On 30 August 2009, a good part of the Japanese electorate finally decided to interrupt the Liberal Democratic Party’s half century in power and gave instead a clear majority to the Democratic Party of Japan.
One can question why it took the Japanese people some 20 years and several elections to decide this political shift ever since the bursting of the economic bubble. This would certainly have not been the case in most Western countries where a percentage of the population happily changes sides at each election.
The answer is partly historical but also cultural.
Historically, ever since Japan’s emergence as a modern state, political parties have tended to be a sideshow to the real business of running the country’s economy. This was left to the various Ministries’ elite bureaucrats who dutifully steered Japan towards prosperity and stability. During the last 50 years or so, the LDP was able to surf on that wave and even after the bubble burst in the late 80s, the politically apathetic public did not mind reconducting the party in power despite the regularly recurring scandals and deepening economic problems facing it.
After all and despite its shortcomings, the LDP was seen as having played an important role in Japan’s overall economic success of the 60s, 70s and 80s and was therefore able to gain a high level of loyalty from a good part of the middle class electorate especially in the countryside. The LDP was able to convince it that there was no other party able to run Japan effectively. Over and over again, the public fell for it.
Culturally, the Japanese are usually very cautious people and are reluctant to change. Stability and patience are also two of their key cultural characteristics. When Junichiro Koizumi became Prime Minister in 2001, there was great popular support and great hope that the LDP was going to change internally under his leadership and that he would be able to introduce the reforms that the country needed. This was an ideal situation for the electorate as it would not actually and conveniently need to alter its allegiance to the LDP. On all accounts, this proved to be wishful thinking as much of what was implemented went against many of the traditional Japanese values. Some will be seen later in this article.
The recent world crisis came maybe at the right time or rather at the wrong time for the LDP. After lacklustre performances by three successive Prime Ministers namely Shinzo Abe, Yasuo Fukuda and Taro Aso, each lasting about a year and despite numerous stimulus plans, the Japanese economy is registering its worst performance with a forecasted decrease in 2009 in GDP of 6.2%, with exports having decreased recently by about 50% and unemployment reaching currently 5.7%. This situation helped destroy once and for all both the LDP and the bureaucracy’s reputation for economic competence. As a result, the electorate decided to turn towards the DPJ more out of disgust and despair than real belief that it will solve their problems.
So what will the DPJ do now that it occupies more than 300 seats in the Lower House of the Diet of the 480 available?
The DPJ manifesto is attractive. Some of its promises include large child-care allowances (about 200 euros per child a month), pension guarantees and higher medical spending, tax breaks for small businesses, a postponement for at least 4 years of the increase in consumption tax (VAT) currently set at 5%, income subsidies for farmers, cutting petrol taxes, scrapping expensive highway tolls, allowing greater political autonomy and an end to the bureaucrat-led government.
Although there are worries about how to pay for all these policies, the DPJ maintains that it will be able to finance them by diverting funds from the recent stimulus plans traditionally focused on building more public works and infrastructures such as roads and airports. In its own words, by a transfer from the “concrete” to the “people” as its key slogan is to put “People’s Lives First”. The result is still likely to be a worsening of the fiscal debt amounting already to 180% of the country’s annual GDP.
Other worries lie in the DPJ’s plan to ban the use of temporary workers in manufacturing and to set a higher minimum wage level. The powerful Keidanren, Japan’s Business Federation, is seeing these measures as being counter productive as they will reduce labour flexibility.
Despite its clear victory, many Japanese also wonder how effective its leader, Yukio Hatoyama, will be as Prime Minister. Like all four recent Prime Ministers, he also is a ‘hereditary’ politician with a family having held important positions over three generations in the LDP – his grandfather was actually one of the founders of that Party. Like many older DPJ members, he is in fact a defector from the LDP. With a PHD in Engineering from Stanford University and a higher education from Japan’s top University (Todai), he was really seen more as an academic scholar than a shrewd politician. He actually started his professional career as professor at one of Tokyo’s universities (Senshu). Of course, politics in Japan has for a long time been associated with rich and powerful families who do not have to fight and struggle to get in.
To make things even more questionable, the DPJ, although showing a more social face, is not radically different from the LDP. If the LDP can be categorised as conservative and centre-right, the DPJ can be seen as just a little to the left of it but it would certainly not qualify as being socialist although the Party opposes the kind of privatisation and liberalisation reform that was highly valued by former LDP Prime Minister Junichiro Koizumi. Socialists and Communists are represented in both Chambers of the Diet but with just a few seats and have never been a threat to the LDP.
An even bigger challenge is the DPJ’s promise to lower and even eliminate the influence of the powerful bureaucracy which has worked hand in hand with the LDP all these years. It remains to be seen how it will handle this very delicate task. As Atsuo Ito, an independent political analyst who recently wrote a book on the Democratic Party, said “the bureaucracy will survive Mr Hatoyama like it survived many past historical events”. The Party’s Manifesto’s pledge to send 100 of its Diet members to various Ministries and Agencies to control them seems quite unrealistic.
