Noda Must Keep His Eye on the Prize in Japan

By Matthew Goodman

The Japanese have a word, ganbaru, that loosely translates as "show resolve." It is the quintessentially Japanese quality that the world has seen so movingly on display since the triple disasters of March 11, 2011. As measured by the policy boldness he has displayed over the past month, Prime Minister Yoshihiko Noda clearly has it in spades. Noda will need all of his resolve to make one last push over the next few months to secure Japan's economic future-and his own legacy as one of the most effective Japanese leaders of the postwar era.

On taking office last September, Noda inherited a trifecta of economic challenges that would have tested the resolve of a political leader anywhere: a battered economy struggling to emerge from nearly two decades of deflation and find new sources of long-term growth; a debt burden that by some measures is the highest in the advanced world; and the sudden and near-total loss of 30 percent of Japan's electricity supply following the Fukushima disaster and the decision to shutter all of the nation's nuclear reactors.

Noda quickly revealed his determination to take on all three of these challenges, despite formidable political obstacles. In the face of deep misgivings nationally and within his own party, he made the case for preserving some nuclear energy capacity. He declared his intention to push through legislation to double the reviled consumption tax to put government finances on a sounder footing. And at last November's APEC Summit in Honolulu, he signaled his desire to bring Japan into the Trans-Pacific Partnership (TPP) trade negotiations to help spark long-term Japanese economic growth.

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Noda has now taken steps to address two of these challenges. On June 16, he ordered the reopening of a pair of nuclear reactors in western Japan after arm-twisting the relevant local authorities. And 10 days later, he won passage through the Diet's Lower House of legislation to raise the consumption tax. This summer will still be an uncomfortable one in Japan, as air conditioning in homes and offices is turned down to ensure adequate energy supplies; meanwhile, the tax vote prompted a large-scale defection of Diet members from Noda's ruling Democratic Party of Japan (DPJ) that could put all of his reforms in jeopardy. But the recent actions were important and bold first steps.

Now comes the hard part. Japanese entry into TPP holds the promise of forcing the structural reforms that are so needed to raise the productivity and growth of the Japanese economy. Key reforms include making labor markets more flexible and increasing the productive participation of women in the workforce; liberalizing Japan's inefficient service sectors; and rationalizing and opening the protected agriculture sector.

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Matthew P. Goodman holds the William E. Simon Chair in Political Economy at the Center for Strategic and International Studies (CSIS) in Washington, D.C.

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