Japan – The Political Game Becomes More Complicated

By Scott B. MacDonald

Japan’s political life is in the process of an important shift. The roots of that shift began 10 years ago, when the opposition defeated the Liberal Democratic Party (LDP) for the first time in 38 years. In August 1993, Prime Minister Morihiro Hosokawa assumed leadership over what was ultimately a brief eight-month non-LDP government. The Hata government, which followed was another anti-LDP coalition, which lasted even less time. Although the Hosokawa government soon fell and was eventually replaced by a new LDP-led coalition government, Japan’s political landscape is still feeling the impact of that event in three ways.

First, Hosokawa initiated a process of broad economic deregulation that is still continuing today. Although the pace of reform has been slow, it has been relatively steady, often in the face of strong resistance from within the ruling LDP. The Japanese public is generally supportive of reform, especially if it breaks the over-10 year slump in the economy. In a recent Nikkei opinion poll, 56% of respondents supported Koizumi’s plans to privatize the three postal operations – mail service, savings and life insurance and 64% favored his intention to submit a bill privatizing the four public highway corporations during next year’s Diet session, with only 13% opposed. Koizumi has taken advantage of this public sentiment to beat down anti-reform opposition within the LDP and to blunt the appeal of the opposition. While the Prime Minister has not been able to have his way all the time, he has continued to push for reform and had some victories as in the case with the nationalization of Resona.

Second, the opposition learned that unity is the key to victory, an idea that was forgotten for many years. Hosokawa was able to forge together an anti-LDP alliance that was capable of winning an election and forming a government. Hosokawa’s government was undone when members of the anti-LDP alliance began to fight with each other.

Unity now appears to be back in vogue with the merger of the Democratic Party of Japan (DPJ) and the smaller Liberal Party (led by Ichiro Ozawa). The opposition is starting to score points with potential voters in making the claim that it does not have an issue with Koizumi’s ideas about reform, but the Prime Minister’s inability to follow through with implementation. There has been a shift in the opinion polls. In February 2003, opinion polls gave the ruling LDP/New Komeito/Conservative Party alliance 41% support. That support, according to the latest poll in the Asahi newspaper, has fallen to 34%. The DPJ also had 34%, up from 33% earlier in the year. Although the DPJ gain is tiny, the opposition party is keeping its pool of support, while the LDP-led alliance is seeing its support erode.

Other polls are not as sanguine for the DPJ, but they also show that the gap between the two parties is shrinking. The question is where do those voters go, if not to the LDP? The opposition expects to get some of those voters.

The third and final lesson is that in the dull gray world of Japanese politics, in which the debate is about structural reform and overhauling the post office, personality matters. Hosokawa is fondly looked back upon by many Japanese as someone who reached out to the people. Prime Minister Koizumi clearly understands this. With his Elvis-like persona, he has been one of the more colorful political figures in Japan for a long time, easily eclipsing more conservative former prime ministers such as Mori, Obuchi (of which was said that he had all the charisma of cold pizza) and Murayama. Koizumi has repeatedly taken his message directly to the people, often on the radio.

It would appear that Koizumi’s main rival, Naoto Kan, leader of the DPJ also recognizes the need to court the public. Kan’s photogenic ways no doubt played a part in helping him rise above the DPJ’s founder Yukio Hatoyama, who resigned last December after failing to consummate an earlier effort to merge with the Liberal Party. Sadly, Hatoyama lacked widespread public appeal. Kan has that public appeal, especially as he was involved in uncovering the use of tainted blood that caused an outbreak in HIV.

The opposition’s newest weapon is the upcoming DPJ campaign manifesto. This is something relatively new to Japan and it could spell trouble for the LDP. The DPJ manifesto is likely to include an overhaul of the tax code, pension reform and further deregulation measures. It will also most likely have a timetable for reform implementation; something that voters can later measure exactly what is accomplished.

Koizumi’s problem is that while he and his closest supporters have similar goals, many within the LDP just want to forget reform altogether. This makes the September LDP leadership convention very interesting. Koizumi has already indicated that if re-elected as LDP chief, he will make the party’s manifesto one of reform. Koizumi is well aware of that without him, the LDP will flounder badly at the hands of voters. Consequently, he is likely to push through his leadership bid with a reform manifesto attached. If the LDP says no to the Prime Minister, it will be left with lesser-known leaders.

In one recent opinion poll conducted by the Nihon Keizai Shimbun about the best candidate for the LDP’s presidential election, Koizumi easily led with 42% of support, compared to Deputy Cabinet Secretary Shinzo Abe with 13% and former Policy Research Council Chairman Shizuka Kamei with 5%. Taro Aso, one of the conservative anti-reformers, received even less support. Without Koizumi as the leader of the LDP the answer of which party to vote for in the next elections will be easy: they will go with the handsome and dynamic Kan of the DPJ, with a pro-reform manifesto over the vague promises of the LDP led by some colorless conservative anti-reformer.

We still think that Koizumi will win the September 2003 LDP leadership contest and will call in October for lower house elections in November. He still has the momentum, especially as the economy appears to be on a recovery track and the Nikkei is up. Koizumi is also aware that Kan and Ozawa preside over a merged party that has a wide range of views. As the Asia Times Richard Hanson noted (July 29, 2003) commented: “There will be a lot of squabbling within the newly merged DPJ, which has not been able to suppress its own factional divides ever since it was created out of a gaggle of rogue politicians and dead-end parties.” A critical question here is whether the merged JDP can stop acting like many ronin (masterless samurai) and pull together a focused force. In addition, Ozawa has in the past has been too outspoken and harsh. Perhaps he can be provoked.

Consequently, we think that Japan’s political landscape has become more complicated and competitive. Koizumi still casts the longest shadow and is the most likely to dominate. However, Kan is now casting a shadow and the upcoming election could be far more exciting and closer than previously thought. Even if the opposition does not win, the outcome will put Japan more on a two-party system, in which ideas and personalities matter more than colorless party machines.

Scott B. MacDonald is a Senior Consultant at KWR International, Inc. KWR International is a consulting firm specializing in the delivery of research, public/investor relations and advisory services.