D. V. STRELTSOV

Doctor of Historical Sciences, MGIMO (U), Ministry of Foreign Affairs of Russia

Keywords: Japan, global financial crisis, Abe's cabinet, "abenomics", social programs, consumer tax

The coming to power of Shinzo Abe's cabinet in December 2012 placed economic issues at the center of the political agenda. Many Japanese people then voted for the Liberal Democratic Party (LDP), mainly in the hope that a change of government would radically change the difficult economic situation.

Against the backdrop of a prolonged recession with no prospects of recovery, a sense of pessimism has taken root among the masses, bordering on the feeling that the country has signed a capitulation after a long, grueling war. Such sentiments were also fueled by objective indicators showing that the country was increasingly losing its leadership positions in the global economy, which it had been proud of since the late 1960s, and which it began to lose in the early 1990s.

STAGNATION

Having entered the post-industrial stage of economic development, Japan has been unable to break out of stagnation for more than two decades. Economic statistics show a significant weakening of its position in the world. Thus, according to the International Monetary Fund (IMF), the country's share of world GDP in nominal terms (in current dollars), which was 13.65% ($3.85 trillion/$28.2 trillion) in 1992, fell to 8.25% ($5.96 trillion/$72.2 trillion) and 6.8% in 2012. ($5.01 trillion*/$73.45 trillion) in 2013, forecast for 2018-6.1% ($5.94 trillion/$96.9 trillion)¹. Japan has not been able to overcome the chronic depression and reach satisfactory growth figures. The economy is still reeling from a deflationary spiral.

Japan found itself in a difficult situation at the beginning of the second decade of the XXI century and due to the difficult state of public finances. Total public debt exceeded two times the country's GDP (238.02% in 2012).². The country's international competitiveness has also declined markedly. If up to the early 1990s. Japan took a confident first place in this indicator, then in 2011. It dropped to 10th, but rose to 9th** in 2013.3 ^The macroeconomic situation in Japan continued to worsen due to the worsening social problems associated with an aging population, declining birth rates, labor shortages, and an increase in the share of non-permanent workers in the overall hiring structure. An increase in the share of older people in the demographic structure of society is accompanied by an increase in the dependency burden on the working generation. The issue of creating a functioning national pension system is acute: the principles of generational solidarity no longer guarantee pensioners a decent existence.

The situation was aggravated by the fact that at the beginning of the second decade of the XXI century, the country faced two severe crises. First, it is the natural and man-made disaster of March 11, 2011, which caused a heavy additional burden on the state budget to overcome its consequences. And the Fukushima tragedy made Japan face the need for a radical revision of its entire energy policy.

Secondly, it is the aggravation of the international situation in East Asia. Due to the active implementation of the DPRK's nuclear missile program, many Japanese people experienced a sense of immediate military threat for the first time in several decades. Territorial disputes with neighboring countries, especially with the PRC, regarding the Senkaku/Diaoyu Islands also contribute to the tightening of the foreign policy environment. The perception of an acute crisis in this area has put on the agenda the issue of a radical revision of the entire country's national security policy.

The difficulties experienced by the country have given an impetus to the development of a new discourse on ways out of the crisis. Among

* A fairly significant reduction in Japan's GDP in US dollars is associated with a corresponding depreciation of the yen, which has a positive impact on the country's exports. ed.).

** In 2013, Switzerland ranked 1st in the international competitiveness ranking, followed by Singapore, Finland, Germany, and the United States, while China ranked 29th, South Africa 53rd, Brazil 58th, India 60th, and Russia 64th. ed.).

