No. 28 — July 21, 2000

Feature Article

LOWER HOUSE ELECTIONS PORTEND MORE MUDDLING THROUGH IN JAPAN

Barbara Wanner

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Summary

Given the enormity of the economic, business and social-welfare problems confronting Japan, some pundits could not resist speculating that the Liberal Democratic Party and its governing partners, the New Komeito and the New Conservative Party, would take a royal drubbing in the June 25 lower house elections. The proverbial last straw that would cause voters to abandon the ruling parties in droves, they proposed, was none other than the substantively weak, gaffe-prone Prime Minister Yoshiro Mori, who had been propelled to the nation's highest elected office by LDP elders in need of a loyalist to warm the seat vacated by the gravely ill Keizo Obuchi. To the surprise of these observers, not only did the coalition clinch a 271-seat absolute majority in the 480-member House of Representatives, but the three parties also quickly united behind Mr. Mori, ensuring his easy reelection as premier.

The election results were hardly a rousing endorsement of Mr. Mori and his triparty administration, however. The Liberal Democrats lost the simple majority that they had had in the lower house before it was dissolved for the poll. The ranks of its partners also were thinned by more than a third. The opposition parties, in contrast, boosted their Diet representation substantially — but not by enough to unseat the coalition.

Voters seemed to be saying that even though they continued to lose faith in the LDP's leadership, they were not ready to entrust the running of the government to an opposition led by the Democratic Party of Japan. Mr. Mori's win also may be viewed as a victory by default. The prime minister was able to keep his job primarily because he was a less-divisive figure than any potential LDP contender. Furthermore, Mr. Mori is needed to preside over the late July summit on Okinawa of the leaders of the Group of Seven industrial nations plus Russia.

Most experts believe that the next major turning point for the LDP and its partners will be the July 2001 upper house elections — although almost anything could happen in the meantime in Japan's fluid political world. Mr. Mori already faces some known challenges in the near term. In addition to getting the economy on a self-sustaining recovery track, the prime minister must navigate the mine field created by a bribery scandal involving a former Construction minister, the collapse of retailer Sogo Co., Ltd. and the January 2001 implementation of a sweeping bureaucratic reorganization.

In the end, Mr. Mori may be forced out of office sooner rather than later, especially if further revelations implicate senior LDP members in the Ministry of Construction scandal. Moreover, the LDP leadership could be threatened by instability from within the party that is fueled by generational differences as well as by the clash of traditional interest group agendas, a growing split among key constituencies and old-fashion power plays. However, barring the emergence of a unified political opposition with a well-conceived policy platform, the Liberal Democrats will deal with these potentially transformational forces by making only incremental changes in policy and political behavior. Then again, muddling through is how the LDP has managed to hang onto power for 40-plus years.

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Elections Disappoint Proponents Of Change

The June 25 elections for the Diet's House of Representatives were hyped by the media as representing an important turning point in postwar Japanese politics. If nothing else, they were the first opportunity for voters to pass judgment on the nation's leadership in almost four years — and much had occurred during that time. For starters, the government had seemed to change with the seasons. Between November 1996 and June 2000, three successive prime ministers had presided over five different administrations, each of which was composed of an assortment of political parties that ran the ideological gamut from the left-leaning, pacifist Social Democratic Party of Japan to the ultraconservative, nationalistic Liberal Party.1

The frequency of these political realignments and the fact that they appeared to be driven more by the Liberal Democratic Party's desire to controlthe Diet than by policy-related or ideological concerns have eroded public trust in politicians and the political system. Surveys indicate that about half of all eligible voters are not affiliated with a particular party. The declining turnout for national elections also has been attributed to a growing perception among people that their votes do not matter. Politicians will do whatever is necessary to remain in power, regardless of public sentiments, survey respondents have lamented.2

Disaffection Builds

An electorate that previously had been largely apathetic defied conventional wisdom in the July 1998 upper house poll by delivering a crushing defeat to LDP candidates.3 Fed up with the ruling party's dithering approach to resolving the country's economic problems and its inability to move decisively to put right a banking industry on the verge of collapse, voters expressed their outrage via the ballot box. Many experts regarded this unanticipated outcome as a seminal event in Japan's postwar democracy. In this view, voters for all intents and purposes had served notice that they no longer would assume that the LDP knew what was best for Japan simply because it had been in power for 40 years. Henceforth, these experts concluded, people would hold the Liberal Democratic powers-that-be accountable for the nation's economic and political welfare.4 The impetus for the sweeping reforms that economists on both sides of the Pacific have argued are imperative for Japan's recovery would come from the grass roots — or so the results of the upper house elections seemed to indicate.

Thus, notwithstanding preelection surveys suggesting a low-to-moderate turnout, some commentators — perhaps caught up in wishful thinking — predicted an even stronger anti-LDP backlash in the late June lower house contests. The triparty government of Prime Minister Yoshiro Mori, composed of the LDP, the New Komeito and the New Conservative Party, was extremely unpopular with the typical Japanese. Voters apparently viewed the coalition as simply an opportunistic union of the three parties aimed at dominating both Diet houses (see Table 1).

Table 1: Party Membership in the Diet, July 5, 2000

Lower
House

Upper
House

Ruling Parties

aa Liberal Democratic Party

232

106

aa New Komeito

31

24

aa New Conservative Party

7

6

Opposition Parties

aa Democratic Party of Japan

129

58

aa Japan Communist Party

23

20

aa Liberal Party

22

5

aa Social Democratic Party of Japan

19

13

aa Independents/Minor Parties

16

20

Vacancies

1

0

Total

480

252

Source: Kyodo News Wire Service, July 5, 2000.

