The Role of Policy Advice in China’s and Japan’s
Economic Policies since the Global Financial Crisis
Pascal Abb, GIGA German Institute of Global and Area Studies, Germany
Patrick Koellner, GIGA and University of Hamburg, Germany1
Sebastian Maslow, Tohoku University, Japan
Paper to be presented at the Political Studies Association
Annual International Conference 2017, University of Strathclyde, Glasgow, 10 April 2017.
Please do not cite this paper without permission by the authors.
Abstract
This paper examines whether and, if so, how Chinese and Japanese government responses to
the Global Financial Crisis as well as subsequent signature economic policies were informed
by policy advice. To mitigate the domestic economic fallout of the crisis, policymakers in the
world’s second and third largest economies resorted to massive fiscal stimulus policies. Policy
advice by think tanks or other idea brokers played no role in these immediate government
responses to the crisis. After the crisis however, new governments in China and Japan became
increasingly interested in policy-relevant ideas on how to recalibrate the Chinese economy
and how to reenergise the Japanese economy. A window of opportunity thus opened for
policy entrepreneurs based in academia and, especially in the Chinese case, also in think
tanks, who became instrumental in developing and promoting major new economic policy
programmes, viz. China’s ‘One Belt, One Road’ initiative and ‘Abenomics’ in Japan.
Keywords: global financial crisis, economic policy, policy advice, think tanks, China, Japan
1
Paper presenter. Email: [email protected]
1 Introduction
The repercussions of the 2008-09 Global Financial Crisis (GFC) were felt around the globe.
In this paper we examine how external policy advisors, including think tanks, contributed to
developing Chinese and Japanese crisis and post-crisis economic policy directions. We ask
whether and, if so, which advisors outside the formal government and/or ruling party
apparatus, advanced what kind of policy ideas that were translated into economic policy
during and after the crisis. While the substance of China’s and Japan’s economic policies
attracts considerable interest and scrutiny by economists and professional analysts, little is
known where the ideas underlying these policies come from. Studying the expertise-policy
nexus in China and Japan through the lens of their crisis and post-crisis economic
policymaking helps our understanding of this nexus and the role of think tanks therein. It also
provides a comparative perspective on policymaking in these two countries which are not
often studied in conjunction due to the segmentation of area expertise on Asia.
In the world’s then second and third largest economies, the initial government
responses to the collapse of global markets in late 2008 were quite similar. Governments in
Tokyo and Beijing tried to mitigate the domestic fallout of the global economic crisis that
followed on the heels of the financial crisis by means of massive fiscal stimuli, injecting vast
amounts of public investment into infrastructure and other areas. China’s stimulus programme
succeeded in avoiding a short-term slump in growth – in fact, it sent the country’s economy
into overdrive at a time when almost all of its major trading partners were experiencing
recessions. China’s GDP grew by an astonishing 50 percent between 2009 and 2014, helping
it to power past Japan in the world economy. While many countries resorted to austerity
drives after the financial crisis to shore up their battered public finances, austerity did not
become a leitmotif for economic policymakers in China and remained of limited importance
in Japan. The hegemony of the austerity discourse after the GFC that some observers have
identified (and criticized, see e.g. Blyth 2013) was thus never truly global. The GFC underlined that China needed to move beyond the hitherto dominant exportoriented, low-cost growth model. This quickly became a key issue for the new generation of
Chinese leadership, centred on State President Xi Jinping, which took power in late 2012. One
major new economic policy adopted by the Chinese government was the ‘One Belt, One
Road’ (OBOR) initiative, which links economic with geostrategic aims. In Japan, the main
watershed event leading to a transformation of economic policy was the national election in
late 2012, which brought Prime Minister Shinzō Abe (back) into power. The Abe government
embarked on an unconventional economic policy-experiment combining very activist
2 monetary policy with initially massive fiscal stimuli and the promise of structural reforms.
The controversial ‘Abenomics’ dominated the Japanese economic policymaking agenda
between 2013 and 2015.
The remainder of this article is structured as follows. In the next two sections we first
sketch the contours of economic policymaking in China and Japan, focusing on the role of
policy advice and think tanks therein. We then illuminate the two governments’ responses to
the GFC and trace how expertise shaped the development and promotion of the two signature
policies of Abenomics and OBOR. In the concluding section we discuss the commonalities
and differences concerning the role of policy advice in these two cases as well as think tank
involvement in policy formation in China and Japan more generally. Crucial differences in
terms of government support of and use of think tanks in the two major Asian countries show
that notions of an ‘Asian model’ of think tank development need to be questioned.
In methodological terms, we take a cue from recent work on how to trace policy
processes as well as other political developments and outcomes (Bennett & Checkel 2015).
