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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The three big mistakes the government has made in its Brexit talks

Nicola Sturgeon fears that the UK has no negotiating position at all. It's worse than she thinks. 

It’s fair to say that the first meeting of the government’s Brexit ministers and the leaders of the devolved legislatures did not go well.

Scotland’s Nicola Sturgeon told reporters outside that it had all been “deeply frustrating”, and that it was impossible for her to undermine the United Kingdom’s negotiating position as “I can’t undermine something that doesn’t exist, and at the moment it doesn’t seem to me like there is a UK negotiating strategy”.

To which cynical observers might say: she would, wouldn’t she? It’s in Sturgeon’s interest to paint the Westminster government as clueless and operating in a way that puts Scotland’s interests at risk. Maybe so, but Carwyn Jones, her Welsh opposite number, tends to strike a more conciliatory figure at these events – he’s praised both George Osborne and David Cameron in the past.

So it’s hard not to be alarmed at his statement to the press that there is still “huge uncertainty” about what the British government’s negotiating position. Even Arlene Foster, the first minister in Northern Ireland, whose party, the DUP, is seen as an increasingly reliable ally for the Conservative government, could only really volunteer that “we’re in a negotiation and we will be in a negotiation and it will be complex”.

All of which makes Jeremy Corbyn’s one-liner in the Commons today that the government is pursuing neither hard Brexit nor soft Brexit but “chaotic Brexit” ring true.

It all adds to a growing suspicion that the government’s negotiating strategy might be, as Jacqui Smith once quipped of Ed Miliband’s policy review, something of “a pregnant panda – it's been a very long time in the making and no one's quite sure if there's anything in there anyway”.

That’s not the case – but the reality is not much more comforting. The government has long believed, as Philip Hammond put when being grilled by the House of Lords on the issue:

"There's an intrinsic tension here between democratic accountability of the government and effective negotiation with a third party. Our paramount objective must be to get a good deal for Britain. I am afraid will not be achieved by spelling out our negotiating strategy."

That was echoed by Theresa May in response to Corbyn’s claim that the government has no plan for Brexit:

 “We have a plan, which is not to give out details of the negotiation as they are being negotiated”

Are Hammond and May right? Well, sort of. There is an innate tension between democratic accountability and a good deal, of course. The more is known about what the government’s red lines in negotiations, the higher the price they will have to pay to protect. That’s why, sensibly, Hammond, both as Foreign Secretary during the dying days of David Cameron’s government, and now as Chancellor, has attempted to head off public commitments about the shape of the Brexit deal.

But – and it’s a big but – the government has already shown a great deal of its hand. May made three big reveals about the government’s Brexit strategy it in her conference speech: firstly, she started the clock ticking on when Britain will definitely leave the European Union, by saying she will activate Article 50 no later than 31 March 2017. Secondly, she said that Brexit meant that Britain would control its own borders. And thirdly, she said that Brexit meant that Britain would no longer be subject to the judgements of the European Court of Justice.

The first reveal means that there is no chance that any of 27 remaining nations of the European Union will break ranks and begin informal talks before Article 50 is triggered.

The second reveal makes it clear that Britain will leave the single market, because none of the four freedoms – of goods, services, capital or people – can be negotiated away, not least because of the fear of political contagion within the EU27, as an exit deal which allowed the United Kingdom to maintain the three other freedoms while giving up the fourth would cause increased pressure from Eurosceptics in western Europe.

And the third reveal makes it equally clear that Britain will leave the customs union as there is no way you can be part of a union if you do not wish to accept its legal arbiter.

So the government has already revealed its big priorities and has therefore jacked up the price, meaning that the arguments about not revealing the government’s hand is not as strong as it ideally would be.

The other problem, though, is this: Theresa May’s Brexit objectives cannot be met without a hard Brexit, with the only question the scale of the initial shock. As I’ve written before, there is a sense that the government might be able to “pay to play”, ie, in exchange for continuing to send money to Brussels and to member states, the United Kingdom could maintain a decent standard of access to the single market.

My impression is that the mood in Brussels now makes this very tricky. The tone coming out of Conservative party conference has left goodwill in short supply, meaning that a “pay to play” deal is unlikely. But the other problem is that, by leaving so much of its objectives in the dark, Theresa May is not really laying the groundwork for a situation where she can return to Britain with an exit deal where Britain pays large sums to the European Union for a worse deal than the one it has now. (By the way, that is very much the best case scenario for what she might come back with.) Silence may make for good negotiations in Brussels – but in terms of the negotiation that may follow swiftly after in Westminster, it has entirely the opposite effect. 

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