*** For more information, see: Kireeva A. A. Japan-China: the Dispute over the Senkaku/Diaoyu Islands // Asia and Africa Today, 2013, N 10-11; Rusakov E. M. Preface to the article by Martynova E. S. Rivalry of the USA and China in Asia: how does it threaten ASEAN? // Asia and Africa Today, 2014, No. 2 (ed. ed.).

alarmist sentiments among the intellectual elite have noticeably increased. The thesis of Japan's "third defeat", put forward by the Japanese publicist Tahiti Sakaya (the first defeat is considered to be the crisis of the Late Tokugawa period*, the second - the defeat of Japan in World War II), even came into circulation.⁴

In these circumstances, the political authorities, in fact, found themselves faced with the need to take on the functions of crisis management. Meanwhile, the results of Japan's political development over the past 20-plus years did not give grounds for much optimism in terms of its managerial effectiveness. The political elite was still in a state of transformation. In this regard, many hoped that after returning to power, Abe's LDP would be able to find the right strategy for "national salvation". These expectations were met by the Japanese Prime Minister himself, who put forward the slogan" return of Japan " (Nihon-o torimodosu) - restoration of the positions lost by the country in the 1990s-2000s.

MEET ABENOMICS

After winning the 2012 elections, Abe's cabinet announced a wide range of measures to stimulate the national economy, which were collectively referred to as" abenomics "- by analogy with"Reaganomics" ^.5

In the government's interpretation, "abenomics" has three components, or "three arrows". First, it is monetary policy, which means "quantitative easing" (pumping "cheap money"), which provides an additional inflow of money supply to the economy. It is assumed that Japan will be able to end deflation, devalue the yen and give impetus to the development of export industries. The goal is to move to controlled inflation-no more than 2% per year.

Second, it is a package of fiscal stimulus measures for the Japanese economy, including cuts in corporate taxes and increased public direct investment. Among the practical measures already implemented by the cabinet is the adoption in January 2013 of an additional budget of 13.1 trillion yen**. Shinzo Abe proposed to invest about 200 trillion yen over 10 years in the form of government orders for various infrastructure development projects, hoping that this money will draw out the entire economy.⁶ According to Akir Amari, Minister of Economic Regeneration, the government will provide funding for projects that will "reduce the damage caused by natural disasters, prevent disasters and protect people's lives." ⁷ This includes not only the construction of new infrastructure facilities, but also the repair and restoration of old, worn-out facilities, including bridges, tunnels, roads, power plants, etc. The urgency of this task was particularly evident after several roof panels collapsed in December 2012 in the Sagago tunnel, which was built during the prosperous years, due to untimely replacement of fixing bolts, which buried cars passing through the tunnel.

Third, it is a "policy of economic growth", which consists in targeted stimulation of promising sectors of the economy. It implies the continuation of Koizumi's structural reforms, while vigorously activating the role of the state in this process. The" third arrow "of" abenomics " is expected to create a powerful multiplier effect that will help pull the entire country's economy out of the crisis.

The policy of economic growth includes a whole set of "surgical" tools for targeted stimulation of business activity in the country. An important part of it is measures aimed at reviving industrial production. To this end, in particular, it is planned to pursue an active policy of economic deregulation. For example, in the summer of 2013, the Government submitted to the Parliament a draft law on deregulation of the electric power sector.

In addition, the Government intends to continue its policy of

* In the period before the Meiji Restoration (Revolution) in 1868 (editor's note).

* * $1 is equal to about 102 yen, before "abenomics" its rate fluctuated at 80 yen (approx. ed.).

participation of the country in free trade zones and other preferential agreements providing for radical liberalization of foreign economic relations. Abe's cabinet resolutely set out to join the Trans-Pacific Partnership negotiations*: on July 23, 2013, Japan became a full participant in the initiative. After joining the TPP, the country will face a radical reduction in import tariffs on all types of products, including agricultural products (although it was stated that for five types of agricultural products, including rice and wheat, the government will defend Japan's special rights to impose increased duties). The new prime Minister, thus, made it clear that he was not going to continue the tough protectionist policy towards the national agricultural market, which was followed by all his predecessors. It is noteworthy that the government's policy of liberalizing markets is gaining support not only among residents of large cities, but also in rural areas: in the July 2013 elections to the upper house of parliament, almost all LDP candidates in agricultural prefectures won.

An important component of the strategy is the development of human capital. This component of" abenomics " includes measures to increase the use of the potential of the female workforce, the development of a system of preschool institutions, the introduction of flexible working hours, i.e. measures that will allow women with children to go to work at convenient hours, etc. ⁸ Much attention is expected to be paid to the development of higher education, in particular, adaptation of the Japanese education system to international standards, its modification in accordance with global trends. For example, the government intends to provide additional opportunities for Japanese students to study English abroad. Measures are being taken to attract foreign labor.

