Japanese Legislative Elections Show the Danger of Ignoring Economic Realities for the Sake of Populism

I do not normally comment on Japanese politics. It is not because I am not interested in politics or the country. But it is much more because, for much of the past decades, it has not been a source of change or inspiration. As the country struggled with deflation, economic stagnancy, and depopulation, politicians had little to say about solutions, preferring to muddle on with a combination of quantitative easing and pensioning off the growing cohort of old people, buying political capital in a land where the youth are largely characterized by political apathy.

But finally, change seems to be in order. As Japan headed to the polls this past Sunday for upper house legislative elections, new political alignments are beginning to come into shape, driven by the haplessness of the ruling Liberal Democratic Party (LDP) and the rise of increasingly credible and popular challenges both to its left and right. As the country shakes the political monopoly of the LDP, it could finally hope for an exit to its policymaking sclerosis. And new ideas implemented could finally drive optimism for a different future based on change.

Not all proposed changes, however, suggest that a different future may necessarily be a brighter one. To attract voters, parties of all stripes and colors are competing to see who can dole out more money as part of their policy platform. More subsidies for childbirth, childrearing, and education, combined with lower taxes and higher minimum wage are sound like great ideas for giving people more incentives to spend more, until one realizes that the country is facing one of the highest debt levels in the world, with an interest rate that is no longer rock-bottom.

It is no wonder that foreign investors are questioning the sustainability of Japan's status as one of the financial havens of the world, where their money can be safely stored in times of turmoil elsewhere. As the government prints more money to potentially fund these populist policies, at the same time as a still-growing pension pot for an ever-older population and a more robust military in an ever-more unpredictable international environment, how long will it be before the Japanese yen is hit with intolerable devaluation, and the government starts to struggle with debt repayments?

Economics is not the only thing foreign investors need to worry about. In the Sanseito, Japan has finally found its version of Alternative für Deutschland and the National Rally. Amidst the growing number of foreign residents and tourists, right-wing politicians have vocally denounced their supposed negative impact on the everyday lives of the natives, finding resonance among voters by speaking about degraded infrastructure, cheating on medical payments, unjustifiably claiming government subsidies, introducing crime, and pushing up the prices of everything from food to real estate. 

Thanks to the politicians, openly voiced xenophobia is no longer a social taboo. Despite foreigners being less than 3% of the total resident population, the Japanese people have risen in protest against an "excessive" number of "low-quality" foreigners. The Sanseito's publicly displayed "Japanese First" election posters no longer feel so jarring when placed against an increasing number of signs in front of restaurants, shops, and other establishments that openly refuse entry to non-Japanese people. The country's shift will not stay just political; it will be cultural.

Thus, whether or not Japan finds a new way forward to become a "better" country as a result of the latest political shakeup, it most likely has to build upon that new way without as many foreigners. In time, they will come to miss those foreigners. In exchange for their cultural incomprehension and outsized spending power that irritate locals, the foreigners bring what is sorely lacking even now: innovative ideas that power new engines of growth, as well as the manpower and funding needed to put those ideas into action in the decades ahead.

Amidst the political fluctuation that Japan rarely experiences, one may hope for optimism, based on more money to spend in a cheaper, more orderly social environment. That ideal may even come to fruition for a few years thanks to a new set of populist policymakers. But what happens when fiscal reality hits and foreigners are nowhere to be found? The line between poverty and prosperity is increasingly thin in a fluctuating global economy constantly disrupted by technological advances. Those who reminisce about the ideal would soon find out the true meaning of "beggars cannot be choosers."