No. 1 — January 7, 2000


Weekly Review

--- by Barbara Wanner

Prime Minister Keizo Obuchi tried to ring in the new year on an upbeat note, vowing in his January 1 address to the nation to push ahead with an "economic renaissance" policy designed to help realize 1 percent real growth in FY 2000. Seasoned watchers of Nagata-cho (Japan's Capitol Hill) point out, though, that the amiable premier's cheery message belied some serious political problems that he must confront when the Diet convenes January 20 for its 2000 regular session. Depending on how Mr. Obuchi maneuvers through this mine field, he may emerge with a stronger governing coalition or face intense pressure to dissolve the lower house of the Diet for elections considerably sooner than the statutory deadline of October 19, 2000.

Given the premier's already sagging public approval ratings and Japan's still-uncertain economic prospects, some insiders have suggested that Mr. Obuchi and his advisers will try to cut whatever deals are necessary to avoid early elections. The prime minister, in fact, has said that he will not consider holding the lower house polls until after the Diet enacts the nearly ¥85 trillion ($708.3 billion at ¥120=$1.00) general account budget for the fiscal year that begins April 1, 2000 (see previous article).

Other commentators are less optimistic that the consensus-oriented premier can hold together his fractious governing coalition, which includes the Liberal Democratic Party, the Liberal Party and the New Komeito. The Liberal Party, in particular, may force Mr. Obuchi's hand if he is unable to deliver on his eleventh-hour promise to make enactment of a Diet seat-reduction bill the first order of business in the upcoming legislative session.

The fall 1999 special Diet session ended December 15 on a dramatic note. During the final hours, both chambers cleared a bill banning corporate contributions to individual politicians beginning January 1, 2000. The Political Funds Control Law, which took effect in January 1995, dictated this change. However, the Diet failed to act on another provision of the campaign-finance reform law that ended business contributions to political parties as of the same date unless lawmakers approved a waiver. The lower house considered just such a suspension bill, but in the end, members decided to delay a vote on this controversial move until the new Diet session.

The real theatrics occurred, though, when Ichiro Ozawa threatened for the second time to pull the Liberal Party out of the coalition government. Provoking his latest fit of anger was the failure of the Diet to approve before the end of the special session a bill to reduce the number of proportional representation seats in the lower house by 20 against an ultimate cut of 50. The Liberal Party head and his lieutenants thought that they had a firm commitment from the LDP to enact the plan, which Mr. Ozawa sees as a primary way to accelerate the transformation of Japanese politics into a two-party system that is more responsive to voters. Whatever promise was made was broken, however, because of the New Komeito's strong objections to the seat-reduction move (see JEI Report No. 38B, October 8, 1999).

In the end, Mr. Ozawa backed down, saying December 15 that the LDP had agreed to work with the Liberal Party to pass the seat-reduction bill at the beginning of the regular 2000 Diet session. Liberal Democrats readily acknowledge, however, that they again may have trouble keeping their word. To political analysts, this admission is further evidence that the Liberal Party's departure from the coalition is just a matter of time.

Although a coalition composed of just the LDP and the New Komeito still would dominate the lower house (see Table), the end of the Liberal Party's cabinet participation would reflect poorly on Mr. Obuchi's leadership skills. Experts attribute the steep slide in the Obuchi administration's public approval ratings since October to voters' cynicism about the very opportunism that drove the triparty union. A decision by Mr. Ozawa finally to make good on his threat would highlight the flimsiness of the alliance's foundation. That, in turn, could cause the public to question anew whether Mr. Obuchi truly had the nation's interests in mind when he brought the Liberal Party and the New Komeito into the government or merely was trying to hang on to his job and safeguard his party's interests.

Party Membership in the Diet, December 28, 1999



Ruling Parties

Liberal Democratic Party



New Komeito



Liberal Party



Opposition Parties

Democratic Party of Japan



Japan Communist Party



Social Democratic Party of Japan



Independents/Minor Parties









Source: Kyodo News Wire Service, December 28, 1999.

Even before lawmakers took a break for the traditional New Year's festivities, the Liberal Party tried to ratchet up the pressure for action on Diet reform. Secretary General Hirohisa Fuji said in a December 19 television interview that his party would leave the coalition "immediately" if the seat-reduction bill did not become law by the end of January. Delivering a speech the same day to a gathering of New Komeito members, LDP Secretary General Yoshiro Mori apparently tried to assuage the Liberal Party as well as serve notice to the LDP's centrist governing partner that Mr. Obuchi wanted no further paralysis over this matter. Mr. Mori explained that the LDP is actively "considering whether the Diet seat-reduction bill could be deliberated before debate on the budget for the next fiscal year."

In his New Year's address, Mr. Obuchi went a step beyond Mr. Mori in trying to persuade the Liberal Party to remain in the governing camp. Not only did he pledge to "do his utmost to keep his promise on the [electoral-reform] bill," but he also publicly floated the notion of a LDP-Liberal Party merger. "Liberal Party members share with the LDP many basic philosophies," the prime minister said. He added that Mr. Ozawa already had agreed in general terms to such a plan. However, Mr. Obuchi admitted what pundits have been saying all along — that implementing a merger would not be easy because of the inevitable conflicts that would develop in the selection of candidates for single-seat races in the next lower house elections. In quite a few districts, both parties plan to back candidates. Incumbent lawmakers, in particular, would be outraged if they were forced to withdraw from their race in the interest of LDP-Liberal Party unity.

Indeed, some LDP members probably would support a merger with the Liberal Party — provided that their former colleague, Mr. Ozawa, is not included. His repeated threats to quit the coalition, along with his overall brinkmanship, seem to have made him more enemies in the LDP. Mr. Ozawa already is reviled by a not-insignificant group of Liberal Democrats. They never will forgive him for leading an internal revolt in 1993 that ultimately cost the LDP control of the government for the first time in more than 35 years. Thus, some LDP strategists may encourage Mr. Obuchi not to kowtow to the Liberal Party chief's demands for Diet reform as a way of splintering the smallest ruling partner. Mr. Ozawa and his loyalists presumably would go off in a huff, while pro-LDP members of the Liberal Party would be welcomed back into the fold. At least that is one scenario making its way around political circles in Tokyo.

In the meantime, Mr. Obuchi, who did not reach the pinnacle of power without possessing sound political instincts, is acutely aware that pocketbook issues, more than broken promises between parties, usually determine election outcomes. This, no doubt, explains his continued emphasis on the importance of timely action on a FY 2000 budget that is heavy on fiscal stimulus. The prime minister also has a sharp eye trained on economic indicators. Regardless of Mr. Ozawa's antics, Mr. Obuchi would be loath to dissolve the Diet for elections if the fourth-quarter 1999 gross domestic product figures, which will be released in March, are disappointing.

All of this suggests that if the logjam on Diet reform persists and if the Liberal Party joins the political opposition, Mr. Obuchi may have to relinquish his hope for an extended stay in office. But as long as the LDP and the New Komeito control the Diet's pivotal lower house, he probably will try to hang on for as many months as possible — at least long enough to ensure that economic conditions will not damage his party's chances at the polls. Some veteran observers of Japanese politics have suggested that, in the final analysis, the perceived winner of the intracoalition standoff may be the player who is better at poker.

The views expressed in this report are those of the author
and do not necessarily represent those of the Japan Economic Institute

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