This literature indicates that there is no clear-cut causal pattern linking policy ideas advocated
by knowledge entrepreneurs to specific policy outcomes. Rather, the role and impact of policy
advice varies over time and across policy areas (Jacobs 2015). To trace the impact of policyrelevant ideas and their carriers, researchers thus need to piece relevant evidence together,
drawing on a host of primary and secondary sources, in order to arrive at plausible narratives
of where policy initiatives came from and how they were further developed.
Think Tanks and Economic Policy Advice in China
The development of think tanks in China has been inextricably linked with crucial turning
points in its economic policy. Notably, the demand for technocratic advice surged with the
onset of the reform era in the late 1970s and the transition from centrally planned economy to
a ‘developmental state’ Chinese-style (cf. Knight 2014). Deng Xiaoping personally
spearheaded efforts to establish new, high-level policy research institutes such as the Chinese
Academy of Social Sciences (CASS, Sleeboom-Faulkner 2007: 41-42) or the Development
Research Center (DRC), which were directly attached to the State Council, China’s central
government. An array of institutes specializing in development issues sprung up around the
State Planning Commission, China’s top economic planning agency (now the National
Development and Reform Commission, NDRC). Prestigious universities like Beijing or
Tsinghua University also dedicated some of their departments to policy research. This
resulted in a very large think tank landscape with at least two hundred institutes that regularly
3 participate in the policy process (SASS 2015). Despite political backlashes especially after the
Tiananmen Square crackdown, the CCP leadership has continuously acknowledged the role of
experts as indispensable in delivering the kind of ‘scientific decision-making’ on which its
legitimacy now rests. This has been underscored by a recent initiative to build 100 ‘new-type
think tanks with Chinese characteristics’ to serve its governing needs (CCPGO 2015; ECFR
2016).
As a result, the majority of Chinese think tanks are ‘semi-official’ (formally attached to
a government or party agency from which they draw most of their budget), with a smaller
number of ‘civilian’, or independent think tanks like the Tianze (Unirule) institute (Zhu &
Xue 2007; ECFR 2016). The dominance of state-affiliated institutes is a result of a conscious
policy to tie think tanks closely to the state-party power center, with formal communication
channels allowing them to channel advice to their supervising agencies. Much of the alleged
influence of these institutes is exercised in consultations behind the scenes or through socalled ‘internal reference materials’, written input for the eyes of decision-makers (Glaser
2013). By contrast, independent institutes are usually considered less influential since they
lack such institutional ties and instead have to rely on the personal connections of their leaders
or public dissemination (Zhu & Xue 2007).
Ideational process tracing is challenging under such circumstances, as the highly opaque
nature of policymaking in China – which often leaves experts themselves guessing about the
impact of their ideas – and the inaccessibility of high-ranking decision-makers make it very
difficult to establish concrete evidence of influence. Furthermore, China’s authoritarian
system imposes limits on expert speech, although – as will be shown – this does not result in a
total lack of critical voices, especially at early stages of the policy process. There are however
many publicly accessible writings which are useful for tracing the intellectual origins of key
policies and the participation of Chinese think tanks in debates on China’s growth model –
both at the domestic level, where such debates intensified with the onset of the GFC, and
internationally, where this model is being actively promoted for emulation under the OBOR
programme (Yu 2015; Swaine 2015). OBOR has received significant international attention
as a sign of China’s emergence as a global power and willingness to challenge US hegemonic
interests, and has also captured the imagination of observers of varying ideological stripes
who champion it as an alternative to ‘Western’ austerity policies (e.g., LaRouche 2015;
Symonds 2015). The sheer amount of intellectual resources devoted to OBOR makes it a
highly relevant example for tracing the influence of think tanks in developing signature
policies in China.
4 The Lack of Think-Tank Impact on China’s Response to the Global Financial Crisis
Long before the onset of the GFC, many of China’s state-employed economists – among them
researchers at several CASS institutes, the DRC, and the Central Party School – had begun to
highlight fundamental problems in the Chinese economy, both in open publications and
‘internal references’. In their view, the Chinese economy had grown dangerously over-reliant
on exports and investments in the industrial sector. Due to a mixture of political interference
and structural incentives, the growing Chinese capital stock had been allocated increasingly
inefficiently, and as a result, China’s growth model was in danger of leaving the country in a
‘middle income trap’ (Lynch 2015).
Although such warnings represented a broad consensus among domestic and foreign
economists, China’s response to the collapse of global markets in late 2008 ultimately
doubled down on the same recipe in order to trigger a short-term growth burst, based on
concerns that a sudden drop in growth could lead to serious popular discontent especially
among vulnerable low-skilled and migrant workers (Yep 2009; Naughton 2015). Maintaining
high levels of growth through state investment, especially in infrastructure projects, remained
the favoured tool to stave off social conflicts (Summers 2009; Li & Mayraz 2016). The
NDRC encouraged, quickly approved and bundled many new infrastructure projects for
China’s domestic stimulus programme (Yang 2015). This programme was flanked by a rapid
expansion of monetary supply and credit, albeit – in the eyes of many Chinese economists – at
the cost of growing asset bubbles, non-performing loans and an unstable ‘shadow banking’
system supplying private credit (Lynch 2015).
