It’s Been A Year To Forget For Leaders Of China, Japan, Korea

The old adage that “misery loves company” took on a whole new scale this year as China, Japan and South Korea suffered bull markets in things to be unhappy about.

In China, Xi Jinping’s “zero Covid” nightmare overshadowed the milestone of his winning an unprecedented third term as leader. As growth hit the lowest levels in 30 years, Xi’s Communist Party faced the worst social unrest since the late 1980s as Chinese protesters pushed back against draconian lockdowns.

Japanese Prime Minister Fumio Kishida saw his political fortunes essentially disappear over the last 12 months. The worst inflation in 40 years emerged as the yen fell the most in nearly three decades as wages flatlined. Fallout from the July assassination of mentor, former Prime Minister Shinzo Abe, was rivaled only by a parade of scandals involving Kishida Cabinet members.

Over in South Korea, voters are already wallowing in buyer’s remorse over Yoon Suk-yeol’s seven-month-old presidency. Myriad controversies, diplomatic missteps, zero progress recalibrating economic engines and North Korea rattling its cage again have Yoon’s approval numbers in the 20s at times. And pundits turning his pledges to lead with “fairness and common sense” into a punchline.

This North Asian axis of leadership mediocrity could not come at a worse time. Though their intervals in power differ widely—Xi’s been around since 2012—the bigger picture implications in ways about which global investors cannot be happy. After a squandered 2022 in terms of structural reforms, it is quite unclear whether Xi, Kishida or Yoon has the political capital to right things next year.

Granted, the comparisons here are challenging to draw. Unlike Kishida’s 15-month-old premiership, Xi is not fighting to keep his job in the months ahead. Neither is Yoon, who has more than four-and-half years left to hone his leadership skills.

But Xi is essentially limping out of 2022. A year ago, loads of pundits, Eurasia’s Ian Bremmer for one, were all over the airwaves predicting economic suicide if Xi stuck with rolling lockdowns of entire metropolises. Early and often, observers warned, too, that China needed to import superior Western vaccines as the Omicron became the dominant strain.

Basically, Xi ignored it all and stood pat with his policy. Whether out of fear or stubbornness or an epidemic of party groupthink, Xi dragged China further into a self-inflicted Covid-policy crisis as the world reopened.

Things got so bad that Xi found himself unleashing democratic forces Beijing was slow to understand. The biggest protests since students commandeered Tiananmen Square in 1989 pushed Xi to reverse course. And in ways that sent a clear message: China’s 1.4 billion people have more power than they knew previously.

You know leaders are panicked when a government is censoring and doctoring television images of fans enjoying overseas sporting events without masks. It raises questions about whether Xi can take the politically risky steps of increasing the size of the private sector, boosting innovation, raising productivity and building stronger economic muscles.

Also, as China experiences its biggest Covid outbreaks, efforts to slow the spread anew will challenge Xi’s ability to multitask throughout 2023. And perhaps spur increased ingenuity amongst the Chinese people to stay one step ahead of censors as they remind Xi they’re watching.

Kishida’s 2023 is almost sure to start with speculation his days are numbered. Abe’s nearly eight-year long premiership was quite the aberration. Between 2006 and 2012—and since Abe resigned in September 2020—leaders have gotten roughly 12 months in power.

Even if Kishida can keep the political revolving door from spinning anew, support rates in the 30s do not augur well for his chances of recalibrating economic engines. Nor does the 3.7% inflation Japan in importing via a currency that, despite a recent rebound, lost 16% of its value this year.

Then there is prickly decision on who replaces Haruhiko Kuroda as Bank of Japan governor come March. Earlier this month, Kuroda’s team rocked global markets with the tiniest and most obvious of gestures: allowing 10-year bond yields to rise to around 0.5%, double the previous upper limit.

Kishida spent the waning days of 2022 trying to remind investors he really is an economic change-agent. He telegraphed a “bold investment” in catalyzing a startup boom and improving productivity.

Great, but where were these grand schemes 12-plus months ago when Kishida was a newer, less troubled leader with more clout among lawmakers? If we learned anything from Abe’s weak-results tenure it is to get some big reform wins early on. Abe waited too long. Kishida now looks more desperate than determined.

Yoon, meantime, is a study in hobbling a presidency out of the gate. True, he won on an “anti-feminist” platform. Still, it was jarring to see him move to shutter the Ministry of Gender Equality and Family. It is bad politics to tell half your nation, essentially, that you do not matter to the government until 2027. Getting caught on a hot mic slamming politicians in Washington, Seoul’s most important ally? Amateur hour.

The problem with North Asia’s three big economies in managerial disarray is that it reduces the odds that the leaders of China, Japan and Korea will act boldly to raise their economic games. It reduces the chances for regional cooperation. In fact, the incentives to lash out at neighbors to boost domestic support are increasing.

Worst of all, the events of the last year in Beijing, Tokyo and Seoul probably portend less vibrant North Asian economies five to 10 years from now. Misery, indeed.