Japan launches massive stimulus package

Shinzo Abe: Bad guy done good?

The Japanese government has approved a massive emergency stimulus package, worth ¥10.3trn (£71.5bn), aimed at restoring growth in the long-stagnant economy.

The package will be used to fund infrastructure investment, disaster mitigation projects, subsidies for companies which invest heavily in research and development, and financial aid to small businesses. The government hopes to raise growth by 2 percentage points, as well as add over half a million jobs to the economy.

The prime minister, Shinzo Abe, also made clear again that he is planning to exercise far more direct control over Japanese monetary policy than is conventional. Before Abe was elected, he announced that the BoJ should embrace "unlimited easing" and cut interest rates below even the 0.1 per cent paid on deposits "to strengthen pressure to lend".

Today, Abe reiterated that pressure, telling a press conference:

We will put an end to this shrinking, and aim to build a stronger economy where earnings and incomes can grow. For that, the government must first take the initiative to create demand, and boost the entire economy.

Abe has no qualms with wild policy. Last week, he "nationalised" industrial stock in Japan, buying private infrastructure with public funds in order to force the pace of investment in the country.

It seems quite clear that Abe is prepared to use every possible channel available to him to push for a return to growth in Japan. The results have been positive so far; bond yields have stayed low, while the yen has finally dropped (which might be bad for the country's elderly, but is very good for its economy overall).

Paul Krugman argues that all of this success isn't exactly on purpose. It bears more hallmarks of Abe –  "a nationalist, a denier of World War II atrocities, a man with little obvious interest in economic policy" – doing exactly the opposite of what he's told to do based purely on his contempt for learned opinion:

It will be a bitter irony if a pretty bad guy, with all the wrong motives, ends up doing the right thing economically, while all the good guys fail because they’re too determined to be, well, good guys. But that’s what happened in the 1930s, too…

On the 22nd, the Bank of Japan will meet, and we'll see how much it listened to Abe. If it does follow his requests/demands for aggressive monetary policy, the country will solidify its reputation as one to watch in the immediate future.

Shinzo Abe. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
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Here's what Theresa May could say to save the Brexit talks

The best option would be to invent a time machine, but unfortunately that's not on the table. 

One of my favourite types of joke is the logical impossibility: a statement that seems plausible but, on closer examination, is simply impossible and contradictory. “If you break both legs, don’t come running to me” is one. The most famous concerns a hapless tourist popping into a pub to ask for directions to London, or Manchester, or Belfast or wherever. “Well,” the barman replies, “I wouldn’t have started from here.”

That’s the trouble, too, with assessing what the government should do next in its approach to the Brexit talks: I wouldn’t have started from here.

I wouldn’t have started from a transient Leave campaign that offered a series of promises that can’t be reconciled with one another, but that’s the nature of a referendum in which the government isn’t supporting the change proposition. It’s always in the interest of the change proposition to be at best flexible and at worst outright disregarding of the truth.

Britain would be better off if it were leaving the European Union after a vote in which a pro-Brexit government had already had to prepare a white paper and an exit strategy before seeking popular consent. Now the government is tasked with negotiating the terms of Britain’s exit from the European Union with a mandate that is contradictory and unclear. (Take immigration. It’s clear that a majority of people who voted to leave want control over Britain’s borders. But it’s also clear that a minority did not and if you take that minority away, there’s no majority for a Leave vote.

Does that then mean that the “democratic” option is a Brexit that prioritises minimising economic harm at the cost of continuing free movement of people? That option might command more support than the 52 per cent that Leave got but it also runs roughshod over the concerns that really drove Britain’s Leave vote.

You wouldn’t, having had a referendum in inauspicious circumstances, have a government that neglected to make a big and genuinely generous offer on the rights of the three million citizens of the European Union currently living in the United Kingdom.

In fact the government would have immediately done all it could to show that it wanted to approach exit in a constructive and co-operative manner. Why? Because the more difficult it looks like the departing nation is going to be, the greater the incentive the remaining nations of the European Union have to insist that you leave via Article 50. Why? Because the Article 50 process is designed to reduce the leverage of the departing state through its strict timetable. Its architect, British diplomat John Kerr, envisaged it being used after an increasingly authoritarian state on the bloc’s eastern periphery found its voting rights suspended and quit “in high dudgeon”.

The strict timeframe also hurts the European Union, as it increases the chances of an unsatisfactory or incomplete deal. The only incentive to use it is if the departing nation is going to behave in a unconstructive way.

Then if you were going to have to exit via the Article 50 process, you’d wait until the elections in France and Germany were over, and restructure Whitehall and the rest of the British state so it was fit to face the challenges of Brexit. And you wouldn’t behave so shabbily towards the heads of the devolved administrations that Nicola Sturgeon of the SNP and Carwyn Jones of the Welsh Labour Party have not become political allies.

So having neglected to do all of that, it’s hard to say: here’s what Theresa May should say in Florence, short of inventing time travel and starting the whole process again from scratch.

What she could do, though, is show flexibility on the question of British contributions to the European budget after we leave, and present a serious solution to the problem of how you ensure that the rights of three million EU citizens living in Britain have a legal backdrop that can’t simply be unpicked by 325 MPs in the House of Commons, and show some engagement in the question of what happens to the Irish border after Brexit.

There are solutions to all of these problems – but the trouble is that all of them are unacceptable to at least part of the Conservative Party. A reminder that, as far as the trouble with Brexit goes, Theresa May is the name of the monster – not the doctor. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.