Abe's Complicated Legacy: His foreign policy architecture may help avert an international conflict, but his economic policies may have sown the seeds for a major financial crisis.

• Author: Bessent, Scott

Shinzo Abe, the two-time and longest serving prime minister of Japan, assassinated on July 8, 2022, should be remembered as one of the great transformational government leaders of the past fifty years. Similar to Margaret Thatcher, Ronald Reagan, and Helmut Kohl, who all led their countries through economic shocks, foreign threats, and domestic makeovers, Prime Minister Abe was reelected in 2012 for his second tenure and faced a period fraught with internal malaise and rising external tensions.

From 2012 to 2020, he reconstructed his country's security, economic, societal, and financial structures. He led a domestic economic revival and re-established Japan's geopolitical leadership. Abe believed that a strong Japan required a strong economy. In 2012, he and his economic advisors devised the financial market catchphrase of the year, the "Three Arrows": loose monetary policy, fiscal flexibility, and structural economic reforms. These policies constituted the core of Abenomics, arguably the most talked about financial agenda in 2012 and 2013.

Ultimately, parts of his agenda carry on today, while other pieces were never fully implemented.

Foreign writers have consistently catalogued his achievements in narrow fashion along single topical lines, rather than viewing them, and the man who reframed his country, in a more holistic way. It is important to examine Abe's background, the unsure moment in 2012 of Japan's place in the world order, the Japanese people's guarded longing for strong leadership, and his unconventional method of governing in order to appreciate fully how his policies continue to shape his country, global markets, and international institutions today. Just as Germany's Chancellor Kohl advocated for more European integration as a co-author of the Maastricht Treaty and supported U.S. President Reagan to weaken the Soviet Union, Abe reframed an alliance of Asian, European, and American democracies to counterbalance China.

In many ways, Abe and UK Prime Minister Thatcher shared an uneasy relationship within their parties and with vast swathes of the electorate who still continued to vote for them. Thatcher was an outsider, a trailblazer in a male-dominated arena, and a relentless free-marketeer. She eschewed the polite compromise politics of her Etonian-Oxbridge colleagues. She led Britain through a ferocious miner's strike, a war with Argentina, and into the coalition to liberate Kuwait. While she was a bete noire for those on the left, it was ultimately the uneasy relationship with her Tory party colleagues that brought her down.

Abe elicited strong emotions from both sides of the political spectrum. His family history, especially the career of his maternal grandfather, Nobusuke Kishi, the controversial founder of the LDP Party and prime minister, drew support from Japanese nationalists. However, his support for revising Japan's constitution, specifically Article 9 to allow for a standing army, was met with mixed feelings from centrist voters and howls of disapproval from left-wing constituents. At the end of their careers, both Abe and Thatcher enjoyed a greater popularity on the world stage than in their own countries.

In 2012, Japan was a sleeping giant poised for a constructive awakening to remake the country's post-war identity, replacing tired domestic policies and a vacuum in Indo-Pacific security. The island nation was facing a crisis of national spirit, driven by several seemingly intractable forces: a debt overhang, a deflationary mindset, and a population both aging and shrinking.

Prime Minister Thatcher and President Reagan came to power in periods of similar national self-doubt in their respective countries. Abe re-entered as prime minister just in time to prevent the world's third-largest economy's irrelevance on the global stage. From 2006 to 2012, Japan had six different prime ministers, beginning with Abe whose first ignominious iteration lasted less than a year. China had just passed Japan to become the second largest economy in 2010.

Two decades of economic debilitation, resulting from the unwind of the post-bubble economy, had sapped the previous dynamism of many Japanese corporations. Households were in retreat, hoarding savings and witnessing ever-declining birthrates. The central government had engaged in an economic smoothing operation for most of the past twenty years. This long-term fiscal stimulus was leading many economic and financial analysts to believe that Japan's budget situation and debt stock were unsustainable. Japan's stock indices hovered near forty-year lows, corporate profitability metrics were among the lowest in the developed world, and foreign brokers and banks had abandoned Tokyo for Hong Kong, Singapore, and Shanghai.

In 2012, the people of Japan were still disheartened by the horrific images of the Fukushima nuclear tragedy that occurred in March 2011. As the world watched aghast at scenes of what might have been a nuclear meltdown, the Japanese government mounted a hapless response that demoralized the nation. As a precautionary measure, the government shut down the country's nuclear power plants that had provided the backbone of Japan's electric grid. Recriminations grew between the utility companies, regulators, and the antinuclear segment of the population.

China's rise and assertiveness took on a physical manifestation in 2012. When the Japanese government purchased three of the uninhabited Senkaku Islands in September of that year, a wave of protests swept China. The islands had been the subject of a territorial dispute between the two countries since 1970. Beijing responded with increased airforce sorties into the islands' airspace combined with aggressive positioning of both civilian and military vessels in the area. The BBC described the situation as "the most serious for Sino-Japanese relations in the post-war period in terms of the risk of militarized conflict." The specter of kinetic conflict against a much larger and emboldened opponent loomed large in the Japanese psyche.

Shinzo Abe, like the lionized British Prime Minister Winston Churchill, was one of the rare developed world leaders given a second chance after being removed from office. Remarkably, it is unlikely that Abe's unique ability to govern in the consensus-driven Japanese system would have been possible without his earlier missteps. Abe the important domestic and global leader could not have existed without Abe the failed politician.

Upon arriving in office in December 2012, the former prime minister hit the ground running. He better understood how to manage the bureaucracy, wielding the levers of power with confidence and aplomb. "Abe was a statist," according to award-winning journalist, editor, and think tank founder Yoichi Funabashi, but in his second iteration he moved the power of the state away from the civil servants and back to the Kantei (the prime minister's office) and the ministers. Funabashi believes that Abe was also a restorationist, adopting Meiji-era leader Shimazu Nariakira's mantra, "If we take the initiative, we can dominate; if we do not, we will be dominated."

Two aspects of Abe leaving and returning to office were notable. First, Abe's personal disquiet with his unsuccessful initial term caused him a great deal of personal grief, according to close friends and family. It is said that his mother, the daughter of a former Japanese prime minister, lectured him on how he had mishandled his office, coaching Abe on how to be a more effective leader.

Whether it stemmed from maternal advice, another confidant, or his own reevaluation, Abe remade his approach to government in his second time in office, forming committees of outside experts to establish corporate governance codes. Abe refashioned the...