Not so super

EARLIER this year Shinzo Abe, Japan’s prime minister, unveiled the first two “arrows” of his three-point economic plan—monetary easing and fiscal stimulus—and hinted at structural reforms to come. Japan’s stockmarket soared by 80% in six months. Mr Abe’s approval rating soared, too. Then, after months of euphoria, at the end of May, bond-market jitters about the radical easing plans helped to spark a sell-off in shares. Now Mr Abe’s eagerly awaited “third arrow” of structural reforms has fallen well short of the rings, let alone the bull’s eye. Indeed, it is so wide of the mark that one is left wondering if Abenomics has failed before it even properly began.

The disappointment is all the greater because Mr Abe’s first two efforts were so successful. A weaker yen has boosted exports. The first signs of inflation are appearing in Tokyo—a good thing, given the years of stagnation. The economy grew at an annualised rate of 4.1% in the first quarter as consumers regained confidence. In April Mr Abe signed up to talks on the Trans-Pacific Partnership (TPP), a regional free-trade area, committing Japan to opening up uncompetitive industries. He also promised to overhaul the electricity industry.

On June 5th Mr Abe let loose his third arrow. It contained some useful measures, such as lifting a ban on the sale of drugs online and obliging the government’s pension fund to start holding corporate leaders to account. But much of the rest was old-fashioned industrial policy which has been tried, and has failed, before (see article). Meaningful deregulation, labour-market reform and steps to make agriculture competitive in order to prepare for the TPP were all shelved. Truly bold measures, such as boosting immigration or changing the electoral system to give proper weight to young and urban voters, are off the agenda entirely.

The reason is not hard to spot. Ahead of a crucial election in July, the Liberal Democratic Party (LDP) has been pressing Mr Abe not to offend the farmers, doctors and businessmen on which it has long relied. Yet for those, like this newspaper, who think that Mr Abe has the chance to drag Japan out of its decline, his climb-down is a disappointment. With a public debt of 240% of GDP, printing money and public-works spending can go only so far. Most of what ails Japan, from its insider-dominated labour market to excessive regulation and poor corporate governance, is structural. The excitement has been that Mr Abe seemed to understand this.

Get back into that telephone booth and change clothes

All is not lost. Mr Abe’s popularity remains high, and the LDP’s rivals are on the ropes. Mr Abe knows that if he continues to balk at structural reform, Japan will go back to being a once-great economy condemned to a slow ebb. He said on June 5th that this first package of reforms is just a “way point”, and that, after the election, he will open a “second season” of his growth strategy.

Mr Abe must honour this pledge and face down his own MPs on reforms, as he did when he signed up to talks on the TPP. Now, more than ever, he cannot afford to become distracted by his pet project of changing Japan’s post-war constitution. Instead he should first fill his cabinet with reformists and then take on the rest of his party. Issue by issue, he will need to isolate and then defeat the opponents of change.

It is still too early to write off Abenomics. But this was a bad week for Japan.