Another component of economic growth policy is the creation of new markets. Here, the plan is to turn Japan's weakness into its strength. One example of such an approach is the development of services for the elderly population, as well as the promotion of the achievements of gerontological medicine to world markets, in which Japan occupies a leading position in the world.

Of the abenomics recipes listed above, perhaps the most difficult will be all that relates to the" third arrow", namely," economic growth policy", which affects the corporate sector in almost all sectors of the economy. It is already clear that the proposed package of measures will require much greater efforts on the part of both the state and private companies, and the period required for its implementation will be much longer than it seems at first glance.

As a follow-up to the previously outlined plans for implementing abenomics, the Government published an economic program in June 2013, which set out specific quantitative targets for the short and medium term. The Government has set a target to ensure real GDP growth of 2% per year over the next ten years. It was proposed to increase per capita gross national income by 1.5 million yen per year over 10 years, or 40% from its current level.⁹ Among the concrete measures to achieve the goals set, the task is set: to increase corporate investment to 70 trillion yen per year within three years, to expand the number of places in preschool institutions to 400 thousand by fiscal 2017, and to ensure an increase in exports of agricultural, forestry and fishing products to 1 trillion yen by 2020. yen ¹⁰.

The "abenomics" program caused a wide public outcry, raising hopes that Japan will finally find the right way out of the crisis. Positive economic indicators also contributed to the effect of expectations: GDP growth in the first quarter of 2013 was about 3.8% per annum, and the stock market grew by 40% in the first six months after the LDP returned to power. The inflow of foreign investment to the country increased, and the yen, whose high exchange rate hindered the development of export industries, significantly decreased against the US dollar. Under these circumstances, many voters, believing in the course of the new Prime Minister, voted for the LDP in the elections to the House of Councillors on July 21, 2013, strengthening its position in parliament.

* Trans-Pacific Partnership - a regional trade bloc that includes the United States, Canada, Australia, Malaysia, Singapore, Mexico, Chile, and others. (approx. ed.).

UNBALANCED PUBLIC FINANCES

It is still unclear how the authorities are going to achieve their goals. One of the main questions that abenomics cannot answer is how the authorities are going to solve the problem of unbalanced public finances.

This issue became one of the most difficult and painful on the political agenda of Japan in the 1990s and 2010s. In the two decades since the Japanese economy entered a period of stagnation and accompanying sluggish deflation, government spending has steadily increased and revenues have fallen.

Deflation led to lower tax revenues both in the form of corporate taxes and in the form of income tax. For example, if in 1992 the budget revenue base was about 60 trillion yen, then in fiscal 2012 it was just over 42 trillion yen. Meanwhile, budget spending rose to more than 90 trillion yen. Under these conditions, the state was forced to resort to an increasingly massive issue of debt obligations, the volume of which was constantly increasing. The structure of the state budget for fiscal year 2012 is indicative: out of more than 90.3 trillion yen of state budget revenues, tax revenues amounted to 42.3 trillion yen, or 46.8% of its part, while new government debt obligations were equal to 44.2 trillion yen, or 49% of the budget.¹¹ In other words, the issue of new debt obligations exceeded the total amount of tax collections, becoming the main source of budget revenues. From the perspective of corporate financial management, such a balance sheet would inevitably mean bankruptcy.

Since the rate of increase in public debt servicing costs exceeds economic growth, even with stable state budget revenues, Japan is experiencing a rapid increase in the share of public debt in relation to GDP. As noted above, Japan's total public debt in 2012 exceeded 238% of the country's GDP. This is one of the worst indicators in the world.

It should be noted that Japanese government debt obligations, unlike, for example, Greece and other European countries that faced a severe financial crisis in the late 2000s, are overwhelmingly in the hands of Japanese residents and are concentrated in the long-term bond market with relatively low interest rates, resulting in an immediate threat of a state default it doesn't occur. However, the total amount of public debt is such that interest payments in fiscal 2013 (April 2013 - March 2014) amounted to an astronomical amount of more than 22.2 trillion yen, or almost a quarter of the budget's expenditure side12.

