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| Calling Early Elections in Japan, Abe Rolls the Dice on the Economy | Calling Early Elections in Japan, Abe Rolls the Dice on the Economy |
| (about 17 hours later) | |
| IWAKUNI, Japan — When his popularity was soaring at home, Prime Minister Shinzo Abe declared in Washington a year ago, “Japan is back.” | |
| Now it appears that he spoke too soon. | Now it appears that he spoke too soon. |
| Faced with troubling economic data showing that Japan has slid back into recession, Mr. Abe called Tuesday for early elections, raising fears not only that his vaunted program for economic revival was faltering, but that his popularity might fade with it. | Faced with troubling economic data showing that Japan has slid back into recession, Mr. Abe called Tuesday for early elections, raising fears not only that his vaunted program for economic revival was faltering, but that his popularity might fade with it. |
| Mr. Abe took office with promises of drastic stimulus and change, pursuing a program supercharged with nationalism that he offered as an antidote to Japan’s decades of economic stagnation and chronic malaise. It is not yet clear why his program stalled. Was it that he tried to do too much — unleashing the central bank to pump out cash while raising taxes to rein in the national debt? Or was he not bold enough, failing to enact painful market-opening measures and structural changes needed to make the recovery last? | Mr. Abe took office with promises of drastic stimulus and change, pursuing a program supercharged with nationalism that he offered as an antidote to Japan’s decades of economic stagnation and chronic malaise. It is not yet clear why his program stalled. Was it that he tried to do too much — unleashing the central bank to pump out cash while raising taxes to rein in the national debt? Or was he not bold enough, failing to enact painful market-opening measures and structural changes needed to make the recovery last? |
| Mr. Abe is banking on voters to choose growth. | Mr. Abe is banking on voters to choose growth. |
| “There are divided opinions about the economic policies that we are pursuing,” Mr. Abe said in a speech on national television. “There is also resistance. To continue advancing that growth strategy with the support of the people, we need to listen to the voice of people.” | “There are divided opinions about the economic policies that we are pursuing,” Mr. Abe said in a speech on national television. “There is also resistance. To continue advancing that growth strategy with the support of the people, we need to listen to the voice of people.” |
| Mr. Abe announced that he would dissolve Parliament this week and hold an election for the lower house next month. He said he wanted voters to approve his decision to postpone a scheduled increase in the national sales tax, which he said would have slowed the economy further. | Mr. Abe announced that he would dissolve Parliament this week and hold an election for the lower house next month. He said he wanted voters to approve his decision to postpone a scheduled increase in the national sales tax, which he said would have slowed the economy further. |
| He also framed the election as a broader referendum on his economic recovery measures, known as Abenomics. But political analysts said his call for an election was an admission that Abenomics was losing steam. | He also framed the election as a broader referendum on his economic recovery measures, known as Abenomics. But political analysts said his call for an election was an admission that Abenomics was losing steam. |
| With a mixture of increased government spending and an aggressive flow of cash into the economy from the central bank, the program spurred a recovery in Japan, lifted the country’s stock market and won praise as a potential model for other developed economies. | With a mixture of increased government spending and an aggressive flow of cash into the economy from the central bank, the program spurred a recovery in Japan, lifted the country’s stock market and won praise as a potential model for other developed economies. |
| But it has not ended the long slide in the incomes of average citizens, especially those who did not benefit from the rally of the stock market. This problem was compounded when the central bank took strong action to end nearly two decades of corrosive deflation, and get prices rising again. Suddenly, working Japanese felt poorer, caught between inflated costs and falling wages. | But it has not ended the long slide in the incomes of average citizens, especially those who did not benefit from the rally of the stock market. This problem was compounded when the central bank took strong action to end nearly two decades of corrosive deflation, and get prices rising again. Suddenly, working Japanese felt poorer, caught between inflated costs and falling wages. |
| The biggest blow to Abenomics, though, may have come from an increase this year in the national sales tax. The increase was written into law before Mr. Abe took office two years ago, and it had the backing of many fiscal hawks in his governing Liberal Democratic Party as a way to rein in Japan’s enormous budget deficits. | The biggest blow to Abenomics, though, may have come from an increase this year in the national sales tax. The increase was written into law before Mr. Abe took office two years ago, and it had the backing of many fiscal hawks in his governing Liberal Democratic Party as a way to rein in Japan’s enormous budget deficits. |
