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Japan’s incoming prime minister on Friday stressed the need to ensure the country’s economy “fully emerges from deflation” and pledged to take measures to boost wages, signaling that his immediate priority would be maintaining a sustained economic recovery.
Shigeru Ishiba said revitalizing consumption was key for Japan to emerge from economic stagnation, adding the new administration must consider the most effective means to cushion the blow to households from rising inflation.
“Japan’s gross domestic product has been flat in the past two decades,” with wage growth yet to exceed inflation, Ishiba told a news conference after winning Friday’s ruling party’s leadership race, which de-facto makes him next prime minister due to the party’s dominance in parliament.
“Unless consumption increases, the economy won’t do well,” he said, promising to accelerate Prime Minister Fumio Kishida’s policies aimed at boosting household income through wage hikes.
The remarks suggest Ishiba will carry over many of the economic policies pursued by Kishida, who focused on measures to boost wages and endorsed the Bank of Japan’s (BOJ) exit from massive monetary stimulus.
Parliament is set to choose Ishiba as new premier on Tuesday, after which he will form a new cabinet the same day.
The yen bounced on Friday, recovering earlier losses, after Ishiba, a former defence minister seen as a critic of past aggressive monetary stimulus, won the ruling Liberal Democratic Party’s (LDP) leadership contest.
He beat Sanae Takaichi, a vocal proponent of deceased former premier Shinzo Abe’s “Abenomics” stimulus policies, in the final run-off.
While Ishiba did not comment on monetary policy at Friday’s news conference, analysts saw his win as removing one roadblock for the BOJ in raising interest rates further.
“Ishiba’s win would give the BOJ a freer hand as Ishiba, who doesn’t appear to have a very strong view on monetary policy, will likely respect the central bank’s decisions,” said Kazutaka Maeda, an economist at Meiji Yasuda Research Institute.
“With today’s result, the influence of Abenomics will essentially disappear,” Maeda said, predicting the next interest rate hike would come as early as December.
Takeshi Minami, the chief economist at Norinchukin Research Institute, also said the victory of Ishiba would make it easier for the BOJ to normalize monetary policy.
“In terms of economic policy, Japan is bidding farewell to Abenomics,” he said.
Ishiba is likely to announce a plan to compile a fresh stimulus package focusing on steps to curb food and fuel prices, which will be funded by a supplementary budget.
Under Governor Kazuo Ueda, who was appointed by Kishida, the BOJ exited negative rates in March and raised short-term borrowing costs to 0.25% in a landmark shift away from prolonged, radical monetary stimulus.
Ueda has said the BOJ will keep raising rates if inflation remains on track to stably hit 2% as it projects, though he stressed the bank will spend time gauging how global economic uncertainties affect Japan’s fragile recovery.
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Emil Kovács graduated from the Journalism program at Eötvös Loránd University in Hungary. During his journalism studies, he focused on data journalism, investigative reporting, and multimedia storytelling. He gained experience by writing for the university’s student newspaper, where he gained attention for his articles on social issues. After graduation, Emil began working as a reporter at a European news agency, where he conducts in-depth analyses of international news and current events.
