TOKYO – Japanese Prime Minister Yoshihide Suga’s state of emergency announcement on Thursday had all the conviction of a hostage video.
Suga had been reluctant to take the step – Japan’s second such Covid-19 response in seven months. Like his predecessor Shinzo Abe, he has prioritized protecting economic growth. Since taking the reins on September 16, Suga has been even more hands-off in his approach to the pandemic.
Now a steady surge in infections is forcing his hand.
On Wednesday, new cases topped 6,000 for the first time. One-day records were recorded in Tokyo with more than 2,000 new cases on Thursday and many other cities.
Business flights to and from China and South Korea, opened up as “travel bubbles,” have been halted.
Yet Suga’s Thursday declaration might best be called “emergency lite,” says analyst Scott Seaman of Eurasia Group. Suga is calling for more focused, and far less stringent, guidelines than those that slammed Asia’s No 2 economy last spring.
In doing so, he may be ensuring Japan’s coronavirus troubles get even worse.
His request that restaurants and bars close at 8 pm, that companies let some staff work from home and that people consider traveling less is as mild a response as he could get away with politically.
High-profile Tokyo Governor Yuriko Koike, by contrast, has been imploring national leaders to act more boldly. But nothing about Suga’s move is bold, and nor does it look likely to alter people’s behavior sufficiently to halt infection rates.
Nor is it likely this latest emergency decree will last only one month – until February 7 – as Suga claims.
On Tuesday Shigeru Omi, who heads the panel of experts supposedly informing Suga’s government, called that timeline next to impossible. Rather, Omi said, “it will need a little longer – March or April, I’m not sure.”
What is sure, though, is that Suga’s light-touch approach to the pandemic is impressing no one. A precipitous drop in his approval rating is unlikely to slow, and the 2020 Tokyo Olympics, postponed until July, are looking even cloudier thanks to Suga’s feeble leadership.
This week’s events are a timely window through which to view Suga’s journey from great reform hope to near-lame-duck status in less than four months.
From high hopes to no-hoper
When Abe, Japan’s longest-serving leader, handed Suga the baton in September, expectations were modest. Still many hoped that Suga, who’d been Abe’s chief cabinet secretary for seven-plus years, might use his technocratic skills to good effect.
It helped that Suga was teeing up a number of reform wins by lowering mobile phone fees, cutting red tape and putting Japan on a path to carbon neutrality by 2050.
But what has been done? Nada.
The telecom empire struck back, stymying Suga’s path to offer relief to consumers who pay abnormally high data rates.
And just as telecom giants are flexing their muscles as major campaign donors, the nuclear lobby is also digging in.
So, too, is Tokyo’s sprawling, labyrinthine bureaucracy. The capable administrative reform minister Taro Kono is on the case but the challenge is daunting.
Instead of reforms, addressing the recession Suga inherited has taken precedence.
Seven months ago, around the time of Japan’s last emergency declaration, the government began unleashing US$2.2 trillion of rescue spending. Since assuming power, Suga’s team cobbled together another $700 billion of stimulus. It’s planning a record $1.03 trillion budget for next year.
Yet economic data continue to move in the wrong direction. The 0.9% drop in consumer prices in November from a year ago was the biggest in a decade. It’s a stark sign that Tokyo’s deflation battle has gone full circle as Covid-19 fallout worsens.
Less pain, less gain
Suga’s low-energy, low-urgency pandemic response may be setting Japan up for greater problems ahead.
“It’s not surprising but nevertheless bears noting that the top item on NHK now – on the day that the Japanese government will introduce a new Covid-19 state of emergency for greater Tokyo – is the storming of the US Capitol,” notes analyst Tobias Harris of Teneo intelligence.
Granted, a Europe-style lockdown might be overkill for Japan. All things considered, Japan remains a Covid-19 success, having just over 3,600 deaths. With just under 260,000 cases, Japan, with a population 126 million, has fewer infections than Miami.
And the civil rights provisions of Japan’s postwar constitution make police clearing people from the street a non-starter.
And some worry that Tokyo is going overboard. They argue that the “Japan model”, or universal mask-wearing and an emphasis on Covid-cluster-busting, is working.
