NO. 26 &emdash; July 11, 1997


Feature Article


Since the Diet's mid-June adjournment, the Japanese media has been rife with speculation that Tokyo's ordinarily hot summer will sizzle even more because of political maneuvering within and between the ruling Liberal Democratic Party and the opposition parties. The early April agreement between the conservative LDP and right-leaning Shinshinto, the largest opposition force, to cooperate in passing legislation that allows the continued legal use by the U.S. military of land on Okinawa on which leases were about to expire started the rumor mill churning that these two parties would merge. Former Prime Minister Morihiro Hosokawa's resignation from Shinshinto shortly after the Diet recessed, coming only six months after ex-premier Tsutomu Hata and 12 followers split from the largest opposition party, appeared to substantiate the widely held view that Shinshinto was fracturing.

What ultimately will affect a conservative-conservative alliance or ho-ho rengo, pundits contend, will be this fall's policy agenda. It includes the final report from the bilateral review of the 1978 U.S.-Japan defense operational guidelines as well as Prime Minister Ryutaro Hashimoto's proposed administrative, fiscal and other reforms. Consideration of an expanded defense role for Japan, the bottom line of the guidelines review, in particular could rupture the LDP's current parliamentary alliance with the left-leaning, pacifist Social Democratic Party of Japan and the New Sakigake Party.

While that outcome is plausible, several developments suggest a more complicated scenario &emdash; one that could end up perpetuating the political status quo. The packages of administrative, fiscal and other reforms put together by the Hashimoto government may not prove very far-reaching or divisive. In addition, the SDPJ and the NSP recently have indicated greater willingness to cooperate with the LDP in implementing the coming recommendations from the guidelines review. Ho-ho rengo also may be hard to sell to voters in view of the fact that LDP and Shinshinto candidates fought tooth and nail in nearly all of the single-seat electoral districts in the October 1996 lower house elections. These factors notwithstanding, the LDP leadership race in September, which pits politicians favoring a broad conservative alliance against those who support the current triparty legislative arrangement, could alter the political landscape.

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Weekly Review

Construction Firm Bankruptcy Rattles Japanese Financial Markets by Douglas Ostrom

Normally, the failure of a firm with annual sales of less than ¥200 billion would not create waves resulting in trillions of yen in losses on the Tokyo stock market over a two-day period. Exactly that happened, however, after Tokai Kogyo Co., Ltd. announced July 4 that it was filing for bankruptcy but not liquidating. The construction company was the first publicly traded general contractor to file for bankruptcy in the postwar era.


Scandals Focus Spotlight On Corporate Governance by Jon Choy

A string of recent scandals linking executives of major Japanese firms with underworld extortionists as well as public fights among company presidents and directors have thrown a harsh spotlight on the domestic business community and Japan's system of corporate governance. A consensus seems to exist that the duties, powers and responsibilities of company presidents, boards of directors and other top-level executives are not clearly defined in Japan.


Japan Stays Top Foreign Aid Donor Despite Steep Decline by Eric Altbach

Japan remained the largest provider of official development assistance in the world in 1996 &emdash; but just barely. The combination of a weak yen, a sluggish economic recovery and a continuing effort to slow the growth of government spending finally seemed to overcome Tokyo's immunity to the "aid fatigue" that has beset other major donors in the 1990s.


Liberal Democrats, Communists Win Big In Tokyo Elections by Barbara Wanner

The Liberal Democratic Party and the Japan Communist Party emerged as the big winners in the July 6 elections for the Tokyo Metropolitan Assembly, in the process calling into question the continued viability of some of the non-LDP opposition parties. Slightly less than 41 percent of eligible voters bothered to cast ballots, however, a stunning 10 percentage points less than in the 1993 poll for Japan's largest city government. Pundits say that the lack of major issues dividing the parties and voters' disappointment with the performance of Tokyo Governor Yukio Aoshima, an independent, persuaded many people to stay at home.



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