Another downside of this speedy response was a lack of serious internal deliberation, let
alone a broad public debate, over the design of the stimulus programme. According to Yang
(2011, 2015), the NDRC made far-reaching decisions on spending priorities ‘without wideranging consultation’, effectively ‘limiting policy input to the representatives of vested
interests’. In practice, this meant that powerful state-owned enterprises (SOEs) with an inside
channel to the NDRC had privileged access to make their concerns heard, and the subsequent
stimulus distribution favoured sectors such as construction and heavy industry, which are
traditionally dominated by SOEs (Yang 2015).
The need for a short-term, politically acceptable response to the rapidly unfolding
economic crisis also inhibited the kind of ‘scientific’ decision-making to which China’s think
tanks are supposed to contribute. The more centralised decision-making became, the harder it
was for think tanks without direct ties to key actors like the State Council or the NDRC to
5 provide input. Even well-connected experts found it hard to convey advice that ran counter to
immediate political objectives: for example, Yu Yongding, then director of the CASS Institute
for World Economics and Politics, opined that China’s stimulus was exacerbating
fundamental problems like overinvestment, overcapacities, debt accumulation at lower levels
of government and non-performing loans (Yu 2010). However, such advice had little impact.
Think Tanks and Policy Impulses for the ‘One Belt, One Road’ Initiative
In autumn 2013, president Xi Jinping announced a new programme that has since dominated
the debate on China’s foreign policy and overseas investments: the ‘One Belt, One Road’
initiative, a sweeping vision to construct a land-based transport network spanning Eurasia (the
‘Silk Road Economic Belt’) and ports along the shores of South Asia and East Africa (the
‘Maritime Silk Road’). Both are intended to strengthen China’s connections with its export
markets in Europe and resource suppliers in Africa, while also providing much-needed
infrastructure in transit countries and jumpstarting their economic growth in line with China’s
own development experience (NDRC et al. 2015). Projects will be financed by new
investment vehicles – mainly the Chinese government’s ‘Silk Road Fund’ and the Chinese-led
Asian Infrastructure Investment Bank (AIIB) – while ideally also cooperation with existing
institutions like the Asian Development Bank (ADB) and the World Bank (ibid.). Following a
practice established elsewhere, Chinese construction companies and work crews are expected
to be the main contractors for OBOR projects. With an intended reach of over 60 countries
and a volume of over a hundred billion dollars, OBOR is an extremely complex and ambitious
project, and has come to dominate the research agendas of many Chinese think tanks.
However, experts have also had a significant influence on its development as a brief review of
the project’s intellectual precedents will show.
The key idea of building transportation links across Eurasia is not new: a ‘second
Eurasian land bridge’ of railways connecting Lianyungang with Rotterdam was proposed as
early as 1991. However, the idea made slow progress outside of China mainly because
existing institutions like the ADB were reluctant to fund related projects (Garver 2006). In
2007, Zheng Xinli, a senior policy adviser to the CCP’s Central Committee, noted that a
similar lack of infrastructure was hindering development in rural Laos. Since the ADB had
not stepped up to the task, he suggested establishing a new China-led funding organization,
although under Hu Jintao’s government, this idea was initially not taken up (Perlez 2015).
In the wake of the GFC, interest in the subject was rekindled and related ideas were
developed by prominent economists and government advisers. In February 2009, Lin Yifu,
6 the founder of the Center for Economic Research at Beijing University and then World Bank
chief economist, proposed a ‘New Marshall Plan’ and a special fund for worldwide
infrastructure expansion to meet demand in developing countries and put the idle resources of
major economies to use (Lynch 2009). His proposal did not specifically target China but
noted the need to find new markets for Chinese construction companies and reported their
experiences in Africa as examples for Chinese engagement abroad (Lin & Wang 2013). Two
months later, Xu Shanda, a member of the Political Consultative Conference, introduced his
own ‘Chinese Marshall Plan’: Beijing should use its foreign currency reserves to set up a fund
of its own, extend loans for overseas infrastructure projects in order to create demand for
domestic companies, internationalise the renminbi, and increase China’s global influence
(Yuan 2009). This idea was quickly endorsed by other high-level think tankers, like Ding
Yifan of the DRC and Zhang Yansheng of the NDRC Overseas Economics Institute, at a
conference on the subject (Sina Finance 2009).
