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Economy minister's departure leaves Abenomics in a lurch

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Japanese Prime Minister Shinzo Abe lost a key cabinet ally when Akira Amari resigned as economy minister on Jan. 28.   © Reuters

TOKYO   The resignation of Economic and Fiscal Policy Minister Akira Amari over graft allegations may have delivered a fatal blow to the policy objectives of Japanese Prime Minister Shinzo Abe.

     Amari, who also doubled as minister for economic revitalization, was a driver of Abe's reflationary policy package, dubbed Abenomics. He was the mediator in the "quartet" of top cabinet officials and was the head of a group of economy ministry officials tasked with devising growth strategies. On top of that, he was Japan's chief negotiator for the Trans-Pacific Partnership free trade agreement.

     The sudden departure of such a key player on Team Abe will inevitably change the dynamics of the government.

LOSING BALANCE   On Dec. 23, the quartet -- Abe, Amari, Deputy Prime Minister and Finance Minister Taro Aso and Chief Cabinet Secretary Yoshihide Suga -- met at a Chinese restaurant in Tokyo's Akasaka district after the government had all but adopted a fiscal 2016 budget. "I'm so glad we embarked on Abenomics," one of them said. The four heavyweights had been working together since Abe and the Liberal Democratic Party returned to power in December 2012. Aside from Foreign Minister Fumio Kishida, they are the only officials who have continuously held ministerial positions in the second Abe government.

     The quartet is a cross-factional mixture born of Abe's political maneuvering during the formation of his first cabinet in 2006. In that government, the other three men all held important positions: Aso was foreign minister and LDP secretary-general; Suga was minister for internal affairs and communications as well as head of the LDP's election strategy bureau; and Amari worked as minister for economy, trade and industry.

     Ties between Suga and Amari deepened as both continued to hold key cabinet and party posts, including when Aso was prime minister and when Abe became head of the LDP during its stint in opposition.

     Most of the important domestic policy decisions that gave shape to Abenomics were settled in conclave by the quartet. Such decisions included the appointment of Bank of Japan Gov. Haruhiko Kuroda, a hike in the consumption tax rate from 5% to 8%, the postponement of a further tax increase to 10%, and a cut in effective corporate tax rates. By picking relatively loyal but inexperienced lawmakers -- first Sanae Takaichi and later Tomomi Inada -- to lead the LDP's Policy Research Council, Abe was clearly looking to concentrate power in the cabinet.

     After returning as prime minister, Abe gradually shifted to an economy-first approach. His 2013 basic policy on economic and fiscal management was aimed at "pursuing both economic revitalization and fiscal consolidation." But in 2015, the wording was tweaked to "Without economic revitalization, there can be no fiscal consolidation."

     Suga has always been supportive of Abe's economic policy, while Aso has repeatedly voiced concerns about fiscal discipline. Caught in between, Amari sided with Abe to tilt the quartet's balance toward the prime minister's growth-oriented policies.

     Amari, who seemed to see himself as the "No. 4 guy" in the quartet's virtual hierarchy, was a stabilizing force. He served as a buffer between Suga and Aso, and on many occasions turned differences into agreements, averting head-to-head confrontations between the prime minister and the finance ministry.

     Amari's successor as economic and fiscal policy minister, Nobuteru Ishihara, has big shoes to fill.

TPP AT RISK   On Jan. 27, Koichi Hagiuda, deputy chief cabinet secretary, said: "Ahead of the signing ceremony for the Trans-Pacific Partnership agreement [to be held in New Zealand on Feb. 4], a ministerial meeting will take place where relevant countries discuss important issues. It will be difficult for anyone but Amari, who's been involved in the negotiations from the very beginning, to handle it."

     Amari was given full authority for TPP negotiations under the cabinet secretariat's newly created TPP headquarters. The prime minister's aim was to streamline the government's trade negotiation scheme, which had been scattered across four different ministries -- foreign, trade, agricultural and finance -- often in an uncoordinated manner, and let Amari be the mouthpiece for Japan under Abe's direct supervision.

     This structure, similar to the Office of the U.S. Trade Representative, allowed Amari to carry out tough negotiations with his U.S. counterpart, Michael Froman, who holds full negotiating powers over the issue. Amari was the only one who could play such a central role and who had such deep knowledge of subjects ranging from auto tariffs to exceptional treatment for certain agricultural products.

     Discussion on the free trade agreement, including its ratification, will likely be the highlight of the second half of the Japanese parliament's session in April and May. Now that Amari has resigned, Abe will have to stand before parliament without his star debater on the issue. After Amari's resignation announcement on Jan. 28, Abe told journalists of his regret that he had been unable to persuade Amari "to ride out the storm and stay on to press forward with his policy."

     In his New Year's message, Abe quoted a proverb: "A castle takes three years to build, yet it can fall in a single day." Little did he suspect that one of his closest allies would soon fall.

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