There are many reasons for that, but he showed that various arguments he made when he was a member of the National Assembly were regressing. The representative example is that the Asian version of NATO, which has been claimed for about 20 years, has changed to a reserved position. In the case of economic policy, he said he would escape from Abenomics, but in the end, he continued to give the impression of reversing or regressing. In the end, it was virtually difficult to pursue a policy with a clear color because of the weak support base within the party, and in the end, it was necessary to reverse the current structure to overcome this situation and to realize any political philosophy of Ishiba himself. So, you can interpret it as if you've set a bit of an irrational number.

◆ Cho Tae-hyun: As you said, I went a little too far. As a result, the Liberal Democratic Party lost a lot of seats. This resulted in a decrease in the number of opposition seats and a significant increase in the number of seats in the ruling New Komeito Party. If this happens, won't there be a problem with your location?

◇ Lee Chang-min: Yes, that's right. First of all, if you look at the election results, the Liberal Democratic Party did not reach a single majority with 191 seats. Next, it is called the Liberal Democratic Party-Kindong 'Self-Government Alliance', and even if you calculate it with the ruling party, it is only 215 seats. The majority is 233 seats, but I'm 18 seats short of this. It has been 15 years since 2009 that the coalition government did not reach a majority, which means that the election has lost 64 seats because the Jagong coalition government had 279 seats before the election. As a result, the general election to strengthen the party's support base has become such a self-serving measure that could give up the government.

◆ Cho Tae-hyun: Then what will happen to the scenario in the future? First of all, he said he had no intention of stepping down, but is there any possibility of stepping down? Then?

◇ Lee Chang-min: In theory, the prime minister could actually change. The total number of seats in the opposition party is 235. The prime minister may change if the main opposition Constitutional Democratic Party can unite all other opposition parties, then independents, because it has two more seats than its majority of 233, but this scenario is almost impossible at the moment. This is because the color of the Japan Restoration Association, which has 38 seats, and the National Democratic Party, which has 28 seats, is very different from the main opposition Constitutional Democratic Party. So it's practically difficult for an opposition coalition to be formed, and for now, the ruling Liberal Democratic Party is expected to continue its efforts to recruit as many independents as possible and expand coalition with other parties such as the National Democratic Party and the Japan Restoration Party before next month's special session of the prime ministerial nomination. However, even if Ishiba remains in power now, there is a high possibility that the blame for Ishiba will continue to be raised, so it is likely that the internal power fight to bring down Ishiba will begin in earnest within the party.

◆ Cho Tae-hyun: Then overall, the situation across the country is very confusing. You said the color was a little ambiguous, but isn't it inevitable that the economic policies and directions that Prime Minister Ishiba was trying to pursue are very difficult?

◇ Lee Chang-min: Yes, that's right. For the time being, Prime Minister Ishiba's economic policy will be very difficult to materialize. Prime Minister Ishiba's economic policy package is sometimes called Ishibanomics. You can think of Ishibanomics as being composed of three main parts. The first is to break away from Abenomics. Abenomics' Financial Policy, Fiscal Policy In fact, it has been criticized for causing side effects such as the current super yen's depreciation by doing things that should have ended in a short period of time for more than 10 years.
◆ Cho Tae-hyun: Like zero interest rates.

◇ Lee Chang-min: That's right. So I'm going to get rid of these two. So he said he would raise interest rates and pursue a balanced policy without fiscal policy. There's this one. Second, he said he would inherit Kishida-nomics. In the case of Kishida-nomics, they have worked very hard on raising wages by emphasizing a virtuous cycle of growth and distribution. In particular, in this year's case, there was a 5.1% all-time wage increase in Chuntu, so he said that he would raise the minimum wage from 1,000 yen to 1,500 yen within a few years while inheriting Kishida-nomics. Lastly, thirdly, I said that I would do more local creation here.

◆ Cho Tae-hyun: The creation of the province.

◇ Lee Chang-min: Yes, Prime Minister Ishiba himself is from a very economically vulnerable region called Tottori. So he also served as the head of the local creation department in 2016. So he said he would come up with special measures to solve the three problems of population decline, local extinction, and concentration in Tokyo at once, but he did not specify this. In any case, these three are the three characteristics that make up a certain Ishibanomics, but in the current situation, it is very difficult for Ishibanomics to materialize in the future.

◆ Cho Tae-hyun: The creation of the province means the renewal of the province.

◇ Lee Chang-min: That's right. You can think of it as fat activation.

◆ Cho Tae-hyun: I see, revitalizing the province. Then, in the future, the work of lifting the veil of Ishibanomics will inevitably be very difficult, but one of the things you mentioned earlier is the normalization of financial policy and monetary policy. I talked about the autonomy of the Bank of Japan several times. But doesn't the Bank of Japan have autonomy? Why did this come out?

◇ Lee Chang-min: Yes. In the case of the Bank of Japan, when Abenomics begins in 2013, the Bank of Japan and the Japanese government make a joint statement. What the joint statement is, it will be united to escape deflation, which is a joint goal between the government and the Bank of Japan. It's a statement that we'll be united and respond to policy. From then on, in fact, the Bank of Japan has lost its autonomy.

◆ Cho Tae-hyun: That's right.