The second strand in the intellectual development of OBOR is the debate over how to
rebalance China’s internal development to benefit its relatively poor Western regions. This
issue dates back to the era of President Jiang Zemin (1993-2003) who proposed to ‘reduce the
development gap between regions’ in 1996 and announced a dedicated ‘Western
development’ strategy in 1999 (Lai 2002). The problems associated with lagging development
in the West had been raised by experts earlier, among them the influential economist Hu
Angang and a team of researchers from the Institute for Contemporary China Studies (first
based at the Academy of Sciences, later at Tsinghua University), a leading think tank for
‘state of the nation’ (guoqing) research. In 1994, they compiled a report on boosting Western
development, and disseminated its findings in internal references, a lecture for provincial
cadres, and most notably, a forum on the drafting of the ninth five-year plan (Hu et al. 2016).
The formal adoption of the Western development strategy in 1999 led to the
implementation of specific suggestions regarding financial aid by the central government,
infrastructure development and kick-starting light industry to utilise local resources, including
plans for exporting these goods along the ‘New Silk Road’ (Lai 2002). This plan also served
the further strategic purpose of stabilising China’s volatile Xinjiang region and projecting
influence through Central Asia (Clarke 2008), a motivation shared with the OBOR initiative.
Besides identifying both the means and the target area of what would ultimately become
OBOR, think tanks also shaped the political ambition that would take it far beyond its origins
in scope and symbolic meaning. China’s rapid emergence from the GFC drastically altered
the views of the country’s International Relations community, strengthening the conviction
7 that China’s regional and global interests should be asserted more vigorously (Swaine 2010).
The following years saw increasing tensions due to unresolved maritime territorial disputes
between China and its neighbours, and – in the wake of the Obama administration’s
‘rebalancing’ towards Asia – even a potential great power competition. In October 2012,
Wang Jisi, the dean of Beijing University’s School of International Studies recommended a
‘rebalancing’ of China’s own foreign relations: by ‘going West’ and focusing on Central Asia,
it could avoid a competition with the US over maritime East Asia, bolster the development of
potentially friendly countries on its periphery, and serve its own growth and stability interests
(Wang 2012). Timed to coincide with the leadership transition, the piece reportedly became a
key inspiration for Xi Jinping’s foreign policy approach, who asked for a concrete
implementation of the strategy (Sun 2013). Similarly, the idea for a Chinese funding
organization was revived and eventually developed into the AIIB concept (Perlez 2015).
These experts were not the only ones providing ideas, but their contributions arguably
had the most direct impact and influenced policy development at critical points. The scholars
involved stood out for their personal status, academic prominence and connections to political
decision-makers, which also allowed them to circumvent formal routes for communicating
advice to directly superior organs. Such personal links remain important in China, despite
attempts to institutionalise policy advice in expert commissions and formal consultation
procedures (Naughton 2002).
Think tanks as such might however play a big role in the implementation phase of
OBOR and have explicitly been tasked with contributing to the success of the initiative
(Xinhua 2016), using their research and networking activities. Shi Yulong from the NDRCaffiliated Academy of Macroeconomic Research recently defined this role as drawing up a
‘strategic framework’ for OBOR and helping to coordinate it with other infrastructure
initiatives, participating in project assessments and making funding decisions more ‘scientific’
and efficient. Most importantly, however, they should advise other nations on how to emulate
China’s own development model and ‘build a strong social foundation’ for OBOR through
partnerships with institutes in recipient countries (Shi 2016).
In order to achieve this task, several dedicated platforms have been launched. Among
these, the largest is the ‘Research and Development International’ (RDI) platform organized
by CASS, which grew out of a Chinese-Pakistani project to provide advice on the ‘economic
corridor’ between both countries. It has since expanded to become a general platform, pooling
knowledge on conditions in target countries from Chinese and international think tanks and
channelling it to decision-makers and enterprises involved in the project (China Daily 2015).
8 Given the political significance of OBOR, another key task for many Chinese think tanks will
be to sell the project to both foreign and domestic audiences, for which they have already
stepped up their networking activities, organized a large number of dedicated international
conferences, and invited delegations from recipient. It is, however, too early to tell whether
this kind of outreach will suffice to build the desired ‘social foundation’ for OBOR, especially
at a time when many neighbouring states are growing wary of deeper economic integration
with China. With the CCP’s current hostility towards foreign and civil society influences on
China’s political agenda, it is at least doubtful if this process will result in genuine two-way
communication and meaningful input from concerned groups abroad. Finally, another
question is whether think tanks will be able to exercise genuine influence – including critical
advice – or whether the initiative’s implementation will follow political imperatives, with
experts relegated to the sidelines or requested to engage in a legitimising role.
