28 June 2016•Update: 29 June 2016
By Todd Crowell
TOKYO
The global stir created by the British referendum on whether to leave or remain in the European Union came just as campaigning was getting underway for Japan’s upper house election on July 10.
Japanese Prime Minister Shinzo Abe called an urgent meeting of his closest cabinet colleagues and economic advisors on how to lessen the fallout on the economy after the Leave campaign won 52 percent of the vote in the United Kingdom last week.
In a statement, Abe said his government would “continue to work for market stability”.
Speaking by telephone from Switzerland, where he was attending an economic meeting, Bank of Japan governor, Haruhiko Kuroda, one of the key architects in Abe’s economic strategy, promised to inject more money into the economy if needed.
The Japanese public eagerly awaited the opening of the markets Monday to determine whether the disastrous plunges that followed the Brexit vote results would be repeated.
On Friday, the Nikkei stock market index fell 8 percent to its lowest point in 16 years.
The value of the Yen briefly passed the 100-to-the-dollar mark before settling down to around 102.
The stock market rebounded marginally Monday by climbing by around 2 percent.
The government stood ready to intervene in the currency markets by buying yen to push its value further down, although Tokyo was constrained from doing too much on this front for fear of being labeled a currency manipulator.
The board of governors at the Bank of Japan does not officially reconvene until late July, but that does not preclude an emergency meeting. Kuroda has promised to maintain liquidity.
The modest rebound was welcome good news for the premier in his quest to win at least a majority of the seats being contested for the House of Councillors, the upper house of Japan’s bicameral legislature.
Abe wanted to make this coming election all about his decision to delay a planned increase in the national sales tax until October 2019.
He had used a similar argument in 2014 after delaying the tax hike for the first time and won a landslide victory.
On the other hand, any news that reminds the public of the failure of his signature economic strategy, known as Abenomics, cannot be welcome.
Just about the only tangible success was a significant boost in the stock market and a great weakening of the yen.
Both of these were essentially wiped out following the Brexit result.
There are, however, good indications that most of the Japanese public has already written off Abe’s economic reform anyway.
After the urgent cabinet meeting Monday, Abe promised to support a new $100 billion stimulus package. Debate in parliament on this would begin after the July 10 election, he stated.
Tokyo is also concerned about the impact the Brexit vote will have on the 1,380 Japanese-owned companies located in the U.K., which they often use as a platform for doing business with the EU.
The opposition parties, led by the Democratic Party (DP), tended to ignore the impact of Brexit or Abenomics to focus mainly on opposing the Abe administration’s designs on changing the constitution.
“I have a strong sense of crisis,” said DP leader Katsuya Okada. He, however, wasn’t referring to the fallout from Brexit, but to Abe’s long-standing dream to change Japan’s pacifistic constitution.