Even Hatoyama’s handling of the DPJ itself will not be easy. After all, the Party, founded in 1998, is an amalgam of six smaller parties which have come together in the opposition but who have different views on many issues. Only four newly elected parliamentarians have had ministerial experience in the past, all under the LDP umbrella. The same can be said about his handling of the Party’s ex-leader and powerful figure Ichiro Ozawa, who had to resign his position a few months ago due to a fund-raising scandal.
Although Yukio Hatoyama is often praised for his openness, his idealism, his concern for the public good and his long term vision, his reported lack of leadership and his tendency to change stance are not going to help him in meeting all the challenges that he now has in front of him. Last but not least, his position vis-à-vis the United States and the planned international role of Japan in the coming years remain vague. His statements have shifted from “forging a new and more equal US alliance” to promising “continuity”.
As most of readers will remember, Japan went through a severe economic crisis back in 1989-90 when its ‘economic bubble’ exploded or, more correctly, imploded. The most visible sign was the drop in the Nikkei from a high of almost 40,000 to about 10,000 within a fairly short span of time. The damage to the banking sector was huge and the value of real estate plunged. The government repeatedly announced huge stimulus packages mainly in public works, building more roads, more airports, etc. Many companies were forced to restructure and Japanese workers for the first time started to feel the pain: unemployment increased especially among middle age employees; salaries for the employed were frozen and many were left with negative equity. Interest on savings dropped to basically zero. Even after 20 years, the situation has not improved and annual GDP growth has been minimal.
When one visits Japan however, one cannot fail to notice that it is still a very wealthy country and at first glance does not seem to be in trouble. The number of luxurious cars has never been higher. Foreign brands have taken the opportunity of lower real estate costs to open new flagship stores. New buildings pop up everywhere, whole new districts are developed, department stores are full of well-dressed buyers, restaurants are doing well and people in general continue to look happy. In fact, none of my Japanese acquaintances complained about the economic or political situation. Of course, this was not really a surprise as in Japan one doesn’t criticize unduly nor complain about difficulties and hardships.
In reality however the situation has reached a critical stage. The Nikkei is still around 10,000. The now defunct government and its unpopular Prime Minister Taro Aso, launched four stimulus plans in the last 12 months worth 1,000 billion euros, on a par with the amounts being spent in the US and China. The last phase of this investment programme is supposed to focus on reviving internal consumption, creating employment, helping companies to develop green technology and energy saving industries. It also covers improvements in health, social and education services.
Needless to say, most Japanese viewed these efforts positively even if some of them saw also some clever government maneuvering ahead of the parliamentary elections. This indeed smelled desperately of election strategy coming in addition to the cheque (about 150 euros per person) received earlier this year by all Japanese households.
Under the more popular Prime Minister Junichiro Koizumi, the government had encouraged the hiring of temporary workers to give more flexibility to companies. As a result, a third of all employees are now temporary workers. This policy created a lot of instability as it made it difficult for people to plan their careers or obtain bank loans to buy property, in addition to going against the Japanese tradition of life-long employment security, which in turn fosters employee loyalty and obedience. In many ways, this measure has had a profound negative effect on Japanese society and many of its core values. The defunct government finally realised this and was planning to promote long-term employment again. Unfortunately, it was too late and this will now be done by the DJP.
The long-term employment system has done well for Japan in the past. The company for many Japanese is like a family, even often the family ahead of wife and children. The employee was ready to sacrifice himself for this family, giving up their bonus or part of their pay for example, for the good of the company. Permanent employment was seen as protecting employees and taking care of their needs in line with traditional Confucian doctrine.
In the meantime, statistics coming out of Japan have been quite alarming. Japan is even now on the verge of losing its number two worldwide economic ranking to China. Of course, Japan cannot be compared to China. China’s economy is continuing to grow as a developing country with a population of 1.3 billion at an annual speed of around 10%. Japan on the other hand has a mature economy with saturated markets. Companies cannot easily find new products/services to sell. Some in despair have even resorted to start selling clothes for dogs and cats!
The aging population, the low birth rate of 1.2 and the decrease in population are also worrisome factors. Projections indicate that the population will decrease to 95 million from the current 128 million by 2050. There may be no other option but to further lengthen the retirement age and possibly lower pension amounts, two measures, which the DPJ has naturally not included in its manifesto. On the contrary it wants to encourage the population to have more children but that measure will take time to become effective.
As one can see, plenty of challenges await the new government. Of course, many of these problems are not unique to Japan. The Western world is struggling with many of them as well.
Since World War 2, Japan has worked hard to become a leading economy. Most of its population has enjoyed the results and experienced the rewards. Japanese people gave ample time and opportunity to the LDP to sort out the country’s problems but instead just witnessed a worsening of the situation year by year. Reluctantly, a majority of the electorate decided without enthusiasm to try someone else. It only took it 20 years to do so. The next 12 months will tell if their decision was the right one.
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