Economic upheaval

Japan's Abe loses a shield but keeps his armour

The resignation of Japan's economy minister is a flesh wound for Premier Shinzo Abe. The departure of Akira Amari, a senior Abe ally who led transatlantic trade talks, is embarrassing. Still, the prime minister and his Liberal Democratic Party (LDP) remain strong. And while Japan's revival through the so-called Abenomics programme faces real challenges, these are mostly financial and economic.

Amari's defenestration doesn't reveal a party on the brink of collapse. The cabinet's approval rating is 47 per cent, a recent Nikkei poll cited by Nomura shows. Sure, it has declined steadily from a honeymoon peak above 70 per cent - but this mirrors the only other recent long-lasting administration, that of Junichiro Koizumi. Meanwhile, the opposition Democratic Party of Japan (DPJ) is in tatters, with sub-10 per cent popularity ratings against the LDP's 39 per cent.
 
Nor does Abe face obvious internal challengers. And Japan's executive, legislature, bureaucracy and central bank have a tendency to pull together in a way that would seem alien in, say, Washington DC. The big political question is actually whether to call a lower-house election this summer, alongside a mandatory upper-house poll, to capitalise on the DPJ's disarray.

That's not to say all is hunky-dory in the world's third-largest economy. If Amari's departure hits the LDP's popularity, tough medicine like an unpopular sales-tax increase might have to be put back. But most of the biggest headaches are not explicitly political. Creating a virtuous cycle of rising wages and healthy inflation has proved fiendishly hard. The Bank of Japan faces rising pressure to expand an already epic easing programme. And a faltering China poses a big threat to growth that was only anaemic to start with.

Among companies, too, there are further setbacks. A push to make Japanese businesses better-run and more profitable is scoring real successes, but embarrassing blow-ups at Toshiba and Sharp suggest there is still some way to go. Meanwhile, the Nikkei 225 stock index - a flawed but highly visible barometer of economic vitality - is close to bear market territory.

Losing an economy minister doesn't help fix any of these problems. In contrast to most countries in the midst of big economic transformations, it also doesn't make those problems any worse.