Mr. Mori essentially had inherited this governing arrangement from Prime Minister Keizo Obuchi. In October 1999, he had brought the centrist, Buddhist-backed New Komeito into an alliance that joined the conservative LDP with the even more right-wing Liberal Party (see JEI Report No. 39B, October 15, 1999). The Liberal Party's early April decision to leave the coalition for both political and policy-related reasons further highlighted the flimsiness of the triparty accord. The fact that 11 of Liberal Party chief Ichiro Ozawa's followers chose to remain aligned as the New Conservative Party made these changes at the highest reaches of government seem like nothing more than a game of musical chairs (see JEI Report No. 14B, April 7, 2000).

Even more disturbing to voters, however, was the fact that the incessant political maneuvering and alliance-building had not necessarily produced policies that effectively addressed Japan's still-staggering economic problems. Growth remained uncertain, unemployment was at record levels and, in an effort to jump-start the economy, Tokyo had saddled the nation with a public debt exceeding its gross domestic product. Public opinion surveys over the past three years have indicated a growing loss of faith in the LDP-led government's ability to address the country's array of economic and social needs. Even formerly stalwart party supporters in the business community have become ever more disillusioned with Liberal Democratic policy prescriptions that have failed to lift the recessionary pall. Declining campaign contributions and a loosening of the postwar compact between the public and the private sectors are two signs of this rift.5

Despite these disturbing trends, Liberal Democratic elders in early April appeared to thumb their noses at an electorate clearly disenchanted with their power games when they selected Mr. Obuchi's successor using the same closed-door deliberations that have come to be associated with the corrupt side of LDP politics.6 Mr. Mori, a former LDP secretary general known more for his behind-the-scenes skills than for his policy acumen, got the nod from ruling party doyens even though he clearly lacks the political will, the leadership abilities and the substantive background needed to tackle the acute problems confronting Japan (see JEI Report No. 15B, April 14, 2000).

As if to fulfill his critics' worst expectations, Mr. Mori stumbled badly soon after becoming prime minister by making several politically inflammatory remarks. Speaking to a group of nationalist LDP lawmakers, Mr. Mori described Japan as a "divine nation centering on the emperor" — a statement that precipitated a fire storm of criticism from the political opposition, the coalition parties and even LDP cabinet members. To a nation that holds sacrosanct the pacifist principles embodied in its constitution, this comment, which seemed to venerate the beliefs held by Japan's pre-1945 militarist government to justify its brutal conquest of Asia, was callous, to say the least; some opinion shapers decried Mr. Mori's words as blasphemous.

Even more galling to many observers was the prime minister's refusal to retract the "divine nation" comment. Just two weeks later, moreover, he made yet another controversial, war-era reference. LDP candidates for the lower house elections became so worried that Mr. Mori would commit still more faux pas that would hurt their chances that many requested that the prime minister not make the customary campaign appearances in their districts. Reflecting the worst fears of ruling party politicians, in the days leading up to the late June elections, approval ratings for Mr. Mori skidded into the low teens. Support for the triparty government was not much higher.

Qualified Victory

Convinced that the LDP and its partners would be trounced at the polls, some political experts found themselves scrambling for answers when voters once again proved their predictions wrong. The coalition parties emerged victorious — albeit barely — clinching a 271-seat absolute majority in the 480-member House of Representatives.7 But the elections hardly were a stunning victory for Mr. Mori and his government. While the LDP secured 233 seats, surpassing the 229-seat goal set by party strategists (see JEI Report No. 22B, June 9, 2000), the legislative ranks of the biggest party were thinned by 38 (see Table 2). This was the most substantial shift in power since the Liberal Democrats lost 36 seats in the 1983 lower house elections after a court convicted former Prime Minister Kakuei Tanaka for his actions in the 1976 Lockheed Corp. bribery scandal.

Table 2: Outcome of the June 25 Lower House Elections

Party

Total[1]

Single-Seat Constituencies

Proporational Representation

Seats Held
in Last Diet[2]

Liberal Democratic Party

233

177

56

271

New Komeito

31

7

24

42

New Conservative Party

7

7

0

18

aaa
Democratic Party of Japan

aaa
127

aaa
80

aaa
47

aaa
95

Liberal Party

22

4

18

18

Japan Communist Party

20

0

20

26

Social Democratic Party of Japan

19

4

15

14

Minor Parties/Independents

21

21

0

15

Total

480

300

180

499

[1]These were the first lower house elections under a new plan, enacted in January 2000, that features 300 single-seat constituencies and 180 seats awarded according to a party's proportional share of the total vote.
[2]Previously, the lower house had 500 members: 300 represented single-seat constituencies and 200 were awarded proportional-representation seats. Prime Minister Keizo Obuchi's May 14 death created one vacancy.

Source: Kyodo Wire Service, June 26, 2000.

Moreover, even with postelection shifts in party affiliations, the Liberal Democrats probably still will not command the simple majority that they enjoyed in the last Diet. Their current deficit makes them even more dependent on the support of their colleagues in the New Komeito and the New Conservative Party. But those two groups also incurred some not-insignificant losses. The strength of the New Komeito and the New Conservative Party was reduced by 11 members each. In contrast, the Democratic Party of Japan, the largest opposition power, boosted its Diet presence by 32 members, while the SDPJ and the Liberal Party upped their totals in the House of Representatives by five seats and four seats, respectively (see JEI Report No. 25B, June 30, 2000).

Coalition Instability

Critics who were disappointed that the lower house poll did not upend the status quo-protective, LDP-led regime perversely may have been cheered by postelectoral developments that suggested troubled times ahead for the triparty union. In particular, the day after the elections, Tokyo was rife with speculation that the New Komeito would pull out of the alliance.

