Earlier this year, Japan’s cabinet approved the country’s largest economic stimulus package since the global financial crisis and one of its largest one-time spending bills ever. More than 10 trillion yen, equivalent to about US$116 billion will be invested in public works, corporate lending and other private sector investment incentives. It is the debut legislation of newly-elected Prime Minister Shinzo Abe whose campaign was led by promises of resurrecting Japan’s lackluster economy.
A Much-needed Infrastructure Boost
The bill will front load spending on construction projects, like strengthening defense against earthquakes and updating aging infrastructure. These are updates that most Japanese will tell you are direly needed. Late last year, nine motorists died when a 110-meter-long stretch of the Sasago tunnel connecting Tokyo with central Japan collapsed. I drove through that tunnel on my way to ski on New Year’s Eve and sat on a massive expressway for three hours waiting for passage.
December’s tragic accident – caused by aging bolts fixing the ceiling of the tunnel to the roof (and which may have also been impacted by shifting earth) – has paralyzed one of the country’s heavily trafficked thruways as crews clean and rebuild. It has also prompted a review of tunnels with similar infrastructure, where similar problems have been uncovered. While previous discussions on infrastructure spending had been met with derisory cries of more “bridges to nowhere” and pork-barrel politics, this disaster has focused the electorate on safety and the need to revisit aging infrastructure. Suddenly infrastructure spending is cool.
The giant funding measure is expected to create jobs and increase public safety across Japan’s disaster-prone topography. Win-win, as long as plans are in place to ensure that the bond-sale that is funding it doesn’t further degrade Japan’s debt burden, which stands at more than twice its GDP.
Fueling the East-West Shopping Spree
Unlike similar stimulus measures seen in Japan in the 1990s, this spending boost will fund in a big way incentives for corporate investment, namely a fund to encourage private-sector lending to Japanese firms looking to acquire companies overseas.
Thanks to a strong yen and large cash reserves, Japanese companies are already on a roll in terms of outbound transactions. Also, more than ever, they’re buying in the West. In 2012, more than 80% of Japanese acquisitions involved US-based companies. In October of last year Japanese telecom giant Softbank purchased a 70% stake in U.S.-based Sprint Nextel, a deal worth more than US$23 billion. Hereis a recent Wall Street Journal map of some of the other major Japanese acquisitions of 2012.
The Opportunity for Public Engagement
All of this corporate buying and selling across the International Date Line spells exciting opportunity for communications professionals in Japan and elsewhere. At Edelman in Tokyo, Japanese and non-Japanese companies alike are turning to us for transaction-related support. As M&A activity increases here, we are helping more and more clients with change management – everything from employee engagement to good purpose initiatives and community engagement strategies for market access.
Japan’s economy has been notoriously stop-and-start for years, but the news is an undeniably willful and assertive move to invigorate a business culture that is already hungry for growth and expansion. We’re wise to stay ahead of the momentum and I can report that at Edelman we are.
Our recent appointment of Japan communications veteran Deborah Hayden to regional director, Capital Markets and M&A for Asia Pacific means we are serious about leadership in this area.
I’ve had the privilege of working with Deborah on numerous projects and prospective ones across a variety of industries and I look forward to a prosperous year for Japan and for all of Edelman’s clients here.
Cuyler Mayer is a Daniel J. Edelman Global Fellow and Director in Edelman’s Tokyo office.
Image by OiMax.