5 November 2021

Arminius Capital currently includes long positions in Japanese equities in some of its portfolios, so we keep an eye on Japanese politics as well as the Japanese economy. The new Prime Minister included a surprise or two in his Cabinet, which may lead to a new policy direction.

A change of Prime Minister usually doesn’t result in much change in Japanese policies, because almost all Prime Ministers are created by the Liberal Democratic Party machine, which pursues power rather than policies. But the new PM, the 64-year-old Kishida Fumio, has made some Cabinet appointments which might lead to major changes. Of course, all the top Cabinet posts went to long-serving party stalwarts in order to pay Kishida’s debts to the faction bosses who supported him, but he also added several of the LDP’s rising stars to his Cabinet.

The most surprising appointment was to a newly created job – Minister of Economic Security. Kishida described the role as “securing strategic technology and goods and preventing technology leaks so we can achieve a self-sufficient economic structure.” That translates to ensuring semiconductor supply and innovation, strengthening cyber security, and thwarting Chinese theft of Japanese intellectual property. The new Minister has of course denied that the economic security measures have anything to do with China.

What is really interesting about the job is that its theoretical functions cut across several existing ministries, which will cause vicious turf wars with entrenched bureaucracies. The new Minister will only be able to do his job if he has the firm support of the Prime Minister.

Fortunately, the new Minister seems to have all the right qualifications and connections. Kobayashi Takayuki is the product of an elite education (Kaisei Academy, Tokyo University Law School) and an elite career path (Ministry of Finance, Japanese Embassy in Washington). On the way, he also picked up a Master of Public Policy degree from Harvard’s Kennedy School of Government.

We will watch Minister Kobayashi’s progress with great interest.



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