Think Tanks and Economic Policy Advice in Japan
Economic policy-planning in the post-war decades was connected to the operation of the
Japanese ‘developmental state’ (Johnson 1982), the precursor of all such interventionist,
growth-oriented states in East Asia. An elite state bureaucracy clustered in Tokyo’s
government district Kasumigaseki served as the main repository for policy advice,
marginalising the role of think tanks outside of government. Given the dominant role of the
national bureaucracy in policy gestation, virtually every policymaker and think tanker
interviewed by the authors between 2010 and 2016 pointed out that ‘Kasumigaseki is Japan’s
biggest think tank.’
Yet, the central role of the bureaucracy in policymaking does not mean that there is no
substantial number of economic policy think tanks in Japan. As early as 1963 the Japan
Center for Economic Research (JCER) was established to facilitate research on problems
related to Japan’s industrial growth. In 1997, the National Graduate Institute for Policy
Studies (GRIPS) was established to engage in public policy research. Some ministries also set
up their own research institutes. For example, the Research Institute of Economy, Trade and
Industry got established in 2001 as a research arm of the Ministry of Economy, Trade and
Industry (METI). Japan’s business giants such as Mitsubishi and Nomura have contributed
considerably to Japan’s think tank landscape by setting up or spinning off think tanks
doubling as consulting firms. A well-known example is the Japan Research Institute (JRI), a wholly-owned subsidiary of Sumitomo Mitsui Financial Group. In fact, such businessaffiliated organisations constitute the mainstay of think tanks/consulting firms working on
9 economic and corporate affairs in Japan. With the exception of the centre-right Tokyo
Foundation, established in 1997, and more recently the smaller, liberal Rebuild Japan
Initiative Foundation, established in 2011, efforts to establish intellectually and financially
independent, public-policy oriented ‘US style’ thinks tanks in Japan have largely foundered
given the traditional disinterest of the government and the absence of a philanthropic culture
in Japan (cf. Struyk et al. 1993; Mie 2014).
Occasionally, Japanese governments have sought policy advice via high-profile blueribbon committees to secure broad public support for certain policies or to overcome reform
stalemate caused by inter- or intra-bureaucracy ‘sectionalism’ (aka stove-piping). A wellknown example for the latter is PM Yasuhiro Nakasone’s 1981 Ad Hoc Commission for
Administrative Reform promoting privatization of key national enterprises. To steer economic
reform, Japan’s core executive in form of the Prime Minister’s Office (PMO) has also utilised
external policy expertise by establishing issue-specific and time-limited advisory
commissions (shingikai) or expert panels (yūshikisha kaigi) within the PMO (Schwartz 1998).
Think tankers have participated in such advisory organs but are usually outnumbered by
business representatives and university-based academics.
The unravelling of Japan’s growth regime in the early 1990s paved the way to reforms
of the country’s political and bureaucratic system, resulting in new opportunities and access
points for external experts and their organisations. At least to some degree, the 1993 reform of
the electoral system, which triggered new party competition, has also led to some more
demand for fresh policy ideas. The 1996 administrative reform, which strengthened the role
and capacities of the PMO (Shinoda 2013), had an even stronger impact on policymaking
dynamics. Making adroit use of the beefed-up PMO, PM Jun’ichirō Koizumi (2001-6) used
policy advice to push for the privatisation of Japan’s postal services and fiscal discipline.
Appointing private business leaders and prominent academics to the Council on Economic
and Fiscal Policy (CEFP) chaired by Keio University economist Heizō Takenaka, Koizumi
sought to counter strong opposition to his agenda from within the bureaucracy and the ruling
party while aiming for broad public support (Ota 2006).
As new access points and opportunities for policy entrepreneurs have slowly emerged
since the 1990s, new think tanks such as the Tokyo Foundation have joined established
organisations and well-connected individuals in seeking to influence economic agendasetting. Under PM Abe, some university-based scholars and other idea brokers have also acted
as ‘mobile carriers’ of policy ideas (Jacobs 2015: 65-69), as we will show in the section after
10 the next one, in which we address the Japanese government’s response to the GFC and the
(limited) role of think tanks therein.
Late and Limited Think-Tank Input to Japan’s Response to the Global Financial Crisis
The crash of Japan’s stock market and the burst of its real estate bubble in the early 1990s
marked the onset of Japan’s crisis of prolonged economic stagnation. Confronted with evermore non-performing loans, the Bank of Japan’s (BoJ) effort to purchase Japanese
government bonds while moving towards a zero-interest rate triggered sustained deflation.
Under PM Koizumi, banks were finally recapitalised and able to write-off their bad loans
(Kobayashi 2015). An improved regulatory regime for the Japanese financial sector got
instituted by the mid-2000s, which also helped to ward off the kind of financial crisis that
soon thereafter beset the US and Europe (cf. Harada et al. 2015). This period in the early
2000s also enabled the state to engage in a limited degree of fiscal consolidation, as
championed by the Ministry of Finance (MoF) and by many mainstream economists in view
of Japan’s steadily rising levels of public debt. Fiscal consolidation however took a backseat
when the economic fallout of the GFC triggered Japan’s worst recession since 1945.