◇ Lee Chang-min: But over the past 10 years or so, there is a question of whether the joint statement should be lifted. This is because the situation between the Bank of Japan and the government has changed now, but in 2013, the Bank of Japan and the government had the same goal. It was an escape from deflation, but what the situation is now is that Japan is no longer in a deflationary situation. However, the government has not declared an escape from deflation. So it's a little complicated, but it's the Bank of Japan's job to determine whether it's a deflationary situation or not.

◆ Cho Tae-hyun: That's right.

◇ Lee Chang-min: And right now, Japan is clearly not in a deflationary state because it has been achieving 2% consumer inflation for 30 consecutive months since April 2022. But now the government is not declaring an escape from deflation. Because the declaration of an escape from deflation is not just consumer inflation, but the government's discretion by looking at GDP deflator and GDP gap, but if the government declares an escape from deflation, it loses control of this central bank. So, for example, when it became a super low situation like not too long ago, the Ministry of Finance intervened several times to defend the yen, but it was not very effective. Eventually, the yen's strength changed as the Bank of Japan raised interest rates, but if the government declares deflation, it will not be able to cooperate with the Bank of Japan in some policy in the future. So the key now is that the Bank of Japan wants to determine interest rates with complete independence and autonomy. Looking at the current situation, when will the government declare its withdrawal from deflation? In other words, when will the Bank of Japan's autonomy be fully guaranteed is now at some important stage in the Japanese economy.

◆ Cho Tae-hyun: So the government can still see it as a situation where they want to get their hands on the central bank, so what do you think is the possibility that Prime Minister Ishiba can declare an escape from deflation and normalize these things in the current situation?

◇ Lee Chang-min: The Bank of Japan's position is very hawkish right now, so there are a lot of people who argue that interest rates should be raised to 1% at a faster rate. If Prime Minister Ishiba secures a stable seat in this general election and Ishibaomics becomes more concrete, it is believed that he would have declared an escape from deflation a little faster. But it's not easy right now. Because when the economy is in a bad shape, it leads to approval ratings. In any case, the government needs to continue to control the central bank and continue policy solidarity with banks and central banks according to economic conditions, so declaring an escape from deflation may be delayed in a timely manner, and such uncertainty has increased significantly.

◆ Cho Tae-hyun: I think politics has become a situation that also affects policy, so I think we should take a look at the current economic situation in Japan. Looking at the current situation, you said you have escaped deflation, but how are the overall price indicators and economic indicators coming out well?

◇ Lee Chang-min: First of all, the most important thing is the rate of increase in the consumer price index. The Bank of Japan is also based on this, but for 30 consecutive months, it has achieved more than 2% of its target now. The problem was the real wage. Since wage growth has not been able to keep up with inflation, real wages have continued to be negative. It was a very burdensome factor for the Japanese government or the Bank of Japan, and in June, July, real wages turned positive for the first time in 27 months. Japan received bonuses in the summer, so the bonus effect appeared, but it fell back to negative again in August, making it very difficult to judge. However, it is expected to be converted to Plus from September. This is because the wage increase rate was 5.1% last year and this year in Chun-Too, the highest in 33 years. However, in the case of this wage increase, it is gradually reflected with a time difference, so everyone predicted that the real wage will be completely positive by the second half of this year or the end of this year. Eventually, the real wage increase is expected to settle completely by the end of the year and early next year, so consumption will also revive, and the government will have such an environment to officially declare an escape from deflation next year. I'm looking forward to it like this.

◆ Cho Tae-hyun: Okay. The professor has talked about real wages several times, but real wages reflect the inflation rate in nominal wages, so even if we get the same money, it's not worth it if prices rise. Please understand that. But one more thing to look at now is that it has been transformed into a lot of hawkish opinions. And deflation is also escaping a lot. But recently, the yen has been falling again. Wouldn't these things affect monetary policy, too?

◇ Lee Chang-min: Yes, that's right. Not long ago, after the Bank of Japan raised interest rates further on July 31, it actually moved stably around 140 yen to the dollar, but has recently turned to a weak yen to 150 yen again.

◆ Cho Tae-hyun: Is there a reason?

◇ Lee Chang-min: The biggest reason is that there are continuous indicators that the U.S. economy is not as bad as expected. Since the Fed's big cut in September, the U.S. employment price index has been very good. Now, the U.S. economy has a soft landing, and it's called 'no landing'. There may be a long boom without a recession coming at all. With this prediction, the yen is weakening because the Fed's rate cut will eventually be much slower than expected, and the rate of reduction of the U.S. interest rate gap will be slowed down a lot. However, if the yen's weakness exceeds the 150-yen range and approaches the 160-yen range, it will be October 31. So, there is a financial policy decision meeting in Japan the day after tomorrow. We may wait and see here for a while, but at the last meeting of this year on December 19, I believe that additional interest rate hikes are possible.

◆ Cho Tae-hyun: Okay. Japan is at the crossroads of normalizing its monetary policy, and I think that these political variables will play a big role again. So far, I have looked at the results of important elections in Japan and the aftermath with Lee Chang-min, a professor of convergence Japanese regional studies at Hankuk University of Foreign Studies. Thank you for talking today.

◇ Lee Chang-min: Thank you.