The leadership of the centrist party, which is backed by the controversial Soka Gakkai Buddhist lay group, attributed its poor showing in the June voting to problems with electoral cooperation among the three ruling parties. In an effort to promote their unity and the stable leadership that such cohesion would produce, the coalition chiefs campaigned together, issued a common platform and coordinated the single-seat races. Larger parties, which have bigger war chests and deeper pools of candidates, generally have an advantage over smaller parties in Japan's 300 winner-take-all contests. With that in mind, the LDP did not field candidates in more than a dozen single-seat districts and urged its supporters to vote instead for the hopefuls backed by the New Komeito or the New Conservative Party. Those parties likewise asked their members to support the LDP choices in the races in which the two smaller parties were not running candidates.

While this approach seemed fair in theory, it broke down in practice. The New Komeito's notoriously disciplined 7.5 million Soka Gakkai supporters appeared to follow the game plan with care, awarding their votes to the 160 vetted LDP candidates. LDP supporters, however, were not so accommodating. Exit polls revealed that only 2 percent of Liberal Democrats voted as instructed in contrast to the 50 percent of New Komeito loyalists who claimed to have backed a LDP candidate.

Some pundits attributed this apparent breakdown to LDP voters' distaste for the New Komeito's Soka Gakkai support base.8 LDP-registered voters who did not follow their party's orders to support a coalition contender no doubt viewed the independent or the opposition-backed candidate as the lesser of two evils. Such disobedience within the LDP ranks has shaken the trust of the New Komeito and the New Conservative Party in their senior partner. As a consequence, the stability of the second Mori administration may be in jeopardy.

In fact, some commentators have suggested that if the New Komeito does break away from the coalition, the LDP may have a harder time courting a new partner. The disastrous attempt at triparty electoral cooperation was watched closely by politicians of all persuasions. They no doubt will be wary of joining forces with a group that could not keep its promises to its allies.

Systemic Features

In addition to speculating about the longevity of the triparty government, longtime observers of Japan's political scene continue to wonder why and how the LDP and its partners fared as well as they did, particularly in view of Mr. Mori's less-than-auspicious debut as premier. Some pundits have proposed that inclement weather was part of the reason since many people apparently preferred to stay home rather than to brave the elements. About 60 percent of the electorate cast ballots, a low turnout for a nation where it was not uncommon in the 1980s for nearly 70 percent of voters to participate in national elections. The LDP usually fares well in an atmosphere of ambivalence because of its well-developed local get-out-the-vote machines. In short, those who do vote tend to be Liberal Democratic loyalists.

Other experts argue, however, that the electoral system itself is rigged to benefit the LDP. Gerrymandering has given disproportionate weight to rural districts where the LDP leads in popularity. Liberal Democrats count as one of their strongest support bases the farmers whom they have attempted to protect from lower-cost foreign competitors and aided through subsidies and preferential financing. Indeed, in both the July 1998 upper house elections as well as in the recent lower house poll, opposition-backed politicians were no match for LDP candidates in single-seat races in rural districts.

In addition, the LDP is the only party that has sufficient resources to field candidates in all 300 single-seat races. Six years ago, the pro-reform government of Prime Minister Morihiro Hosokawa gained legislative approval of a package of measures that reconfigured the lower house electoral system and closed some campaign-financing loopholes. The intent was to make elections more policy-oriented as well as to allow for greater frequency in the rotation of the party in power and to reduce the potential for recurrent graft. The establishment of single-seat districts was a key element of the plan. Ostensibly, the candidates of various parties would distinguish themselves in voters' minds with their policy differences rather than their personalities or their personal largess, as was the case under the House of Representatives' old, corruption-prone multiseat system.

The first elections under this plan — held in October 1996 for the lower house — revealed that theory did not necessarily equate with practice. Politicians remained just as reliant on local support organizations and their own war chests to win the single-seat races, and the LDP, with its formidable network of grass-roots machines, continued to enjoy the upper hand.9 Opposition parties conceivably could pool their money and personnel and back a common candidate to take on the LDP contender in a single-seat race. But, as the coalition's experience in the June elections underscored, voters cannot be counted on to cooperate to implement this strategy.

Moreover, by joining forces, opposition parties would not make the most of the proportional-representation formula. The allocation of 200 lower house seats to parties based on their shares of the total vote was another important element of the Hosokawa administration's 1994 reform package, included at the insistence of nonruling groups to ensure that smaller parties would continue to have a voice in the Diet.

Indicative of how important proportional representation is to the political survival of non-LDP parties, the Obuchi government's enactment in January 2000 of legislation cutting lower house proportional representation by 20 seats nearly blew apart the coalition. While the Liberal Party argued that such a change was imperative in order to restructure the political system, leaders of the New Komeito — more than half of whose Diet members had earned their seat through proportional representation — fought the proposal tooth and nail because of the losses their party would incur (see JEI Report No. 5B, February 4, 2000). Indeed, the New Komeito's 11-seat reduction as a result of the June elections was due not just to coordination problems with the LDP. It also reflected the simple fact that fewer proportional-representation seats now are available to be divvied up among smaller parties.

The important point, say political experts, is that the LDP used its size and its strength to devise an electoral strategy that would ensure its continued dominance in the Diet. In the words of Richard Katz, senior editor of The Oriental Economist Report, the current House of Representatives electoral system is designed to divide the opposition vote in the important single-seat races while enabling the LDP to win with a relatively small share of the total vote.10 In the single-seat races in June, the LDP gained only 40 percent of the vote, yet it won 60 percent of the seats. In terms of proportional representation, the LDP attracted just 29 percent of the vote, a mere one point more than the DPJ.11

Opposition Shortcomings

As important as systemic features were in deciding the June electoral outcome, the reality was that the political opposition failed to provide a credible alternative to continued LDP leadership. This shortcoming also handicapped non-LDP parties in the 1996 lower house elections,12 but opposition leaders seemed to have learned nothing from that lesson. Despite the DPJ's impressive 32-seat gain in the lower house, Nihon Keizai Shimbun, the respected business daily, skewered the opposition parties for missing "the big fish." Instead of uniting under one umbrella and presenting voters with a well-conceived policy platform, the Democratic-led opposition focused on attacking Mr. Mori's qualifications, Nikkei charged.

