[Global Focus] "Distribution Over Growth" Kishidanomics... Blocked from the Start

Promised to Strengthen Financial Income Tax
But Suspended After One Week Due to Stock Market Decline

Nearly 70% of Cabinet Are New Faces
Abe's Close Aides in Key Diplomatic and Security Positions

[Asia Economy Reporter Cho Hyun-ui] "If growth occurs but its fruits are not properly distributed, consumption and demand will not become active, and future growth cannot be expected."

Fumio Kishida, the newly appointed Prime Minister of Japan, stated at his first press conference on the 4th after taking office, "I will realize a new capitalism," putting distribution at the forefront of his economic policy. The so-called 'Kishidanomics' centers on policies to expand the income of the middle class through a virtuous cycle of growth and distribution.

Prime Minister Kishida mentioned this term 12 times in his first policy speech at the Diet on the 8th, making it a representative policy slogan. This reflects his intention to break away from Abenomics, which was based on quantitative easing, and to resolve the wealth polarization deepened under the previous administration through active distribution policies.

◆Economy breaks from Abe, but appointments remain the same= Despite this policy shift, the Kishida Cabinet has been evaluated as unable to escape the shadow of the previous administration. Although nearly 70% of the 20 cabinet members, excluding the Prime Minister, are new faces, it has been criticized as merely superficial reform.

Among the 20 members, except for Tetsuo Saito, Minister of Land, Infrastructure, Transport and Tourism from the Komeito party, the cabinet is largely composed of members from the Hosoda faction (4 members) led by former Prime Minister Shinzo Abe, the Takeshita faction (4 members) led by Foreign Minister Toshimitsu Motegi, and the Aso faction (3 members) headed by Taro Aso, Deputy President of the Liberal Democratic Party.

In particular, key positions such as the diplomacy and security line were filled by faction leaders or close aides of Abe who held important posts in the Abe or Suga administrations. For example, Foreign Minister Toshimitsu Motegi and Defense Minister Nobuo Kishi, Abe's younger brother, were retained. This appointment signals the continuation of the previous administration's foreign and security policies.

Following the retention of the Foreign and Defense Ministers, Koichi Hagiuda, a close aide of former Prime Minister Abe and former Minister of Education, Culture, Sports, Science and Technology, was appointed Minister of Economy, Trade and Industry. Hirokazu Matsuno, a member of the Hosoda faction led by Abe and former Minister of Education, Culture, Sports, Science and Technology, was appointed Chief Cabinet Secretary, the government's second-in-command and spokesperson. Takayuki Kobayashi, a three-term member known as one of the 'Abe Kids' and former Parliamentary Vice-Minister of Defense, was appointed to the newly established Minister for Economic Security.

The Kishida Cabinet includes 13 first-time ministers. Considering that the previous Suga Cabinet had only five, this is nearly three times as many. Asahi Shimbun evaluated this as an attempt to project an image of reform. Among the new faces, three members of the House of Representatives with relatively short parliamentary careers, including Minister Kobayashi, were appointed, attracting attention.

However, the average age is 61.8 years, which is not considered 'young blood.' Despite introducing new faces, this is 1.4 years older than the Suga Cabinet (60.4 years). Some of them are senior multi-term lawmakers. For example, Genjiro Kaneko, Minister of Agriculture, Forestry and Fisheries, aged 77, is a veteran with a total of seven terms combining two terms in the House of Councillors and five terms in the House of Representatives. Satoshi Ninoyu, Chairman of the National Public Safety Commission, also aged 77, is a three-term member of the House of Councillors.

◆Troubles from the start... the fate of Kishidanomics= Prime Minister Kishida has proposed taxing financial income as a way to reduce wealth concentration. Japan's financial income tax rate is uniformly set at 20%, but the problem is that the tax burden decreases for the wealthy with a high proportion of financial income. He aimed to correct this. However, when controversy arose, with critics calling it "new socialism, not new capitalism," Kishida suddenly said on the 10th, "I have no intention of touching (strengthening the financial income tax) for the time being." This was less than a week after mentioning the need to reform financial income taxation at his inauguration press conference on the 4th.