To mitigate the domestic fallout of the global economic crisis starting in the second
half of 2008, then Prime Minister Tarō Asō quickly announced a massive stimulus package
worth 51 billion US dollars (Wassener 2008). The stimulus, heavy on public infrastructure
spending, however failed to sufficiently boost growth and consumption. In 2009, Japan’s
economy contracted by 5.5 per cent, compared to 2.8% in the US and 4.5% for the Eurozone
(World Bank 2016). Japan’s gross government debt-to-GDP ratio also further escalated,
reaching 215 per cent in 2010 (Kuttner et al. 2015).
To gather some external advice on how to optimize response measures to the GFC, the
PMO conducted in late March 2009, i.e. several months after the onset of the economic crisis,
a series of meetings with experts outside the government, including representatives from think
tanks such as JCER and the JRI. Experts made brief presentations including policy
recommendations. In total, 84 such recommendations were gathered (Kantei 2009). For
example, JCER’s president Mitsuhiro Fukao advocated negative interest rates to overcome
deflation — a policy the BoJ adopted only years later in 2015. Effectively, the policy advice
provided by think tankers, university-based academics and other experts in spring 2009 did
not result in any immediate government action.
11 Policy Advice in the Development of ‘Abenomics’
The return of Shinzō Abe as PM in December 2012 spurred high expectations as the new
LDP-led government pledged to restore growth and to resolve chronic deflation through a mix
of fiscal consolidation measures, monetary expansion, and structural reform policies. In this
section, we trace the origins and development of ‘Abenomics’ and focus on the critical role
played by a small circle of university-based academics and (former) bureaucrats in this
process.
During his first term as prime minister during 2006 and 2007, Abe was expected to
continue Koizumi’s reform path and relied on the expertise of Koizumi’s economic adviser
Takenaka and the CFEP. Moreover, shortly before becoming PM in 2006, Abe initiated the
short-lived LDP party think tank ‘Japan 2005’, which advocated structural reform to restore
economic growth. However, activist monetary policy did not feature in Abe’s first term in
office. As introduced in early 2013, Abenomics consisted of the ‘three arrows’, viz. monetary,
fiscal, and structural reforms aimed at revitalising the Japanese economy. This first stage of
Abenomics focussed in particular on quantitative and qualitative monetary easing with the
express aim of lifting Japan’s inflation rate to two per cent by 2015.
The ‘reflationist’ component of Abenomics can be traced to a small group of nonmainstream knowledge entrepreneurs who advised Abe on economic and fiscal policies after
his return to government in 2012. At its core, Abe’s group of close economic advisers
consisted of Yale University economist Kōichi Hamada, former MoF senior civil servant
turned Shizuoka University professor Etsurō Honda (who under Abe became a special adviser
to the Cabinet), Asian Development Bank director and former MoF senior civil servant
Haruhiko Kuroda, Gakushuin University economist Kikuo Iwata, and Kyoto University
economist Satoshi Fujii.
Abe’s reform agenda was mainly inspired by the economic thought of Iwata and
Hamada. In 2011 Abe attended lectures given by these two economists to the LDP. While
Iwata outlined precise growth targets necessary for Japan to compete with China, Yale’s
Hamada advocated monetary and fiscal expansion in opposition to tax hikes designed to
finance reconstruction measures in the wake of the 2011 tsunami and nuclear disaster (Asahi
shinbun shuzai han 2016). Hamada, an outspoken critique of the BoJ’s past passivity
regarding fiscal easing, had also served as a senior advisor for Japan’s Economic Planning
Agency (EPA) from 1998 to 2001 when Abe was a deputy chief cabinet secretary responsible
for coordinating meetings with the EPA (Hamada 2013).
12 Following the advice of this group of experts, Abe pushed the BoJ to embark on an
aggressive monetary expansion and asset-buying to end Japan’s sustained deflation. The new
government overcame initial resistance on the part of the BoJ in line by threatening to limit
the bank’s autonomy. And to enforce his policy line, Abe appointed Kuroda as Governor of
the BoJ in February 2013. A fellow ‘mobile carrier’ of Abenomics thinking, Iwata, became
vice-governor of the BoJ in April 2013. These appointments allowed Abe to mobilise a
majority on the bank’s board for his controversial policy course. Inspired by the policies
pursued by former US Federal Reserve Chairman Ben Bernanke, Kuroda’s ‘big bazooka’
programme massively increased money supply via huge purchases of government bonds. In
addition, the Abe government passed a stimulus package worth 200 billion US dollars
(Harding 2015). Six months into Abenomics, Japan’s stock market had gained 80 per cent in
value while Japan’s economy grew at an annualized rate of 4.1 per cent. Moreover, core
consumer prices continued to rise in the first half of 2013, indicating that Japan was indeed
bound for inflation.