| Yet that tax increase appears to have had a bigger braking effect on the economy than most economists expected, reducing consumer spending and snuffing out the fragile recovery. The extent of the damage was not known until Monday, when official figures showed that Japan’s economy had contracted in the summer for the second straight quarter — meaning that it was back in recession. | Yet that tax increase appears to have had a bigger braking effect on the economy than most economists expected, reducing consumer spending and snuffing out the fragile recovery. The extent of the damage was not known until Monday, when official figures showed that Japan’s economy had contracted in the summer for the second straight quarter — meaning that it was back in recession. |
| That bad economic news, along with criticism of his policies from opposition parties, prompted his call for early elections, Mr. Abe said. “There is criticism that Abenomics is a failure,” Mr. Abe said. “So what should we do? Unfortunately, I have yet to hear one concrete idea.” | That bad economic news, along with criticism of his policies from opposition parties, prompted his call for early elections, Mr. Abe said. “There is criticism that Abenomics is a failure,” Mr. Abe said. “So what should we do? Unfortunately, I have yet to hear one concrete idea.” |
| Analysts said a prolonged economic slowdown could spell the end of a strong two-year run by Mr. Abe. Success in lifting Japan’s economic gloom and restoring confidence is critical to his popularity, the analysts added. | Analysts said a prolonged economic slowdown could spell the end of a strong two-year run by Mr. Abe. Success in lifting Japan’s economic gloom and restoring confidence is critical to his popularity, the analysts added. |
| “The size of the economy’s decline was a big shock to Abe and the Liberal Democratic Party,” said Katsuyuki Yakushiji, a professor of politics at Toyo University in Tokyo. “It makes Abenomics look like a failure. Abe suddenly looks desperate to stay in power.” | “The size of the economy’s decline was a big shock to Abe and the Liberal Democratic Party,” said Katsuyuki Yakushiji, a professor of politics at Toyo University in Tokyo. “It makes Abenomics look like a failure. Abe suddenly looks desperate to stay in power.” |
| Analysts also said the signs that Abenomics was fizzling could hamper Mr. Abe’s efforts to take less popular actions, like expanding the role of Japan’s military or restarting its shuttered nuclear plants. | Analysts also said the signs that Abenomics was fizzling could hamper Mr. Abe’s efforts to take less popular actions, like expanding the role of Japan’s military or restarting its shuttered nuclear plants. |
| However, many political experts said they also detected deep pessimism in Mr. Abe’s decision: He was essentially admitting that he did not see the economy regaining energy any time soon, they said, and that he would rather face the voters now than after they have become unhappier. | However, many political experts said they also detected deep pessimism in Mr. Abe’s decision: He was essentially admitting that he did not see the economy regaining energy any time soon, they said, and that he would rather face the voters now than after they have become unhappier. |
| Mr. Abe’s approval ratings have already begun to fall into the low 40s in recent opinion surveys. The flagging economy is not the only reason: A series of political finance scandals has also hurt his administration, bringing back unpleasant memories of Mr. Abe’s first tenure as prime minister seven years ago, when similar scandals toppled his government. | Mr. Abe’s approval ratings have already begun to fall into the low 40s in recent opinion surveys. The flagging economy is not the only reason: A series of political finance scandals has also hurt his administration, bringing back unpleasant memories of Mr. Abe’s first tenure as prime minister seven years ago, when similar scandals toppled his government. |
| “There is only one reason to call an election now, and that is the fear that things will be only worse if he waits,” said Gerald L. Curtis, a specialist on Japanese politics at Columbia University. “The expectation of political stability and an Abe administration unchallenged for six years, that so many thought just two weeks ago was the most likely scenario, is now history.” Even so, Mr. Abe was betting that his party was still more appealing to voters than the main opposition party, the Democrats, who have fallen into disarray since their defeat two years ago. | “There is only one reason to call an election now, and that is the fear that things will be only worse if he waits,” said Gerald L. Curtis, a specialist on Japanese politics at Columbia University. “The expectation of political stability and an Abe administration unchallenged for six years, that so many thought just two weeks ago was the most likely scenario, is now history.” Even so, Mr. Abe was betting that his party was still more appealing to voters than the main opposition party, the Democrats, who have fallen into disarray since their defeat two years ago. |
| In fact, experts said, one reason to call an early election is to deny the Democrats and other opposition parties the chance to enlist a full slate of candidates and mount a serious challenge. | In fact, experts said, one reason to call an early election is to deny the Democrats and other opposition parties the chance to enlist a full slate of candidates and mount a serious challenge. |