Back in the early 2000s, when the problem of public debt became a threat to national economic security, the government calculated the further development of the situation. The conclusion was that in order to block the process of an avalanche increase in public debt, the state should significantly reduce budget expenditures and try to reduce the primary balance to a positive balance equal to at least 1.75% of GDP.¹³ Under the Government of the Dz. Koizumi was assigned the task of achieving a primary balance of public finances (i.e., a deficit-free budget balance without taking into account public debt servicing costs) by fiscal 2011. However, the lack of positive dynamics in the economic growth rate, which froze at almost zero, naturally refuted all the initial plans. The situation was aggravated by the global financial and economic crisis that began in the world in 2008, which hurt the Japanese economy, for which external sources of growth were still of primary importance. The natural and man-made disaster of March 11, 2011, also made its contribution, which forced the Government to allocate huge funds for the reconstruction of the affected areas. Under cabinet E. The goal of achieving the primary balance of public finances has now been shifted to fiscal 2020, with the primary balance deficit expected to be reduced by half by fiscal 2015. Abe's second cabinet also announced the same goal.

However, the largest budget burden is represented by allocations for social needs, the share of which is constantly growing against the background of an aggravation of the demographic problem. The fact is that various elements of the social security system that operate on insurance principles continue to be in serious need of public funding. For example, budget revenues depend not only on the basic pension system (since 2009, it has been paid for by the state by 50%), but also on medical care for people over 75 years of age, patronage care, unemployment insurance, social insurance for small and medium-sized enterprises, child benefits, and so on.

FINDING A WAY OUT OF THE TAX IMPASSE

Meanwhile, the Japanese government's ability to increase the tax base in order to stabilize budget revenues is extremely limited. Corporate taxes, which account for almost a quarter of the budget revenue (8.8 trillion yen in fiscal 2012), are significantly higher than in other Asian countries (about 30%). In this regard, the issue on the agenda is not about raising these taxes, but, on the contrary, about reducing them in order to increase the international competitiveness of Japanese products. However, the reduction of taxes will create additional stress for the state budget.

Some of the reserves are hidden in the increase in personal tax rates - income (13.5 trillion yen in fiscal 2012) and consumer (10.4 trillion yen).¹⁴. However, tax increases are an extremely sensitive topic, affecting the fundamental interests of the vast majority of Japanese voters. It is worth recalling that the increase in the consumer tax rate in 1989 and 1997 led to the resignation of the Cabinet of Ministers. As a result, the Japanese government was actually faced with a dilemma: raising taxes, even in the name of saving the national social security system, can cause discontent among voters and have unpleasant political consequences for the current government, while failure to implement strict fiscal measures is fraught with the financial collapse of social security systems. It is clear, however, that an increase in the tax burden is possible only up to certain limits, especially in Japan, where since the 1950s the public has been convinced that it is necessary to maintain a low level of personal tax rates.

In the approach to solving the problem of creating a targeted source of financial resources for solving social policy problems in Japan, the point of view prevailed, according to which such a source should be the consumer tax. The main reason is that income and corporate taxes are becoming less and less reliable sources of tax revenue in the context of long-term stagnation and low economic growth. In addition, as prof. according to Hitotsubashi E. Tadzika University, the income tax has a significant systemic drawback, which consists in the fact that a citizen pays it mainly during the period of his life when, on the one hand, he has the greatest income, but on the other hand, when he has other budgetary priorities besides paying pension contributions - expenses for children's education, mortgage payments, etc. Meanwhile, the need for social security is most pronounced at the end of life.¹⁵ From this point of view, the consumer tax has a number of important advantages.

First of all, its size does not change significantly, depending on the economic situation in the country. This tax is paid fairly evenly throughout the life of an individual. The use of funds received from the consumer tax, therefore, helps to reduce the conflict in the distribution between the working and non-working generations of the burden of the financial burden in relation to the social security system. It is also important that the consumer tax is distributed relatively proportionally among the entire population of the country, which increases the degree of its legitimacy in the eyes of the public. Finally, the tax rate in Japan is 5%, which is significantly lower than in most Western countries (about 25% in the Scandinavian countries, 16-20% in Spain, Italy and the United Kingdom). That is why an increase in the consumer tax seems to be the most socially just form of tightening the tax burden.

