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Chief economist update: Prime Minister Suga

Japan has a new prime minister.

Yoshihide Suga is his name. Suga will officially be Prime Minister following a parliamentary vote on September 16 after being elected President of the ruling Liberal Democratic Party (LDP) two days earlier.

Prime Minister Suga faces a baptism of fire, thrust into leadership at a time when Japan (and the world) is in the midst of the COVID-19 pandemic, an economic slump, national security and trade issues involving the United States and China.

Prime Minister Suga has very big shoes to fill in Shinzo Abe who unexpectedly resigned on August 28 for health reasons.

After serving a year and a day as Japan's prime minister from 26 September 2006 to 26 September 2007, Shinzo Abe was re-elected head of state on 26 December 2012 to become Japan's longest-serving prime minister (seven years and 264 days) in history.

Prime Minister Abe is credited with "Abenomics" - coined for his "three arrows" strategy: accommodative monetary policy aimed at achieving the Bank of Japan's (BOJ) 2% inflation target; increased fiscal spending aimed at raising the country's growth rate to 2%; and, structural reforms and liberalisation of some sectors to revitalise Japan's industries.

Abe may not have stayed long enough to see the fruits of his labour but his record-breaking stint as prime minister provided relative policy stability in a country that changed leaders more often than Australia since Kevin Rudd.

Prime Minister Suga promises continuity of his predecessor's policies, declaring at a joint plenary meeting of LDP members: "We need to inherit and facilitate policies promoted by Prime Minister Abe in order for us to overcome this crisis and for each and every individual to have a safe and stable life...I recognise that I carry that mission".

The good news for prime minister Suga is that while Europe appears to be experiencing a resurgence in COVID-19 infections, a number of countries, including Japan itself,  are now (or on their way) to relaxing restrictions re-imposed after the second wave.

As Factset reports: "...Australia's Victoria state recorded fewest infections since 26-Jun as restrictions lift in regional areas. South Korea eased social distancing curbs, including lifting ban on indoor dining and allowing leisure facilities to open. Tokyo government this week plans to end its policy of asking establishments serving alcohol to close early. New Zealand maintained current restrictions while flagging a lifting of curbs next week".

In addition, global economies and financial markets have already rebounded from the deep slump experienced in the first quarter of 2020.

Then again, COVID-19 still dictates the near-term outlook. A third wave still cannot be discounted.

Read our full COVID-19 news coverage and analysis here.

Read more: Shinzo AbeBank of JapanYoshihide Suga
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