Ishiba is akin to ‘a dam’ holding back the rising tide of fiscal stimulus in Japan: Expert

Ishiba is akin to ‘a dam’ holding back the rising tide of fiscal stimulus in Japan: Expert

of the economic policies and consumption tax was one of the major ones that were talked about obviously given the inflationary picture in Japan. Do you think opposition parties will eventually push for consumption tax relief? That certainly is the one thing they all seem to agree on in one form or another. Obviously, there were a lot of differences between, you know, party like the constitutional Democrats that wanted just a one-year uh relief from food stuffs uh the consumption tax on food stuffs. I mean, that was, you know, pretty limited gesture. Democratic party for the people wanted an across the board 5% cut. Some parties wanted to get rid of the consumption tax entirely. I mean, so there’s a lot of difference about the particulars. Uh but clearly the winds were blowing in favor of, you know, much more fiscal expansion. Uh I mean maybe to mix my metaphors, but I mean some in some ways it felt like Ishiba in his assistance on insistence on the importance of fiscal consolidation. It almost felt like a dam holding back what look looked like this rising tide of of fiscal stimulus and desire for tax cuts and the desire for more uh spending on different benefits particularly for younger Japanese. Um and I think you know if he goes uh you’re going to see I think that that tide is the dam is going to break and and you’re going to see the next government is going to be much more inclined towards fiscal stimulus I suspect. Tobias do you see any possibility of the US and Japan reaching any kind of trade agreement? I mean even if Alkasawasan goes later on today for the eighth time isn’t the US going to be saying why should we be talking to you? You might not even be in this position in a couple of weeks time. I I think there’s a real uh concern about that. I mean, you have to ask whether the US is going to want to actually make deals with someone who looks like a lame duck and you don’t know if any promise he makes is going to stick. Uh so I I mean I think there’s a real question about that and frankly I think we can overstate the degree to which the impending upper house elections were a constraint in the talks. I mean the fact is that you had real differences in negotiating position between the US government and the Japanese government and things that were going to be hard for a Japanese government to sell domestically regardless of whether you had an election coming up. You know the you know compromising on rice is going to be a tough cell uh at any moment for uh for a Japanese government. And frankly now if the LDP is feeling uh like it’s in a state of crisis that not it’s not going to be easy for any LDP leader to coming coming out of this election to then say well actually Japanese public you know we’ve made compromises we’re going to be importing a lot more rice and by the way we have to accept a lot higher tariffs on on automobiles you know we’ve decided to give up on that and we’re going to be buying lot you know all this other stuff from the US and and I I don’t know if any LDP leader right now is going to be in a position to to come home and say well we we signed essentially an unequal treaty with the United States to get the US off our back. And yes, we we won’t have the reciprocal tariffs, but we left all these other things in place. Um I I don’t know if any Japanese government can do that. And so, um it’s hard to see Ishiba getting something done before August 1st. And frankly, it’s hard to see, you know, if he’s out, it’s hard to see his successor having a great deal more success negotiating with Trump than Isha has had. Yeah. I mean, 25% is going to be a death nail for Japanese industry. And the US is talking about more terrorists for the pharmaceutical industry. I mean recession is is everyone is talking about it right now and a deeper one than they were a couple of weeks ago. I mean can how is Japan going to navigate through this? It’s I mean it’s it’s um you know it’s a real question and it’s a real question how you can do it when you have um really a real political crisis going on and you know if Ishiba survives you have a crisis because you have a leader who really has lost the confidence in the public and lost the confidence of much of much of uh his own party and isn’t able to to get anything through the diet. But even if you get a new leader and you get maybe an expanded coalition, you’re still not looking at you know it’s going to be a weak coalition. It’s going to be new. they’re going to be trying to figure out how to work together. Uh, and you know, it’s unclear what mandate it’s going to have and they’re going to be dealing with a real, you know, potentially serious economic blow. Uh, or they’re going to have to, you know, be born, uh, with this new coalition and immediately go to the United States and say, “Fine, we’ll accept your demands. Please remove the 25% tariffs.” Uh, but that is potentially, you know, a real political loser at home for a government that’s going to have, you know, some pretty weak footing. And so it’s it’s not a great situation really economically or politically for Japan right now.

Tobias Harris of Japan Foresight says the next Japan government will be more inclined towards fiscal stimulus, and regardless of the upper house elections, we are unlikely to see Japan making a deal with the U.S. before August 1.