The lack of coherence in the opposition's policy prescriptions results in no small part from the diverse positions of the nonruling parties. The four main non-LDP parties embrace philosophies that range from the leftist, pacifist, social-welfare focus of the SDPJ to the center-to-right views on economics and defense-related matters held by some DPJ politicians. As one expert has noted, the Democrats, like the Liberal Democrats, are divided internally between pro- and anti-reform advocates. For instance, the fall 1998 bailout plan for Japan's sinking banking industry was the product of an alliance among younger, pro-reform members of the LDP and the DPJ.13

The DPJ did go out on a limb with its plan to lower the minimum taxable income for individuals, a proposal that would increase the taxes paid by lower-income families. DPJ chief Yukio Hatoyama argued that this move was a necessary "bitter pill"14 that would enable Japan to begin to pay down its enormous public debt. He also maintained that the average voter would swallow it because of concerns about the economic future and the uncertain impact of those woes on social security-type benefits. The DPJ's impressive performance in the elections suggests that voters may not have been repelled by the proposed tax hike. However, the extent to which this idea — or an intense dislike of Mr. Mori and the triparty government — influenced voting is difficult to determine.15

Pundits also have argued that while Mr. Mori might be a walking public relations disaster, Mr. Hatoyama does not possess sufficient leadership skills or the charisma to inspire the electorate's confidence that he would do a better job running the country than his gaffe-prone competitor. American observers in Japan at the time of the June lower house elections pointed out that Mr. Hatoyama was untelegenic, to say the least, appearing anxious and distracted rather than in command. The fact that the DPJ leader faced a tough reelection fight in a single-seat Hokkaido district no doubt was one of his worries. Mr. Hatoyama's narrow victory further called into question his political strength.

Japan's disaffected but generally informed and savvy electorate no doubt realize that Mr. Mori does not call his own shots. LDP Secretary General Hiromu Nonaka and other senior party officials basically are using him as a seat-warmer to ensure leadership continuity through the late July summit on Okinawa of the leaders of the Group of Seven industrial nations plus Russia. But to a nation inherently averse to chaos and disruption, the better and safer choice was to keep Mr. Mori — with his legion of experienced advisers — as prime minister rather than take a chance on Mr. Hatoyama. The DPJ chief once was described by former Prime Minister Yasuhiro Nakasone as resembling soft ice cream — "sweet and light" and lacking the toughness and the vision to lead the nation. Voters may have concurred to some extent.

Caretaker Still Needed

Another development that seemed to defy political logic was the decision by the LDP, the New Komeito and the New Conservative Party to support Mr. Mori's reelection as prime minister. He was so unpopular with party organizers that, according to certain media reports, in the weeks leading up to the elections, some officials went so far as to remove his picture from local LDP headquarters. Indeed, their fears of Mr. Mori's negative effects on LDP candidates running in single-seat races were borne out since LDP candidates won in only 25 of the 76 districts in which Mr. Mori stumped.16 In the wake of their drubbing at the polls, the New Komeito and the New Conservative Party presumably have no abiding affection for the LDP chief, either.

Yet the day after the elections, senior LDP officials and leaders of the New Komeito and the New Conservative Party endorsed Mr. Mori's reelection. The prime minister also received crucial backing from the LDP factions17 headed by former LDP Secretary General Koichi Kato and former LDP policy chief Taku Yamasaki. Both of them had made politically imprudent and ultimately unsuccessful bids to seize the LDP presidency from Mr. Obuchi in September 1999 (see JEI Report No. 36B, September 24, 1999). Since then, they have had at best uneasy relationships with Mr. Mori, Mr. Nonaka and other old-guard politicians. With the three parties' absolute majority in the lower house, Mr. Mori was reelected easily on the first day of a short special Diet session convened in early July for the express purpose of formally selecting a new prime minister and naming a new government (see JEI Report No. 27B, July 14, 2000).

In trying to make sense of the coalition's decision to keep an individual of questionable competency in the nation's highest elected office, experts suggest that LDP elders may have been motivated by pragmatic concerns. In late April and early May, Mr. Mori made a whirlwind nine-day tour of the G-8 nations, ostensibly to ensure that all participants will be on the same page when they convene on Okinawa in late July (see JEI Report No. 19B, May 12, 2000). Having laid that groundwork, it made sense from a diplomatic standpoint that Mr. Mori should be reelected so that he could serve as the summit host. Proponents of the seat-warmer theory predict that the prime minister will be more vulnerable to an ouster after the G-8 gathering, however.

Other insiders suggest that Mr. Mori was retained as LDP president and prime minister for internal party reasons. Unlike Messrs. Kato and Yamasaki, the former LDP secretary general had been loyal to his predecessor, a trait highly valued by LDP doyens. Mr. Nonaka, who served as the late premier's "shadow shogun" and who possesses political clout rivaling that of the faction chiefs, also may have wanted a status quo-oriented politician whom he could control.

Mr. Kato, in particular, was highly critical of the Obuchi government's reliance on stimulus to get the economy moving. The leader of the third-largest faction also is more comfortable with and interested in matters of diplomacy and national security than Mr. Nonaka. The LDP's second-in-command apparently was worried that installing a reform-minded heavyweight like Mr. Kato as prime minister would fracture the party, possibly leading Messrs. Kato and Yamasaki to form an alliance with the DPJ. Such a move might leave Mr. Nonaka and the change-resistant old guard of the LDP in the minority.

Foreign Minister Yohei Kono was another possible contender. But his election as LDP president and prime minister might have proved just as disruptive. Messrs. Kato and Yamasaki had hinted that they would bolt should Mr. Kono be tapped to lead the party.

