Japanese Prime Minister Fumio Kishida, who took office in October 2021, pledged to rebuild Japan’s economy after decades of stagnation. However, as he prepares to step down following a leadership vote by his party, Kishida’s economic legacy is one of modest gains rather than transformational change. Kishida called for a “new capitalism” that aimed to encourage innovation and fair distribution of wealth through policies similar to his predecessor’s, Shinzo Abe’s, “Abenomics”.
Kishida’s appointment of Bank of Japan Governor Kazuo Ueda, who raised the benchmark interest rate for the first time since 2007, was seen as a significant decision. While the economy saw some positive changes during Kishida’s tenure, progress has been uneven, with GDP effectively standing still in the first half of this year.
Despite some recent improvements such as higher wages and stock prices, analysts remain divided on the overall impact of Kishida’s economic policies. Some view the recent signs of economic revival as temporary, while others believe there is positive momentum compared to the past.
Japan still faces major obstacles to economic growth, including a declining population, low productivity, and an inflexible labor market. The International Monetary Fund has downgraded Japan’s economic growth forecast for 2024, citing disruptions in the auto industry.
Kishida’s ability to implement necessary reforms for Japan’s future prosperity was constrained by political realities and a weak political base. While there has been some progress during his tenure, the long-term challenge for Japan will be to maintain sustainable prosperity and high living standards in the face of a declining population and technological advancements.
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