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Japan’s Continuity Candidate Suga Could Also Dial In Reform

Yuko Takeo, Yoshiaki Nohara and Emi Urabe

(Bloomberg) -- Yoshihide Suga, the frontrunner in the race to become Japan’s next prime minister, is widely seen as a continuity candidate, but his past statements suggest he is a reform advocate who could shake up some of the country’s cosier industries if given a long enough mandate.

Abe’s staunch right-hand man has already called for greater competition among mobile phone carriers and hinted at the need for consolidation of the regional bank sector. While Suga has indicated he would stick to the Abenomics path that includes massive monetary stimulus and a flexible spending approach, he has also said more action will be taken if needed to save jobs.

Assuming Suga becomes premier, he will first need to steer the economy back to a recovery track after its record pandemic-induced slump.

The logic of maintaining stability in the middle of a crisis suggests Suga won’t turn upside down the most recent Abe cabinet lineup if he wins, but any major new appointments and his own replacement will be closely scrutinized to gauge how strongly he wants to leave his mark on policy.

Ahead of the ruling party elections, here are some of his recent and past comments:

Monetary policy

Suga’s comments suggest he won’t change the main direction of Bank of Japan policy but he is prepared to nudge the bank if necessary.

“I’d like to keep the relationship with the Bank of Japan the same as Prime Minister Abe.”

“Under the current circumstances, in order to protect jobs and keep firms going, the government needs to assess the situation and, if needed, do more with monetary policy. We’re at a crucial moment.”

--Sept. 2 press conference

Mobile Phones

Suga has long railed at what he sees as overpriced mobile phone services enjoyed by three carriers controlling around 90% of the market. His insistence on cheaper communications suggests reaching the BOJ’s 2% inflation target quickly or keeping boardroom executives happy aren’t among his biggest concerns.

“They’re seeing operating profits of around 20% with fees that are higher than the global standard. The year before last I said mobile phone fees could be cut by around 40% because I held this sense of there being a problem. I believe we should make sure that is a thorough system where competition between these providers functions properly.”

-- Sept. 2 press conference

Recovery Before Consolidation

Suga has largely stuck to the line that consolidating the country’s public debts goes hand in hand with ensuring economic growth.

“We rebuild public finances through our economy, so first we want to put our main priority on stopping an escalation of infections and getting the economy to recover.”

-- April 20 press conference after first extra budget

Sales Tax

Still, Suga has made clear that after two sales tax hikes in the last six years to help control public finances, he won’t back pedal.

“We are implementing economic measures worth more than 230 trillion yen. Businesses whose incomes have been cut by the coronavirus can get one-year deferrals on taxes and social security payments. But as for the sales tax itself, I think we need that for social welfare programs.”

-- July 29 press conference

He re-emphasized the point in remarks over the weekend, insisting that cutting the consumption tax isn’t an option.

Yardsticks of Abenomics

Suga has pointed out some of the measures he has in mind when judging successful economic policy. Japan’s currency was around 85 yen to the dollar when Abe took office again in December 2012 and the Nikkei 225 was just above 10,000.

“As a result of Abenomics, despite the very severe current economic situation, the yen is around 105 to the dollar. Stocks are around 23,000.”

“Personally I want to continue Abenomics with a firm sense of responsibility, and take it forward.”

-- Sept. 2 press conference

Local Banks

Suga insists there are too many regional banks in Japan and that’s why profitability is low, flagging another industry in need of change. Emphasizing this reason rather than the impact of the central bank’s negative rate on profits suggests Suga won’t be urging the BOJ to alleviate the policy side effects on the banking sector.

“I do think that financial institutions are needed to support firms when companies are facing this sort of situation, but in the long-term, as I’ve mentioned before I think that there are too many of them.”

-- Sept. 2 press conference

Regional Economies

He vows to continue efforts to support regional economic growth, though the return of significant numbers of foreign tourists looks a long way off.

“As cabinet secretary I’ve pushed for bringing in tourists from abroad, increasing inbound demand, and pushed for exporting agricultural products. I want to revive regional economies - that’s where my motivation lies, and that feeling won’t change.”

-- Sept. 2 press conference

Bureaucratic Reform

In his policy manifesto, Suga vows to break down the walls between different ministries and agencies. He is so convinced of his ability to manage bureaucrats he wrote a book about it.

“Bureaucrats are incredibly conservative and inflexible, but are smart, hard working, and well versed in a huge amount of information that’s accumulated within their organizations, including knowledge of overseas goings-on.”

“What’s expected of a politician is the ability to adequately communicate with bureaucrats, motivate them, maximize the strengths of the organization and make citizens’ voices a reality.”

-- Suga’s 2012 book “A Politician’s Determination”

(Updates with weekend remarks and manifesto.)

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