Other analysts have put forward yet another explanation for Mr. Mori's reelection. In the wake of the deaths earlier this year of politicians who epitomized old-line LDP politics with its emphasis on pork-barrel spending, collusive ties with business executives and bureaucrats and seniority-based leadership — namely, Mr. Obuchi, former Prime Minister Noboru Takeshita and former LDP Secretary General Seiroku Kajiyama — Mr. Nonaka may have viewed Mr. Mori as his last chance to retain traditional party practices. In recent years, younger LDP members have been champing at the bit to reform party operations to facilitate the development of policies more responsive to the changing needs of the electorate. Having cut their political teeth under the old system and amassed power by understanding its ins and outs, Mr. Nonaka and others of his generation understandably are reluctant to let go of a party structure and process that have served them well.

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Forces For Change Build Under Surface

Although the LDP and its governing partners remain in power, the outcome of the June lower house elections confirms that the factors behind the ruling party's trouncing in the July 1998 upper house poll were not onetime phenomena. Forces for change, which, over time, will transform the political landscape, continue to build under the surface. But, as one analyst described the situation, "[w]hile the 'old regime' is dying, there is not yet a 'new regime' to replace it."18

Rural/Urban Split

The most notable trend has been a split between rural and urban constituencies. The elections left no doubt that the rural community continues to represent the LDP's strongest bloc of support. This constituency has no reason to back a candidate from a party that has not — as the LDP has — provided generous protection for farmers or raised living standards in certain backwater areas through a steady stream of public works projects.

City dwellers, not surprisingly, have a different view of the LDP-led government. As in the July 1998 upper house contests, LDP candidates took a beating in urban areas, where the largest concentrations of nonaligned voters are located. In Tokyo, for example, DPJ candidates won more than half of the 25 single-seat races — unseating International Trade and Industry Minister Takashi Fukaya in the process. Agriculture, Forestry and Fisheries Minister Tokuichiro Tamazawa also lost his bid to continue to represent a district that includes metropolitan areas in Iwate prefecture.

Analysts attributed these losses to frustration among urbanites at seeing the lion's share of the government's whopping pump-priming packages going to finance infrastructure in the hinterlands. Moreover, city residents have come to resent the powers-that-be for saddling the nation with a crushing public debt simply to ensure their reelection. Despite demographic data suggesting that Japan is becoming increasingly urbanized as more and more children of farm families migrate to cities, the LDP has refused to shut off the valve of public funds and other assistance to its longtime backers in the agricultural sector or to those in the construction business.

Business Divisions

The nation's decade-long stagnation and a fast-changing global economy also have created conflicts of interests within corporate Japan. The policy consensus within the business community — another longtime bastion of LDP support — has eroded as the demand for information and action exceeds what the formerly cozy relationship among the LDP, the corporate world and the bureaucracy can provide in a timely manner. Given the vastly different needs of contractors, "old economy" manufacturers and mom-and-pop retailers and the technology-driven firms that constitute the "new economy," the catchall LDP strategy that once protected the interests of everyone no longer is workable.19

That has not stopped the ruling party's old guard from trying to be everything to everyone, however. The LDP-led government has attempted to buffer the inevitable pains created by economic restructuring by encouraging the conditions for some corporate changes while simultaneously maintaining policies aimed at softening the blows in politically important but economically inefficient and vulnerable sectors.20 Earlier this year, for example, the Obuchi administration extended the deadline for ending unlimited bank deposit insurance protection, thereby reducing the threat of weaker banks losing business, collapsing or being forced to merge (see JEI Report No. 2B, January 14, 2000).

Moreover, notwithstanding Mr. Mori's pledge to make the advance of information technology a centerpiece of his new administration, the coalition has obstructed initiatives that would allow that broadly but poorly defined industry to flourish. Most notably, the government has resisted pressure from both domestic and foreign communications carriers to loosen the market grip of Nippon Telegraph and Telephone Corp. Tokyo's standpat position has made Internet access and other communications services far more expensive than in the United States and Europe and, consequently, has slowed the promised IT revolution. It also has embroiled Japan in a long-running trade dispute with the United States (see JEI Report No. 26B, July 7, 2000).

Due to its go-slow approach to deregulation and restructuring, the LDP has begun to alienate the very business constituencies that could serve as engines for Japan's recovery. Not surprisingly, corporate
political contributions have sagged in the past six years, in part because of the private sector's rising disillusionment with the LDP's inability to address its more diverse agenda.

Corporate Japan's divergent interests and needs also have created competing camps within the LDP. Earlier this year, 180 party legislators formed a caucus to fight deregulation initiatives that would hurt their support bases. As the regular Diet session for 2000 drew to a close, this group managed to water down several proposals that would have threatened small retailers, taxi operators and the medical industry.21

Although he is the most notable member of the anti-reform caucus, Mr. Mori has vowed in his two major policy addresses to date to pursue bold structural reforms. However, with Mr. Nonaka — another anti-reformer — pulling Mr. Mori's strings, not a few pundits have scoffed at the prime minister's rhetoric.

Generational Gap

Younger LDP members share the critics' skepticism concerning the old guard's response to Japan's economic crisis. Barely two weeks after the lower house poll, 42 Liberal Democrats, who mostly are in the 30-to-40-year-old age bracket, banded together as Jiminto no Asuotsukuru Kai (The Group to Create the LDP of Tomorrow). These insurgents object to Mr. Mori's leadership, arguing that he is underqualified for such a demanding position. They also have blasted the prime minister and Mr. Nonaka for relying primarily on seniority and factional strength to select the members of the new cabinet (see Table 3), whom one of Japan's major dailies described as being nothing more than "aging time-servers without clear policy goals."