In order to facilitate his reform agenda, Abe has used two key advisory councils. First,
the CEFP which functioned as a platform for debating macro-economics. Second, a newly
established Council for Industrial Competitiveness (CIC) which focused on structural reform, including increasing female labour market participation and liberalising Japan’s service and
agricultural sector through participation in the Trans-Pacific Partnership (TPP) agreement.
While Abe envisioned Takenaka as a key CEFP member, finance minister Asō rejected this
proposal. Since 2002, Asō had strongly opposed Takenaka’s small government agenda.
Takenaka, who in the past also served as director of the Tokyo Foundation as well as adviser
to the JCER, was eventually appointed to the CIC where he drafted Abe’s National Strategic
Special Zones policy. The dual structure of the CEFP and CIC revealed a fundamental
contradiction within Abenomics. Whereas the first council advocated active government
intervention, the latter championed liberalisation and less government intervention. While
Takenaka represents the latter approach, Susumu Takahashi, chairman of the JRI and a
member of the CEFP, advocated the former. Takahashi proposed active government
intervention into corporate-labour relations and initiated a Commission for GovernmentLabour-Business dialogue in early 2013 to facilitate wage hikes with the aim of reaching the
two-percent inflation target (Asahi shinbun shuzai han 2016).
Think tanks such as Mitsubushi UFJ Research and Consulting (MUFG) embraced
Abe’s course, while MUFG’s chief economist and former economic advisor to the prime
minister’s office, Akihiko Suzuki, called in 2013 for deregulation in order to foster corporate
13 competiveness (Suzuki 2013). This early focus on structural reform was echoed by other think
tanks, such as the Tokyo Foundation (Yakushiji 2014). While these think tanks lacked direct
access to policymaking under PM Abe, who chose to rely more on individual policy advisors,
they did play a role in terms of promoting Abe’s reform agenda through a cascade of media
commentary and an increase in research papers scrutinizing ‘Abenomics’.
As Abenomics began to lose steam in 2014, criticism mounted concerning Abe’s
devotion to structural reform. Critics argued that Abe did not invest his political capital in the
form of high support rates to push for deep structural reforms but instead prioritised issues of
national security and constitutional revision (Katz 2014). Critics also suggested that the initial
success of Abenomics was largely a foreign investment-driven phenomenon while stagnating
income levels have caused consumption to remain weak, thus delaying economic recovery
(Hattori 2014). On the advice of MoF bureaucrats bent on fiscal consolidation, Abe also
permitted a consumption tax hike in April 2014. As a result, Japan’s economy shrank by 1.6
per cent in the following months, sending Japan’s economy back into recession.
In response to growing criticism concerning Abenomics, Abe launched in September
2015 a new array of measures to tackle Japan’s demographic decline and to stimulate
economic growth. Informed by Satoshi Fujii of Kyoto University who masterminded the
‘Economic Policy Vision for the Abe Administration’, Abe promoted the concept of an
‘active society of 100 million people’. Abenomics 2.0, as it came to be called, aims at a
nominal increase of Japan’s GDP by 20 per cent until 2020, an increase of Japan’s fertility
rate to 1.8 per cent, and includes promises to improve child care facilities as well as social
security and working conditions for care workers. In contrast to the earlier ambitious 2015
inflation target, the second stage of Abenomics offered no concrete time frame for many of
the proposed policy measures and made little mention of fiscal and monetary policies. In
consequence, the new measures effectively marked the end of Abenomics as originally
conceived.
Conclusions
In this paper we examined whether and, if so, how policy advice informed Chinese and
Japanese government responses to the GFC and subsequent signature economic policy
initiatives in the two largest non-Western economies. We noted that such advice, by think
tanks or individual idea brokers, did not play a role when governments in Beijing and Tokyo
needed to respond quickly to limit the domestic fallout from the unfolding global financialturned-economic crisis. Both governments responded to the collapse of global markets in late
14 2008 by stimulus programs heavy on infrastructure investment. Unlike in some other major
economies, the initial turn to Keynesianism did not give way to an ‘age of austerity’.
