• The current prime minister of Japan promised to promote a new type of capitalism.
• It would promote sound economic growth.
• It will be combined with a more equitable distribution of income.

Fumio Kishida, the current prime minister of Japan, promised to promote a “new type of capitalism” that would promote sound economic growth combined with a more equitable distribution of income when he took office in October of last year.

However, as Kishida celebrates his year anniversary in power on Tuesday, his trademark policy of “new capitalism” is still lagging behind due to criticism that it lacks specifics and aims.

The third-largest economy in the world is facing increasing difficulties at home and abroad, including rising inflation, a weakening yen, problems with the global supply chain, and the conflict in Ukraine. Kishida is struggling to translate his vision into a coherent economic strategy that can end decades of stagnation.

A professional banker who made a name for himself as the only post-war prime minister with financial experience, Kishida is widely regarded as being an uneasy match for the populist rhetoric he has promoted.

According to Jesper Koll, an economist and executive director at Monex Group in Tokyo, “the main issue is that Kishida has no strong personal convictions, particularly on economic policy.”

Setting up the various teams and the “new capitalism” catchphrase is essentially just a blueprint for business as usual.

Koll said, “There’s simply nothing new or innovative in what [Kishidaproposed ]’s or in what’s coming,” describing the Japanese leader’s “steady hand” leadership as in line with the incremental strategy favoured by the establishment of the ruling Liberal Democratic Party.

An inquiry for comment from Al Jazeera was not answered by the Japanese Prime Minister’s Office.

In a speech given in May at London’s Guildhall, Kishida discussed the “two major revolutions” of capitalism: the transition from laissez-faire to the welfare state and the transition from the welfare state to neoliberalism.

The pendulum “swung between two conceptions in both of these transitions: market or state, public or private,” he said. The shift to a “new type of capitalism,” in which the public and private sectors collaborate, will occur next.

Kishida has outlined policy in largely general terms, including investments in human capital, greater female participation in the workforce, funding for green initiatives, the digitalization of government, and support for startups, while emphasizing the need for a “virtuous cycle” of growth and wealth redistribution.

Tom Learmouth, a doctorate student at the London School of Economics studying the economic history of Japan, claimed that Kishida appeared to be striving for a return to the industrial policy of Japan’s high-growth, post-war era when the public and private sectors collaborated closely.

Tokyo actively sought to select winners in industry during this period of brisk economic growth by focusing investment on industries seen as promising, such transportation and electronics.

Learmouth told Al Jazeera that trying to revive it today, in a completely different economic environment, when lending rates are nearly zero, makes it difficult to see how the government can have much control over the private sector.

Kishida, who criticized Shinzo Abe’s “Abenomics” for widening the wealth gap, did consider concrete reform early in his term by suggesting that Japan’s capital gains tax be raised from the country’s existing 20 percent level. However, the Japanese leader quickly changed his position after opposition from the business community and investors.

Kishida’s redistribution objective, according to Eric J Ritter, a professor of economics at Lakeland University Japan, has not been successful.

Ritter said Al Jazeera, “He had to give up on hiking capital gains taxes on the wealthy, which could’ve been used to help the needy.” “Another concern is raising the tax threshold for working spouses, who must begin paying tax whenever their annual income exceeds 1.1 million yen ($7,580). Family incomes and female participation suffer as a result.

Older population

More recently, Kishida tried to encourage a rise in Japan’s long-stagnant wages through business tax cuts. These earnings have barely increased since the late 1990s and are well below the OECD average. Real wages are still declining as a result of growing import costs, which is another reason why these efforts have fallen short of expectations.

Japanese consumers, who are known for their extreme frugalness, have been forced to further tighten their belts by the falling yen, which last month touched a 24-year low versus the US dollar.

The fact that the labor force is declining in Japan is worse for the economy’s long-term health. With 28 percent of its population over 65, the nation already has the oldest population in the world as a result of years of declining birth rates. Japan’s labour market, which is placed at approximately half of the OECD average, has also come under fire for its low mobility.

Kishida’s economic plan should place a high priority on labor market reforms and social security measures that protect the elderly and vulnerable working age population, according to Shigeto Nagai, head Japan economist at Oxford Economics.

The dynamism of Japanese companies has been hindered by rigid seniority-based compensation under the lifetime employment system, according to Nagai, who called the Japanese leader’s current approach “extremely conceptual and ambiguous.”

According to Nagai, “creating a more dynamic and flexible labor market will enable individual workers to receive more competitive wages reflecting productivity.” The state must assume responsibility for providing social security for the working-age population rather than delegating this task to businesses, according to the author.

The biggest telecommunications company in Japan, NTT, recently announced plans to switch from seniority-based promotion and compensation to performance-based pay, which gave rise to hopes that other businesses might be persuaded to do the same.

Even though Kishida has struggled to implement meaningful economic reform, some commentators argue that just maintaining Japan’s economy during this time of unrest around the world would be a success in and of itself.

Koll declared, “This is a political environment where it’s just another day, another catastrophe. In the current scenario, perhaps using a steady hand that doesn’t upset the apple cart but instead concentrates on small adjustments is the best course of action.

[embedpost slug=”dangerous-ballistic-missile-launched-by-north-korea-over-japan”]