Table 3: Second Mori Cabinet, July 4, 2000

Position

Name

Party[1]

Prime Minister

Yoshiro Mori

LDP

Justice Minister

Okiharu Yasuoka

LDP

Foreign Minister

Yohei Kono*

LDP

Finance Minister

Kiichi Miyazawa*

LDP

Education Minister and
Director General,
Science and Technology Agency

Tadamori Oshima

LDP

Health and Welfare Minister

Yuji Tsushima

LDP

Agriculture, Forestry and Fisheries Minister

Yoichi Tani

LDP

International Trade and Industry Minister

Takeo Hiranuma

LDP

Transport Minister and
Director General,
Hokkaido Development Agency

Hajime Morita

LDP

Posts and Telecommunications Minister

Kozo Hirabayashi

LDP

Labor Minister

Yoshio Yoshikawa

LDP

Construction Minister and
Director General, National Land Agency

Chikage Ogi

NCP

Home Affairs Minister

Mamoru Nishida

LDP

Financial Reconstruction Minister

Kimitaka Kuze

LDP

State Ministers



Chief Cabinet Secretary and
Director General, Okinawa Development Agency

Hidenao Nakagawa

LDP

Director General, Management and Coordination Agency

Kunihiro Tsuzuki*

NK

Director General, Defense Agency

Kazuo Torashima

LDP

Director General, Economic Planning Agency

Taichi Sakaiya*

No Party[2]

Director General, Environment Agency

Yoriko Kawaguchi

No Party[2]

*Reappointed
[1]LDP = Liberal Democratic Party; NCP = New Conservative Party; NK = New Komeito
[2]Mr. Sakaiya and Ms. Kawaguchi are not elected officials.

Source: Kyodo Wire Service, July 4, 2000.

The Young Turks have demanded Mr. Mori's resignation. Sounding more like reformers from the opposition than LDP up-and-comers, they also have argued that their party will not survive if it sticks to its current soft-landing policies. The group, which includes the progeny of such revered — if controversial — figures as Messrs. Tanaka and Kono and Tokyo Gov. Shintaro Ishihara, has vowed to field its own candidate in the next LDP presidential election.

According to founding member Nobuaki Ishihara, the group will focus on "changing the structure and the nature of the LDP rather than getting LDP leaders to overhaul the party." Mr. Ishihara and his like-minded colleagues either have not considered — or are not ready to consider — that changing the structure and the nature of the ruling party is tantamount to overhauling the LDP, and that this process inevitably will involve making difficult policy choices that affect key support groups.

Therein lies the dilemma. If the proponents of change gain the upper hand, the LDP will splinter, but the party also will fall apart if the keepers of the status quo prevail. Either way, huge blocs of voters and campaign contributors will be alienated. That is why the LDP often appears confused and without direction in the deregulation/restructuring debate and seems capable of only incremental changes.22 In short, the LDP is being pulled in opposite directions.

This quandary will not be resolved by the Mori government, the Young Turks or anyone else in Japan in the near term. Political analysts say that it will take several more years and at least one more round of lower house elections before the catchall party truly is modernized.

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Near-Term Challenges Could Destabilize Coalition

As if the pressures for change were not troublesome enough for an anti-reform politician, Mr. Mori is likely to face several tests in the coming months that also could prove to be his undoing. His shaky governing arrangement could fall apart for any number of reasons relating to politics, policies or developments beyond its control.

New Komeito Wavers

The New Komeito may be pressured by its membership to pull out of the coalition in order to rebuild its battered support base. At the very least, the party may drive a harder bargain on social welfare and security-related policies as a way of differentiating itself from the LDP.

But while the LDP now is even more dependent on the New Komeito to maintain a majority in the lower house, some members of the larger party — specifically those who regard the New Komeito's Soka Gakkai affiliation as anathema — may seize on the group's distancing tactics as an excuse to shove it out the door. That move, in turn, could rupture the LDP and possibly provide a window of opportunity for Mr. Kato to forge an alliance with the DPJ. Depending on how many defectors the former LDP secretary general took with him, such a union might enable the Democrats to assume control of the government as part of a new coalition.

Wakachiku Scandal

The late June arrest of former Construction Minister Eiichi Nakao on suspicion of receiving ¥30 million ($272,700 at ¥110=$1.00) in bribes from Tokyo-based Wakachiku Construction Co., Ltd. while in office four years ago also could become a political hot potato for the Mori administration. If the investigation reveals that other prominent LDP officials were on the take, the prime minister may be forced to resign to accept responsibility for the scandal, just as Mr. Takeshita was unseated when the Recruit Co., Ltd. affair blew up in the late 1980s.

Moreover, through his clumsy handling of the selection process for a Construction minister in his new cabinet, Mr. Mori not only focused greater attention on the Wakachiku scandal, but also provided the political opposition with additional ammunition to attack his fitness for office. Mr. Nonaka, who, for all intents and purposes, chose the members of the second Mori cabinet, was said initially to have favored Tadamori Oshima for the Ministry of Construction post. But when Mr. Oshima declined the offer — as did everyone else approached by the LDP secretary general in the wake of Mr. Nakao's arrest — Mr. Nonaka offered the position to New Conservative Party leader Chikage Ogi, ostensibly because female politicians are perceived as being less preoccupied with money and not as tempted by graft as their male counterparts.

Although Ms. Ogi took the job, she was not shy about voicing her disappointment at being passed over for her first choice, Education minister — a position that eventually went to Mr. Oshima — or her recognition of Mr. Nonaka's ulterior motives. "I may have been used to erase the public's suspicions [about the graft associated with public works projects]," she told reporters.23 Some observers also heard in her remarks the seeds of discontent that could create frictions in the LDP's relations with the New Conservative Party.

G-8 Summit

The ink on the final communique for the June 1999 G-8 summit in Cologne, Germany was barely dry when Japanese officials began planning for this year's late July gathering on Okinawa. For months, Tokyo has been obsessed with ensuring the summit's success. Policymakers apparently define a "successful" summit as one at which there are no crippling public demonstrations like those at last fall's abortive World Trade Organization meetings in Seattle (see JEI Report No. 46B, December 10, 1999), no outstanding economic or political dispute between Japan and any of the other summit participants and no embarrassing remarks by Mr. Mori.

