https://www.wsj.com/articles/japans-new-prime-minister-11600195666?mod=opinion_lead_pos4
Yoshihide Suga becomes Japan’s prime minister this week, having been elected leader of the ruling Liberal Democratic Party on Monday. His elevation comes at an important moment for the world’s third-largest economy, and presents new opportunities.
Mr. Suga succeeds Shinzo Abe, who resigned for ill health. He inherits an economy that contracted nearly 28% on an annual basis in the second quarter due to the pandemic. The 2020 Summer Olympics, intended to mark a national renaissance, were postponed. Tokyo has rolled out fiscal stimulus worth some $2.2 trillion, or 40% of gross domestic product—despite a debt-to-GDP ratio already at 230% before the crisis.
Mr. Suga seems set to respond by extending his predecessor’s reform program. Mr. Abe promised to revive the Japanese economy by firing “three arrows” of fiscal and monetary stimulus and policy liberalization. Only the first two arrows launched as hoped, although Mr. Abe did make progress on labor-law and corporate-governance reform and more open immigration. He also tried to negotiate high-quality trade deals such as the Trans-Pacific Partnership to spur domestic competitiveness.
Mr. Suga played a leading role in the development and implementation of this agenda as Mr. Abe’s long-serving cabinet secretary. Now he’s coming with ideas of his own, including an emphasis on reforming inefficient regional banks. Japan has too many and they earn too little profit. Mr. Abe’s monetary explosion hasn’t helped, and Mr. Suga has long believed that consolidation would boost their ability to lend to smaller companies. He also appears to want to remove policy hurdles to consolidation and mergers among smaller firms in the hope that this might stimulate productivity gains.