However, the problem with the consumer tax is that it mostly falls on low-paid segments of the population, for whom the share of everyday consumer spending (on food, clothing, etc.) is much higher than for people with high incomes. Therefore, it is assumed that this tax should be regressive in nature: for the low-paid strata, mechanisms should be provided to mitigate the tax burden, for example, special tax deductions, a compensation system, and so on.

The prospect of an increase in the consumer tax causes a mixed reaction in Japanese society. The majority of Japanese (61%), according to an opinion poll conducted by the Yomiuri newspaper at the end of January 2012, considered the increase in the consumer tax in order to maintain the social security system "necessary" ¹⁶. However, Japanese citizens generally tend to believe that the government itself is to blame for the poor state of public finances, so the first step towards financial recovery of the public sector should be to reduce the state apparatus, reduce the salaries of civil servants, etc. ¹⁷

Throughout the 2000s, the Liberal Democratic Party's governments actually postponed solving this problem until the LDP went into opposition, realizing that raising the tax would have unpleasant political consequences for the party. Given the negative attitude of public opinion towards an immediate increase in tax rates, the Democratic Party of Japan (DPJ) also made a promise not to increase them until the end of the upcoming term of office of the lower house in its election manifestos for the 2009 elections. However, by the end of the 2000s, it became clear that further inaction could lead to far-reaching consequences, including a reduction in the country's international ratings and even its default.

After the resignation of the Cabinet of Yu. Hatoyama in June 2010 declared its intention to carry out a radical reform of the tax system in the near future, including an increase in the consumer tax. The new head of the Cabinet N. Kan said on the eve of the elections to the House of Councillors that, among other measures to change the tax system, he is going to consider raising the consumer tax rate to 10%. In his keynote speech, he outlined the areas where additional budget revenues from the increase in the consumer tax are expected to be allocated. They were talking about aggressively investing them in socially oriented sectors of the economy: the medical care industry, patro-

emergency services for bedridden patients and older persons ¹⁸.

However, the Fukushima tragedy diverted attention from this burning topic for more than a year. In the future, the issue of increasing the consumer tax was linked to the state's social policy within the framework of the "integrated tax and social security system reform", which became one of the central issues on the agenda of the Cabinet of Ministers.Noda, who came to power in August 2011.

(The ending follows)

¹ IMF. World Economic and Financial Surveys. World Economic Outlook. Database - Country Information. October 2013 -www.imf.org/external/pubs/ft/weo/2013/02/weodata/download.aspx

² Ibidem.

³ The Global Competitiveness Report 2013 - 2014. World Forum, p. 15 - http://reports.weforum.org/the-global-competitiveness-report-2013-2014/

^{Sakaya Tahiti.} 4 "Isin" surukakugo (Awareness of the new "restoration"). Tokyo, 2013. p. 32.

^{Honda Itsuro.} 5 Abenomikkusu no shinjin (The truth about "abenomics"). Tokyo, 2013. p. 44."

⁶ Ibid.

⁷ http://www.japanpolicyforum.Jp/en/archive/no13/000430.html#kiji

⁸ Asahi shimbun. 11.06.2013.

⁹ Ibid.

¹⁰ Ibid. 22.06.2013.

¹¹ Japanese Ministry of Finance website - http://www.mof.go.jp/budget/budger_workflow/budget/fy2012/seifuan24/yosan001 .pdf

¹² Highlights of the Budget for FY 2013. P. 1 // Ministry of Finance - http://www.mof.go.jp/english/budget/budget/fy2013/01.pdf

¹³ Nihon keizai. 23.07.2004.

¹⁴ http://www.nhk.or.jp/kaisetsu-blog/400/131225.html

¹⁵ Ibid. 9.09.2013.

¹⁶ Yomiuri shimbun. 29.01.2012.

¹⁷ Largely in response to these public sentiments, the Noda Government passed a law in January 2012 cutting the salaries of civil servants by 8%.

¹⁸ Yomiuri shimbun. 20.06.2010.

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