Summit planners in Japan obviously have no guaranteed protection against any one or all of these situations developing. Mr. Mori has proved himself to be a wild card at the podium, but he laid some important diplomatic groundwork for the G-8 sessions during his meetings with all of the participating leaders this spring. However, two events have occurred in July that no one could have anticipated, much less planned for preemptively.

U.S. military forces in Japan have a public relations nightmare on their hands. A 19-year-old Marine based at the Futenma Air Station on Okinawa was arrested at mid-month for allegedly breaking into a local residence and molesting an adolescent girl while she was sleeping. On the heels of that episode, a 21-year-old Air Force staff sergeant also stationed on Okinawa was arrested on suspicion of injuring a man in a hit-and-run accident. The two incidents epitomize the problems and the abuses with which Okinawans have had to contend as hosts to the largest concentration of Japan-based U.S. forces.

Five years ago, the rape of an Okinawan schoolgirl by three U.S. servicemen sparked a virulent anti-base outcry in Japan. The bilateral Special Action Committee on Okinawa conducted a comprehensive review of the U.S. base presence in the southernmost prefecture. This inquiry culminated in recommendations to consolidate facilities, alter intrusive training procedures and move certain personnel and equipment to military facilities on the main island of Honshu. However, full implementation of the proposed base consolidation on Okinawa — principally, the relocation of a heliport at the Futenma base — has been impaired by residents' still-strong opposition to having American military staff and hardware literally in their backyards.

Last summer, President Clinton turned up the heat on American and Japanese negotiators to find a solution to the Futenma heliport controversy by urging that the matter be resolved before the G-8 summit. The Obuchi administration added to the pressure by selecting Nago, a town on the northern end of the main Okinawan island, to host the G-8 affair. Its choice was all the more significant because Nago has been actively considered as the site for a new civilian-military airfield that also would house the Marine heliport.24

Notwithstanding months of intense discussion between both Washington and Tokyo and Tokyo and the Okinawan capital, Naha, by mid-July, American and Japanese negotiators still had not broken the logjam that had developed over the terms governing the use of the prospective Nago airport. Nor was it clear whether residents of the seaside town supported the project.

As it is, Japanese officials worry that Nago residents and other anti-base agitators on Okinawa will try to disrupt the summit. These concerns were amplified by a 5,000-person rally on Okinawa barely a week before the arrival of the heads of government to protest the incidents of criminal behavior alleged of the two U.S. servicemen. Mr. Mori, of course, neither said nor did anything to incite the demonstrators, but he nevertheless will be held responsible if a similar event interrupts the G-8 proceedings or otherwise overshadows the meetings. That certainly is not the note on which Mr. Nonaka or other LDP strategists want to begin the second Mori term.

The other event threatening a successful G-8 summit is the stalemate between the United States and Japan over the depth and the timing of the cuts that NTT's two regional operating units will make in the fees that they charge other carriers to use their networks to move voice and data traffic between local switching centers and homes and businesses. Neither Washington nor Tokyo wants this dispute to distract from the gathering's focus on the worldwide development of the IT industry and other big-picture issues. However, absent an agreement by the time of the summit, Japan quickly could find itself the subject of a U.S.-initiated WTO complaint.

Sogo Collapse

The opposition parties seized on the late June decision by the government to bail out Sogo Co., Ltd., a second-tier department store operator crippled by more than ¥1.7 trillion ($15.5 billion) in unpaid bills, as further evidence that the LDP intends to protect its friends — even if that means setting an extremely expensive precedent. DPJ charges that this controversial action was yet another example of how the Mori administration was backsliding on its promises of reform hit a responsive chord with the many people already anxious about their future finances.

Although the LDP reversed course on the bailout, forcing Sogo to file for protection from its creditors in bankruptcy court (see JEI Report No. 28B, July 21, 2000), the Mori government is not off the hook. Some analysts agree with the initial thinking of both bureaucrats and LDP politicians that the retailer's collapse could have a ripple effect on the economy because of the large number of suppliers that could take a hit if the department store closed its doors. In other words, LDP policymakers again could face the choice of making their stalwart supporters in the construction, financial and retail industries pay the price for their poor management practices or enabling an easier restructuring.

Governmental Reorganization

A sweeping reorganization of the government that will slash the number of ministries and agencies to 13 from 22 is scheduled to be implemented in January 2001 (see JEI Report No. 27B, July 16, 1999). Like the 1994 political reform initiative, this plan is designed to eliminate the excesses of Japan's relatively closed, state-dominated system. At least according to proponents of administrative reform, rearranging and streamlining the bureaucracies will create a more responsive and capable government, one that no longer burdens the private sector with myriad regulations and other competitive constraints.

It is precisely because of the pending government reorganization that the second Mori cabinet has been perceived as a transitional team. Although the prime minister and Mr. Nonaka were lambasted for awarding cabinet posts based on factional strength, some political experts suggest that such an approach actually may serve a longer-term political purpose. In this view, the LDP chieftains may have seen the recent cabinet appointments as a last chance to pay back political debts or to develop IOUs; those, in turn, may be crucial given the many challenges ahead. Then again, the factional approach might have been just a reflexive response.

If Mr. Mori lasts until January and if he again appears to rely on intraparty politics to determine the makeup of his new, smaller cabinet, the prime minister undoubtedly will face severe criticism for trying to defeat the broader purpose of systemic reform. Against such a backdrop, the opposition parties might be able to mount a no-confidence vote that would force out the LDP chief. But if Mr. Mori ignores factional politics and pressures, he also could jeopardize his leadership position.

