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November 21, 2014
Tobias Harris Joins Sasakawa USA Team
and
A Look at Japan's Snap Election
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Contact for more information:

Sally Donnelly, SBD Advisors

202-452-9133

Sasakawa Peace Foundation USA hires Tobias Harris as economy fellow

Washington, DC - 20 November 2014 - Sasakawa Peace Foundation USA announced today
that Tobias Harris has joined Sasakawa USA as Economy, Trade and Business Fellow.
Tobias will conduct research on economic policymaking in the world's third largest
economy.

Tobias joins Sasakawa USA with years of experience analyzing Japanese politics and
policymaking in publications including the Financial Times,Wall Street Journal and
Foreign Affairs and as an on-air analyst for CNBC, Bloomberg, and other networks.
He has also worked as an aide to Japanese legislator Keiichiro Asao. Tobias holds
an M.Phil. in International Relations from the University of Cambridge, a BA in
Politics and History from Brandeis University, has conducted graduate research at
the Massachusetts Institute of Technology and, from 2011-2012, at the Institute
for Social Science at the University of Tokyo as a Fulbright scholar. In addition
to his work at Sasakawa USA, Tobias will continue serving as a Japan analyst at
an American political risk advisory firm.

Adm. Dennis Blair, Chairman and CEO of Sasakawa USA said, "We're delighted to have
Tobias join us as a fellow in our quickly-expanding research program. His expertise
on the intersection of economics and politics and his familiarity with the key players
in Japan will allow us to bring his keen insights and analysis to a broad audience
at a critical point for Japan's economic future. He'll be providing ongoing analysis
of major developments in Japan's economy and contribute to cross-disciplinary projects
with the rest of our research team to present what I believe will soon be recognized
as must-read research on Japan and U.S.-Japan relations."
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Harris's first work on behalf of Sasakawa USA, published in the Wall Street Journal:
The Shifting Meaning of Japan's Snap Election

By Tobias Harris

November 20, 2014

Read the whole article on WSJ.com here. [http://r20.rs6.net/tn.jsp?f=0010_zzXizlwSnpi-XGw6CDopQor4NOINZD2eOf3Czjl19ICqu2g8k-9BHaCUk-XNBLTclQqLJPWMnvnfHqR_R4RgLEpKYV2nkd-DRP5vXZJDTHz70psmlhGQytCuy3Qna_F6hM9Jyd07y6J74P7Cdd7qmNcZBWGDvyiCfcFMBde-S2m1GWCHfX-ojK9iFoGDOAgfArwCjO5VTE-aBjkxWIqekAUY9a_4wvq3tniUmI84J4ww8mNcn1SwfxakgkFW3K&c=UhEOKKWlZF9wlxwhs-FU9GKbzuz0EbK1y00W6mCvz7Ku1MmU40tK5Q==&ch=qT_lhoNjFrXg0viPqeoTo1fu2wQquEWexAHENGRLwOBMcYZUGdcuBw==]

When reports surfaced last week that Japan's Prime Minister Shinzo Abe was planning
to hold snap elections, it seemed a low-risk way to expand his mandate and push
for a delay in raising the consumption tax again, even in the face of objections
from within his own party. Opposition parties looked in no shape to win, and Mr.
Abe's popularity was relatively high. But with new economic results this week showing
Japan to be in recession, the results of the election are now less certain.

December's general election will likely be a referendum on Abenomics, Mr. Abe's
bold mix of monetary easing, fiscal stimulus and structural reform. While his policies
have buoyed the stock market and boosted the profits of large exporters, they have
done little to improve the fortunes of middle-class families. Their incomes have
lagged behind inflation and have been squeezed by costlier imports and an earlier
consumption-tax hike, levied in April.

Opposition parties were always going to attack Abenomics for its failure to raise
incomes. Their charges will have more credibility now that the economy is in recession.
And even though they are unlikely to unseat Mr. Abe's ruling coalition, they may
reduce its majority by a sizable amount.

After the election Mr. Abe will have to grapple with the central challenge of Abenomics:
Triggering sustainable growth while also reassuring investors, businesses and ratings
agencies with a credible plan to reduce Japan's structural deficit and stabilize
government finances. A recession suggests that the prevailing plan-raising the
consumption-tax rate to increase state revenues-was premature. Despite reassurances
from fiscal hawks that the Japanese economy was strong enough to withstand the blow
to consumer spending, the unexpected recession has discredited those claims.

But the recession is unlikely to give Mr. Abe free rein to prime the pump. The Finance
Ministry and its allies in Mr. Abe's Liberal Democratic Party will press the prime
minister to resist an increase in spending. Foreign investors, ratings agencies
and international financial institutions will expect a new, credible plan to shrink
the deficit.

While Mr. Abe had hoped that a snap election would increase his leverage over fiscal
hawks, a reduced majority would leave him with less leverage than before. The Finance
Ministry and the LDP may accept Mr. Abe's desire to postpone the consumption tax
to April 2017, but they no doubt will demand limits on the ability of the prime
minister to delay again.

By putting off the tax hike-however prudent in the near term-Mr. Abe has implicitly
raised the question of when the economy will be healthy enough or the government
strong enough to tackle Japan's burgeoning national debt, now more than 200% of
gross domestic product in gross terms. Mr. Abe's delay could embolden fiscal hawks,
who can stress the dangers of Japan's deficits in ever-starker terms, especially
given projections that the Bank of Japan [http://r20.rs6.net/tn.jsp?f=0010_zzXizlwSnpi-XGw6CDopQor4NOINZD2eOf3Czjl19ICqu2g8k-9BHaCUk-XNBLs2gH-gsIM9TLszZchjSi78VD4DZb__x4BDG8WbxSOSMHL4YTI1Udvo9Q-WFES-rJ-tQG7-tEhfapTlBlcyHhPVp_JNyAJFpMHBsCzWGep0YAwKgXjiL1UKnvYVzcwpFkK-AzTwa2J1YEti1xynmkTmOJRoulZeTlqOTVl8P6aWX2x0-3cBVtOA==&c=UhEOKKWlZF9wlxwhs-FU9GKbzuz0EbK1y00W6mCvz7Ku1MmU40tK5Q==&ch=qT_lhoNjFrXg0viPqeoTo1fu2wQquEWexAHENGRLwOBMcYZUGdcuBw==]
could own more than half of outstanding government bonds by 2018.

Delaying the tax hike guarantees that the debt question will loom ever larger for
Mr. Abe and his successors. As in the U.S., political dynamics-voter anxiety about
growth and jobs, elite concerns about the national debt-continue to favor an approach
in which the government tries to boost the economy while also trying to raise revenue
and cut spending.

While the BOJ's radical monetary easing has tried to raise inflation expectations
enough for businesses to start spending their retained earnings (more than ¥300
trillion, or $2.537 trillion) on wages or investment, businesses have thus far been
reluctant to spend, notwithstanding modest inflation and pressure from the government.
Mr. Abe could intensify pressure and entertain a tax on retained earnings akin to
the one pending in South Korea, but his party's longstanding ties to big business
may preclude such action.

More than anything, then, Mr. Abe's snap election may turn on the challenge of triggering
economic growth while shrinking a deficit.

Mr. Harris is a fellow at the Sasakawa Peace Foundation USA and an analyst at political
risk advisory firm Teneo Intelligence.
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1819 L Street, NW
Suite 300
Washington, DC 20036
202-296-6694
programs[at]spfusa.org
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