Policy advice provided by actors external to the government/the ruling party did
however play a substantial role in the development and rolling out of subsequent signature
economic policies of the Chinese and Japanese governments, viz. the ‘One Belt, One Road’
initiative and ‘Abenomics’. In retrospect, this can be explained by the window of opportunity
opening up for policy entrepreneurs in both countries. As Guldbrandsson and Fossum (2009:
438), building on Kingdon’s (1995) seminal work on policy formation have noted, ‘[a] policy
window may open when simultaneously a problem is recognized, a policy is available and the
political context is positive for change’, i.e. when, in Kingdon’s terminology, the ‘problem
stream’, the ‘policy stream’ and the ‘politics stream’ converge. This was arguably the case in
both China and Japan in 2012/3, when

China needed to recalibrate its economic model – a task made more urgent in view of
the less benign international economic environment after the GFC – and Japan was
faced by the need to overcome persistent deflation and reenergise the economy in the
face of ‘China’s rise’ (the relevant ‘problem streams’);

idea brokers in China offered advice on how to seek growth potential in foreign
countries and underdeveloped interior regions while idea brokers in Japan offered
‘reflationist’ prescriptions on how to kick-start the economy and to tackle deflation
(the ‘policy streams’); and finally

new governments in China – the new leadership around Xi Jinping coming into office
in 2012/3 – and in Japan – the government under PM Abe elected into office in late
2012 – showed an appetite for interesting policy ideas to address these problems (the
‘politics streams’).
Irrespective of regime characteristics, changes in political leadership thus helped to open
windows of opportunity for both new and rehashed economic policy ideas promoted by idea
brokers in China and Japan. What differed in both cases however was the particular
involvement of think tank(ers) in the two signature economic policies. Whereas think
tank(er)s played a prominent role in in terms of providing initial policy-relevant ideas and
then also in helping to implement the policy in the case of the Chinese OBOR initiative, they
did not feature prominently in the development of Abenomics. Here, a group of (former)
high-ranking Japanese officials and university professors became Abe’s ‘brain trust’ for
15 economic policy. To make sure that the nominally independent Bank of Japan toed the new
policy line, Abe put some of these advisors at the helm of the central bank. Unlike in the
Chinese case, a number of the idea brokers contributing to development of Abenomics ended
up in executive positions, signalling the existence of a more pronounced revolving doorpolicy in Japan in more recent times.
How can we account for these differences? Earlier work on think tanks in Asia has
emphasized the commonalities of think tanks in the region, noting their close links to the state
in general and bureaucracies in particular, their strong emphasis on development issues, and
their often ‘regime enhancing’ rather than ‘regime critical’ character, i.e. their use as
instruments to legitimise and consolidate existing regimes or leaders (Nachiappan et al. 2010;
Stone 2005). Such tendencies and commonalities in the region stand out strongest when
scholars, explicitly or implicitly, contrast think tank development in Asia with that in more
familiar and better-researched settings in North America or the EU. However, once we zoom
in at the situation in individual countries in this heterogeneous world region, the differences in
terms of think tank development and operations in Asia become quite apparent. As shown in
this paper, the two biggest developmental states in Northeast Asia, Japan and China, have
substantially diverged in their approaches to think tank involvement in public policy-making.
In the Japanese case, the elite state bureaucracy has traditionally not been very
receptive to policy advice by third parties and has kept think tank involvement at bay to
defend its own role in policy formation. When political leaders – which since 1955 has meant,
with the exception of a few years, leaders of the LDP – have nonetheless sought policy advice
to overcome bureaucratic stove-piping and/or to build public support for new economic and
other policies, the standard format for doing so have been (often ad hoc) advisory
commissions composed of business representatives and mostly university-based academics.
The limited government demand for policy inputs has contributed to the fact that genuine
public policy oriented think tanks – unlike their more commercially and consulting oriented
counterparts – are few in number and also resource-poor in Japan. It remains to be seen
whether new opportunities created by administrative and other reforms and, on the other hand,
the emergence of a few new think tanks on the scene will change the picture substantially.
The approach of the Chinese government has been different. Under the banner of
‘scientific policymaking’, the Chinese leadership has heavily invested in the build up of a
large array of think tanks that are financed and supervised by state agencies. Under Xi
Jinping, state-led efforts to establish more ‘high-quality’ and globally influential think tanks
‘with Chinese characteristics’ have received particular momentum. Accordingly, a substantial
16 blurring of power and knowledge structures can be observed in China. However, while think
tanks in China seem better integrated into the policymaking system than in Japan, this does
not necessarily equal ‘influence’. Despite attempts of the Chinese government to
institutionalise policy advice in permanent or ad-hoc expert commissions and formal
consultation procedures, the influence wielded by individual knowledge entrepreneurs
continues to weigh more. Still, Chinese think tankers can provide important input when policy
directions are still under discussion and not (yet) set in stone. Moreover, given their close
links to the government, Chinese think tanks can also be put in the service of the state when it
comes to implementing policies – in the case of OBOR, most importantly by promoting good
will in the countries concerned and more generally by helping to legitimise the government
policy line. Future research should investigate, on the one hand, the role of Chinese think
tanks in other instances of policy formation and implementation and, on the other hand, seek
to further test the thesis that administrative and electoral reforms initiated in the 1990s have
led to greater space for policy advice, by think tanks and other idea brokers, in Japanese
public policymaking. Such research promises further returns to the global study of the
expertise-policy nexus.
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22