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Outlook: Gradual Change Continues

Pressure to change the old ways of doing things will dog Mr. Mori at least until the July 2001 upper house elections — assuming that he lasts that long. If political developments, international crises or the prime minister's perceived incompetence do not bring him down before then, those elections, most experts say, will be his next crucial test. Based on voter trends apparent in the July 1998 upper house elections and in June's lower house poll, the electorate probably will continue to express its dissatisfaction with the LDP leadership by chipping away at the party's presence in the House of Councillors.

Even if the LDP loses big in these elections, it still will rule Japan — that is, assuming it can maintain a governing alliance that gives it and its partners a majority in the more powerful House of Representatives. If the New Komeito does bolt, the LDP will be forced to woo independents and DPJ defectors to cobble together another majority. More likely, though, the departure of the Buddhist-backed party will rupture the LDP. A coalition between the DPJ and the Kato and Yamasaki factions then might be possible.

In any event, Mr. Mori has not impressed anyone as a proponent of change. His government probably will try to get away with as little as possible in the way of economic reform. However, until the political opposition can offer a compelling alternative, voters — no matter how angry and frustrated they may be with the LDP — are unlikely to throw the bums out. Thus, muddling through will continue to be the name of the game in Japan — certainly politically but possibly also on the economic front.

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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Notes
aaa

1aa From November 1996 to July 1998, the government of Prime Minister Ryutaro Hashimoto was composed of the LDP, the SDPJ and the New Sakigake Party. Keizo Obuchi succeeded Mr. Hashimoto in July 1998 with a LDP administration that initially ruled on its own. In January 1999, however, the LDP joined hands with the Liberal Party. Ten months later, Mr. Obuchi broadened the coalition by bringing the New Komeito aboard. In early April 2000, the Liberal Party formally split from the government. Liberal Party members who preferred to remain aligned with the LDP and the New Komeito rejoined the coalition as the New Conservative Party. Prime Minister Yoshiro Mori, elected in early April to succeed a gravely ill Mr. Obuchi, inherited the LDP-New Komeito-New Conservative Party governing arrangement. Return to Text

2aa Keizo Nabeshima, "Defining Issues for Japan," The Japan Times, June 19, 2000, p. 20. Return to Text

3aa See Barbara Wanner, "Upper House Polls Shake Up Japanese Politics, But Outlook For Change Remains Uncertain," JEI Report No. 28A, July 24, 1998. Return to Text

4aa Remarks by Gerald Curtis, Columbia University, at the Library of Congress-sponsored program, "Change in Japan: Implications for U.S. Interests," Washington, D.C., December 2, 1999. Return to Text

5aa See Barbara Wanner, "Economic Problems, Political Changes Challenge Japan's Cozy Business-Government Ties," JEI Report No. 22A, June 9, 2000. Return to Text

6aa Mr. Obuchi died May 14, 2000, having never regained full consciousness following his April 1 stroke. Return to Text

7aa The June 25 lower house elections were the first under a new plan, enacted in January 2000, that features 300 single-seat districts and 180 seats awarded according to a party's proportional share of the total vote. Previously, the lower house had 500 members; 300 represented single-seat constituencies, and 200 held proportional-representation seats. Return to Text

8aa The LDP garners the most support among the nation's religious organizations from members of Shinto groups and other followers of Buddhism, who reject Soka Gakkai's dogma and object strongly to its strong-arm recruiting tactics. These groups vigorously oppose the New Komeito's participation in the coalition, arguing that it gives Soka Gakkai a de facto seat at the governing table. That, in turn, it is argued, violates the constitution's separation of church and state. Return to Text

9aa See Barbara Wanner, "Lower House Elections Fail To Meet Expectations Of Change," JEI Report No. 41A, November 1, 1996. Return to Text

10 aa Richard Katz, "LDP R.I.P.?" The International Economy, May/June 2000, p. 33. Return to Text

11aa Richard Katz, "Elections Are Another Nail In Coffin Of LDP Rule," The Oriental Economist Report, June 27, 2000. Available at rbkatz@ix.netcom.com. Return to Text

12aa Wanner (1996), op. cit., p. 9. Return to Text

13aa See Barbara Wanner, "Survival Tactics Take Precedence In Japanese Politics; Leadership Founders," JEI Report No. 45A, December 4, 1998. Return to Text

14aa Ayako Doi, "Japanese Election Results: 'Missing the Big Fish,'" PacNet 26, June 30, 2000. Available at http://www.csis.org/pacfor/pac0026.html. Return to Text

15aa Ibid. Return to Text

16aa Remarks by Michael Mochizuki, George Washington University, at the Japan Information Access Project-sponsored program, "Implications of Japan's Lower House Elections," Washington, D.C., June 28, 2000. Return to Text

17aa The LDP factions are intraparty power centers whose purpose is to further the political and leadership aspirations of their members. These groups rally under the names of Mr. Mori, the late Mr. Obuchi, former LDP Secretary General Koichi Kato, former LDP policy chief Taku Yamasaki, former LDP President Yohei Kono and the late Yoshio Komoto. A seventh faction is led jointly by Takami Eto and Shizuka Kamei. Return to Text

18aa Katz (Oriental Economist), op. cit. Return to Text

19aa Wanner (June 2000), op. cit. Return to Text

20aa T.J. Pempel, "Tokyo's Little Italy," The International Economy, May/June 2000, p. 55. Return to Text

21aa Wanner (June 2000), op. cit. Return to Text

22aa Katz (International Economy), op. cit., p. 32. Return to Text

23aa "Mori's New Cabinet Lineup Shows No Grasp Of Reality," Asahi News, July 5, 2000. Available at http://www.asahi.com/english/english.html. Return to Text

24aa See Barbara Wanner, "Okinawan Base Relocation Continues To Test Tokyo's Relations With Naha, Washington," JEI Report No. 4A, January 28, 2000. Return to Text

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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