“I think this is an overreaction,” says economist Taro Saito of Tokyo’s NLI Research Institute.
But avoiding ever-worsening outcomes means heading off spikes in infection rates, like the one now plaguing Japan. The problem is that Suga’s plan, like Abe’s before him, draws too much from the Donald Trump playbook that has failed so spectacularly in the US.
It fobs off too much of the responsibility on to Koike and Japan’s other prefectural governors. These regional leaders can only urge people to avoid mass gatherings – urgings that can be ignored without penalty.
Movie theaters and concert halls may be restricted, though even that step remains an open question. Schools won’t close this time. University entrance exams will go on as planned.
Businesses could be asked to scale back operations, but won’t face significant fines or penalties for non-compliance. And while the popular “Go To” subsidized travel program has been suspended through January 11, Suga’s government has avoided announcing a more sweeping rollback.
Suga’s refusal to get tough signals a double whammy: No big win and many small losses.
“The comparatively mild nature of the declaration and its circumscribed geographic scope will limit its negative macroeconomic effects,” Seaman says.
“That said, it will likely dampen consumer and business sentiment, increase social pressure on people and companies to restrict their activities in Japan’s largest population center, and fuel skepticism about the prospects for a steady economic recovery this year.”
Adds Suga advisor Omi: “It’s not possible to control in a couple of weeks, or less than a month. Stronger measures might be needed.”
If Suga is hoping his “emergency lite” plan will bolster confidence, he could be mistaken.
“The declaration will also generate more concerns about plans for the Olympics and Paralympics this summer,” Seaman says.
“The government efforts to keep the Games on track will continue to expose it to criticism that they risk importing new Covid cases and that countermeasures will increase their cost and eliminate any economic benefits – for example, via tourism – they might otherwise produce.”
Nor is Thursday’s declaration likely to halt the plunge in Suga’s support. Suga began his premiership in the mid-60% range but ended 2020 on 42%, which historically is the danger zone for Japanese leaders. Some polls have him in the mid-30s.
This is not where the ruling Liberal Democratic Party had hoped to be nine months before Japan must hold an election – in October at the latest.
“Suga’s failure to contain the virus could potentially lead the LDP to oust him even before the general election,” argue analysts at Fitch Solutions.
“Overall, Japan is at risk of returning to a ‘revolving door’ pattern of leadership changes, which would lead to further domestic political stagnation and weaken Tokyo on the international stage.”
The economic headwinds buffeting Japan aren’t helping.
They include a rising yen imperiling an export sector already under strain. The yen’s 8% rally to about 113.10 to the dollar since February 2020 is the last thing Toyota Motor, Sony Corp and Mitsubishi Heavy need as 2021 unfolds.
“Any approach to 100 will no doubt spark a pick-up in verbal intervention,” says economist Chris Turner of Dutch bank ING.
Japan’s Covid-19 reality check has global implications. At the very least, it may require a reassessment of hopes for a big rebound this year.
The US is approaching 21 million coronavirus cases, the UK and Europe are suffering second and third waves and Japan is about to embrace Suga’s new shelter-in-place protocols.
All this gloom could shake the International Monetary Fund’s 5.2% projection for global growth in 2021.
Regarding Suga’s state of emergency, one back-of-the-envelope calculation from economist Toshihiro Nagahama at Dai-ichi Life Research Institute is worrisome.
A roughly one-month interruption in consumer spending patterns in the greater Tokyo area will lop about $27 billion off Japanese gross domestic product, about 0.5%. That, Nagahama reckons, could cost about 147,000 jobs.
Nomura Research Institute’s Takahide Kiuchi puts the cost to the Tokyo region higher – at $47.5 billion. That would depress GDP by 0.88 percentage points.
Yet the economic indicator that might matter most in the short run surrounds the figure 500. Suga’s team says that once Tokyo can keep its new Covid cases below 500 consistently, Japan Inc can get back to normal. And the much-anticipated Olympics can be staged.
Watching Suga’s comments from the podium, and with Tokyo’s cases north of 2,000 on Thursday, that sub-500 era looks a long way off.