Kishida's sudden change of stance is interpreted as an attempt to prevent economic instability caused by a stock market decline ahead of the House of Representatives election at the end of this month. In fact, the market responded coldly to the new cabinet's emergence. The Nikkei 225 index closed lower for eight consecutive trading days until the 6th, the third day after Kishida took office. This is the first time in about 12 years and 3 months since July 9, 2009, that the Nikkei average has fallen for eight consecutive trading days. Nihon Keizai Shimbun pointed out, "There is no disagreement with the idea of distributing the fruits of growth evenly to the people, but caution is needed to avoid repeated fiscal interventions prioritizing distribution without expected expansion of the pie."

Kishida's economic policy, which emphasizes distribution, includes strengthening distribution to subcontractors of large companies, expanding the middle class, enhancing support for child-rearing generations, reviewing price policies for public services such as medical care, nursing, and childcare, and long-term fiscal policies. However, criticism of it as a populist money giveaway has already caused conflicts between the ruling party and government shortly after the new cabinet's launch.

Koji Yano, Vice Minister of Finance, expressed concerns in an article published in the November issue of the monthly magazine Bungei Shunju on the 8th, calling the distribution policy a "(populist) giveaway battle" that could ruin national finances. He likened the current situation, where fiscal soundness issues are being sidelined despite Japan's enormous national debt, to "the Titanic heading toward an iceberg."

In response, Sanae Takaichi, Chairperson of the LDP Policy Research Council, said, "I think it is a very rude tone." Prime Minister Kishida also stated, "It is good that various discussions are taking place, but once the direction is decided, those involved (government officials) must cooperate firmly," effectively indicating that he will not allow any obstruction to the policy.

Even after the new cabinet's launch, there seems to be little change in Japan-South Korea relations for the time being. In his first policy speech at the Diet on the 8th, Kishida mentioned South Korea in only two sentences. He said, "South Korea is an important neighboring country," and "To restore a sound relationship, we will strongly demand appropriate responses from the Korean side based on our country's consistent position." This implies that the Japanese government's stance on conflicts related to Japan's colonial-era actions will remain unchanged. Among major diplomatic partners, South Korea was mentioned last after the United States, North Korea, China, and Russia.

Japanese Prime Minister Fumio Kishida
[Photo by Yonhap News]

◆Lowest approval rating at launch in history= The first test for the Kishida administration is the upcoming by-election for the Diet on the 24th, the first election since the cabinet's launch. It is a by-election to elect two members of the House of Councillors (upper house), serving as a prelude to the general election for the House of Representatives scheduled for the 31st. Kishida has announced the dissolution of the House of Representatives on the 14th and plans to hold the general election on the 31st. He aims to leverage the initial excitement following the cabinet's launch to gain an advantage in the election, but the unexpectedly low approval ratings make the outcome uncertain.

The approval rating of the Kishida Cabinet immediately after its launch was surveyed at 45%, the lowest among newly formed cabinets in the past 20 years. According to a telephone survey conducted by Asahi Shimbun on November 4-5 targeting 972 voters aged 18 and over nationwide, 45% of respondents said they "support the Kishida Cabinet." This is 3 percentage points lower than the previous lowest record of 48% for the Taro Aso Cabinet in 2008.

During the same period, a survey by Mainichi Shimbun recorded a 49% approval rating, and Yomiuri Shimbun's survey showed 56%. The low approval ratings of the Kishida Cabinet appear to be influenced by its failure to clear the accumulated problems of the previous administration. Asahi Shimbun commented, "It is far from the convention effect where approval ratings rise immediately after a new cabinet is launched."

This content was produced with the assistance of AI translation services.