"Japan is back," said a proud Prime Minister Shinzo Abe at the New York Stock exchange in September 2013, nine months after his return to power. "Buy my Abenomics," he declared, pitching his economic policy.
Fast forward five years, and the upcoming presidential election of the ruling Liberal Democratic Party (LDP) will be a test of whether Abe's political methods should be carried on or not. What must be conducted first is a full review of Abenomics. We want former LDP Secretary-General Shigeru Ishiba, who is challenging Abe in the Sept. 20 race, to wage a battle of words about the final balance of Abenomics, including how much of the bills are being left to future generations.
In late 2012, the Abe administration set sail with a goal of ending Japan's deflation. Shortly before that during the House of Representative election, which enabled Abe to come back to power, the premier vehemently assaulted the economic policies of the previous administration of the then Democratic Party of Japan and the Bank of Japan, accusing them of failing to shed deflation and adjust the yen's hike.
Now, we would like to ask Prime Minister Abe, who says "Results are everything," one question. Why isn't the 2-percent inflation goal, which we were promised would be met in around two years, still not in sight?
It has been 5 1/2 years since a massive historical easing of monetary supply -- a move highly unusual throughout the world -- was instituted.
The premier may argue, "The situation has become non-deflationary." But this situation still depends on an unusual monetary policy.
In the United States where the Lehman economic shock of 2008 originated, monetary policy has been normalized and interest rates have been raised seven times since late 2015. In contrast, Japan still has negative interest rates. How is he going to explain this reality?
The prime minister compares the situation before his comeback and now, and exaggerates his achievements by using cherry-picked figures. Take, for example, nominal GDP. Abe says that it has "increased by 58 trillion yen," but more than 30 trillion yen of the figure is due to changes in calculation methods.
Indeed, positive changes have occurred, including a jump in demand due to a rapid increase of foreign visitors to Japan. But we cannot judge if a policy was right or wrong unless we examine the entire cost of our achievements.
The problem is that at the present moment, we do not know what the final cost of Abenomics will be.
Let's look at the issue this way. A host entertains a guest at a restaurant by ordering historically and unusually high quality and a massive quantity of food and drinks. The guest is surprised and begins to feel better. But when the historical, massive and unusual bill comes to the table, the host is gone.
The "bill" is Japan's economic crisis born out of its unusual monetary easing policy and the worst fiscal state among advanced countries. And the guest, of course, is the taxpayer.
The Bank of Japan has shot the first arrow of Abenomics by buying national bonds, or the debts of the nation, at an unprecedented pace. As a result, the long-term bond price has shot up, long-term interest rates have plummeted, and an abnormal situation in which the state makes more money the more it borrows money has become the norm.
One may feel that if the state is making money, so are the people. This arrangement, however, will not last for long. It will begin to reverse itself at some point.
When investors begin to question the state's ability to pay the rapidly increasing interest, bond prices will plunge. In that scenario, what lies ahead is massive economic confusion, the likes of which Greece experienced a few years ago.
Such risks were already pointed out when the Abenomics economic policy mix was introduced 5 1/2 years ago. Those risks keep ballooning as the administration survives longer.
We do not know when, but people will likely focus on the overall balance of Abenomics once the Abe administration is gone. This is all the more reason for Ishiba to ask tough questions and not allow the premier to respond with vague answers.
At the very least, we need to know the premier's detailed plan for improving the country's financial standing.
Abe boasts that tax income has increased by 24 trillion yen since he took back the reins of government. But this amount includes the tax revenues of both the central and local governments. If you compare the tax revenue of the central government for fiscal 2012 and fiscal 2017, the difference is less than 15 trillion yen. And some 7 trillion yen of this amount came from the consumption tax, which was raised in April 2014 from 5 percent to 8 percent.
The premier has twice delayed another consumption tax hike to 10 percent, and he now states that funds from the hike scheduled for 2019 will be used not for improving the nation's financial situation as originally planned, but for educational and childrearing support programs.
What he is saying may sound like an investment in children, but it is the future generation that has to pay the price. Before proposing new slogans such as "an era of a 100-year lifespan," the premier should try to answer the imminent question of how to handle medical costs that come with a quickly aging society, which are expected to shoot up when all of the postwar baby boomers become senior citizens aged 75 or older.
This election is a race to pick the leader of the ruling party which has been a predominant force for so many years. We want the candidates to engage in responsible debate on issues including the burden the public must shoulder in the future.