–PM Kishida Under Pressure To Shore Up Voter Support Before Upper House Election This Year
–Kishida Tackling Pandemic; His Long-Term Approach of Inclusive Policy Takes Time To Have Impact
By Max Sato
(MaceNews) – The Omicron storm in the new year is hurting business and consumer confidence as the government was forced to resume its on-and-off request for strict restrictions on mobility and business operations, short of a state of emergency.
The rapid spread of the pandemic is also eroding public approval of Prime Minister Fumio Kishida, who took office last October after winning a leadership race within the ruling Liberal Democratic Party with his promise to reform the neo-capitalist agenda and introduce a more inclusive policy approach.
His administration is under attack from all sides: critics calling the move to reimpose restrictions too late; owners of bars and restaurants complaining they have been singled out as the main source of infections while infections also spread at workplaces; companies and schools failing to bring in new hires or students who are non-residents and thus have been denied entry, with their visa approval process suspended under Japan’s strict border control during the pandemic.
Sentiment Slips Back To Delta-Hit Summer
The Watchers’ sentiment “direction” index for Japan’s current economic climate plunged by 19.6 points to a five-month low of 37.9 on a seasonally adjusted basis in January, hitting the lowest since 34.9 in August, when the government expanded areas under strict restrictions as the Delta variant triggered a spike in Covid cases.
It was the first drop in five months after the index showing the direction of the current economic conditions edged up 0.7 point to a 16-year high of 57.5 in December (the highest since 57.7 in December 2005). The Cabinet Office conducted an annual update on seasonal adjustments to past figures.
The upside in the survey is that the Watchers’ sentiment “level” index for Japan’s current economic climate fell to 34.1 in January from 47.4 in December but it was still above 33.5 in September and 30.3 in August. “The graph for the current sentiment ‘level’ index has shown ups and downs during the pandemic but the recent bottoms have moved up,” said Sumitomo Mitsui DS Asset Management chief economist Akiyoshi Takumori.
But he added that sentiment indexes have slumped in tandem with spikes in Covid cases and government decisions to impose anti-Covid restrictions.
“The impact of the Omicron variant is so big that passenger traffic that was picking up is now decreasing,” a travel agent in northern Kanto region, north of Tokyo, told the survey. “Organizers are canceling events, too.”
A restaurant manager in southern Kanto noted that customers still came for dinner on weekends in early January while the number of Covid infections increased substantially in Tokyo. “Since the anti-Covid restrictions took effect (in the second half of January), all weekend reservations have been canceled, pushing eating establishments back into a tough situation.”
The number of job openings has declined compared to three months ago since the Covid restrictions were put in place after showing an increase, a staffing agency in the Tokai region in central Japan said.
Rising fuel and material costs are squeezing profit margins and global supply chain constraints are still limiting operations.
“New orders are recovering but the surge in wood prices and container shortages are delaying work at construction sites, which in turn is sending our sales to lower-than-expected levels,” said a lumber and wood products manufacturer in the Shikoku region, western Japan.
The government put Tokyo and 12 other prefectures under strict restrictions on Jan. 21 until Feb. 13, and expanded the areas to 18 more jurisdictions on Jan. 27 until Feb. 20. Social and economic activities in Okinawa and two others had already been restricted since Jan. 9, and another prefecture was added to the list on Feb. 5, bringing the affected total to 35 out of 47 prefectures.
It is expected to extend the measures on Tokyo and 12 other prefectures until March 6 after they expire on Feb. 13, news reports said.
Outlook Uncertainty Grows
“We expect business conditions to start recovering when the number of infections peaks out, but the timing is uncertain,” said a tourist hotel manager in Hokkaido in northern Japan.
A convenience store operator in Kyushu in southern Japan is not so optimistic: “If the number of infections to the Omicron variant increases further and a state of emergency is declared again (after it was lifted on Oct. 1), we cannot expect an economic recovery for the time being.”
A department store operator in Tohoku in northeastern Japan is pinning hopes on booster shots and antiviral pills, which “should moderate the number of new infections by the new fiscal year (starting on April 1) and encourage shopping for spring clothing at its peak sales period.”
But a trucking firm reminds of the transport industry’s predicament, saying, “In addition to the downtrend in distribution of goods, driver shortages and a huge delay in truck deliveries caused by semiconductor shortages are reducing our capacity, which is making it hard to secure sales.”
Sliding Public Support
After starting a modest start in public approval ratings, Prime Minister Kishida is gradually losing voter support for his handling of anti-Covid measures.
A weekend telephone poll by the conservative Yomiuri Shimbun daily showed the approval rating of the Kishida government fell eight points to 58% from 50% in January while the disapproval rating rose to 28% from 22%.
The Nikkei said its voter survey by phone from Jan. 28 to Jan. 30 showed the approval rating of the cabinet dipped six points to 59% from 53% in December, the first drop in its poll since Kishida took office in October. The share of those who responded that they did not support the cabinet rose to 30% from 26%.
In the Nikkei poll, 55% of the respondents said they approved of the government’s measures to cope with the pandemic, down from 61% in December while 36% said they didn’t agree with those measures, up from 33% previously.
In December, Kishida showed some flexibility by accepting demand from municipalities that are tasked to implement government plans to provide families with cash and coupons totaling Y100,000 ($865) per child aged 18 or younger, at the start of the new fiscal year in April, as part of fiscal stimulus.
Some municipalities decided to provide the handout all in cash, complaining that printing and sending coupons tied to goods for children would be time consuming and costly. Others pointed out that they would be overwhelmed with the new task in addition to high volumes of household registrations in March and April, when companies tend to relocate employees in personnel changes.
Kishida received some favorable media coverage by using what he calls his strength of “listening” to other opinions, but economists point out that a one-off cash handout is unlikely to boost economic growth as many households, concerned about uncertain job security and dim wage hike prospects, are expected to save than spend. The ruling camp is also criticized for seeking political gains by timing the cash handout to the peak of municipality assembly elections in the spring and ahead of the upper house election in the summer.
The government also plans to give tax credits to companies that are raising wages but over 60% of the corporations covered by the national tax agency are in the red, which means they are not paying business taxes.
Many firms are likely to limit the scale of annual wage hikes for fiscal 2022, citing uncertainty, while labor unions have been focused on securing jobs and improving working conditions, instead of seeking across-the-board pay increases.
For many voters, it is not clear exactly how Kishida can achieve economic growth and wealth distribution at the same time. At the start, he called for the need to tackle inequality and poverty but then shifted slightly toward “a positive cycle of growth and distribution.” He also stopped mentioning the idea of raising the 20% capital gains tax as a source of financing programs to support lower income earners.
Kishida blames market-oriented policymaking for the widening income inequality, but economic researchers point out that Japan still has heavy government intervention in protecting weak firms and industries and hasn’t pushed ahead with promised medical system and labor market reforms, while failing to provide sufficient social safety net.
Kishida says his idea of a “new capitalism” could not be realized overnight, stressing the need for a “medium- to long-term” approach, but politicians in his party may not be patient enough to keep supporting him unless his government also produces “short-term” results in containing the pandemic and supporting economic recovery before the upper house election this year.
The current six-year term of a half of the upper chamber expires on July 25, which is why an election is expected sometime in July after the 150-day ordinary session of the Diet ends on June. 15.