No. 9 — March 3, 2000


Weekly Review

--- by Barbara Wanner

For the past three months, Japan's main opposition parties have tried to capitalize on the slide in Prime Minister Keizo Obuchi's approval ratings to force the embattled premier to dissolve the Diet for lower house elections. The Democratic Party of Japan, the largest opposition group, orchestrated an unprecedented 11-day boycott of Diet proceedings at the mid-January start of the 2000 legislative session. That protest of the governing parties' allegedly undemocratic consideration of a Diet seat-reduction bill ultimately proved ineffective in moving up the elections from their October 19, 2000 statutory deadline. Boosted by the early February victories of coalition-backed candidates in key local races, Mr. Obuchi has been adamant in his refusal to consider calling the elections before the late July summit on Okinawa of the leaders of the Group of Seven industrial nations plus Russia (see JEI Report No. 6B, February 11, 2000).

Undaunted, the political opposition recently seized on allegations of financial improprieties by one of Mr. Obuchi's top aides to, in effect, embarrass the prime minister out of power. The DPJ, the Japan Communist Party and the Social Democratic Party of Japan demanded at a February 15 hearing of the lower house's Budget Committee that Toshitaka Furukawa, the prime minister's secretary, be summoned before the Diet to address charges that 12 years ago, he swindled a now-deceased supporter of Mr. Obuchi out of stock. The value of the disputed shares in a pager company that subsequently was acquired by NTT Mobile Communications Network, Inc., better known as NTT DoCoMo, has soared to a reported ¥2 billion ($18.2 million at ¥110=$1.00) or more.

Mr. Obuchi repeatedly has denied reports of his aide's misconduct, and Mr. Furukawa filed libel complaints against the sources of these charges, the Weekly Gendai magazine and the journalist who wrote the story. Nevertheless, the supporter's widow continues to insist that she inherited the assets and never authorized their transfer to the prime minister's secretary — claims that continue to give legs to a story that yet may damage Mr. Obuchi.

Not surprisingly, the ruling parties have countered with their own mud-slinging campaign. At about the same time that the reports of Mr. Furukawa's alleged transgressions were surfacing, the Japanese media broke a story concerning DPJ chief Yukio Hatoyama's supposed receipt of some ¥50 million ($454,500) in illegal campaign contributions.

Ostensibly to call a truce — but in reality, daring the prime minister to put himself at risk — Mr. Hatoyama seized the opportunity created by the new weekly period for opposition-party questioning of the prime minister to propose February 23 that both sides come before the Diet to clear themselves. Mr. Obuchi refused to take the bait, insisting that Mr. Furukawa had obtained the stock "through proper procedures." This response prompted Mr. Hatoyama to demand that documentation of the sale be presented to the Diet for inspection.

The potential fallout on the Obuchi government from Mr. Furukawa's questionable acquisition of now-lucrative stock could pale in comparison with the bomb dropped by opposition lawmakers February 24. Members of the DPJ, the JCP and the SDPJ had obtained a tape recording of comments made by Financial Reconstruction Commission Chairman Michio Ochi at a recent gathering of local bank and shinkumi (credit cooperatives) officials in Tochigi prefecture, during which he seemingly indicated a willingness to help lenders obtain more favorable audits from the Financial Supervisory Agency (see previous article).

Although Mr. Obuchi promptly forced Mr. Ochi's resignation, it is unclear whether this action can hold at bay the forces calling for the ouster of his tripartite administration. More likely, the incident involving the FRC chief will heighten concerns about the prime minister's judgment in making political appointments. Mr. Ochi was the second Obuchi administration official to be fired. The Japan Defense Agency's parliamentary vice minister was dismissed in late October 1999 for a controversial interview during which he said, among other things, that Japan should consider arming itself with nuclear weapons (see JEI Report No. 41B, October 29, 1999).

The tape recording also was the proverbial smoking gun, seeming to lend credence to suspicions that Mr. Ochi, unlike his predecessor, Hakuo Yanagisawa, was friendlier to lenders and generally less committed to financial reform. Moreover, Liberal Democratic Party Secretary General Yoshiro Mori in effect confirmed that Mr. Ochi's views are shared by many other ruling party lawmakers. They fear that a tough approach on solvency would drive into the ground the smaller financial institutions that are some of their strongest supporters. "As a politician's remarks in line with the party's thinking, I don't think [Mr. Ochi's] comments were mistaken," Mr. Mori told reporters following the FRC chief's resignation.

Notwithstanding these political tempests, the lower house passed the record-breaking ¥85 trillion ($772.7 billion) general account budget for FY 2000 (see JEI Report No. 1B, January 7, 2000) February 29 — Mr. Obuchi's deadline. When the opposition parties boycotted the opening days of the Diet's regular session, some coalition supporters were concerned that this tactic would complicate action on the budget. The new spending plan is chock-full of public works projects and other pump-priming measures aimed at realizing at least 1 percent real growth in the coming fiscal year. In his late January Diet address, Mr. Obuchi basically staked the future of his administration on realizing early approval of the budget (see JEI Report No. 5B, February 4, 2000). Since the lower house has the final say on budget matters after 30 days, even if the upper house drags its heels, the FY 2000 budget will be on the books in time for the April 1 start of the new fiscal year.

Ironically, however, it now appears that the Obuchi administration's stimulative budget may get it into trouble with voters. A recent opinion poll showed that while more than 60 percent of the respondents doubt that the economy will improve in the short term, nearly 70 percent think that the government should rein in public spending to avoid tax hikes later. In fact, some political commentators contend that growing grass-roots opposition to the Obuchi government's heavy reliance on borrowing — combined with questions about the LDP's commitment to financial reform — could force the prime minister to call the lower house elections sooner rather than later. These bread-and-butter issues are far more important to voters than the alleged stock-trading improprieties of a prime minister's aide, they argue.

Taking their cues from this survey, opposition leaders — when they were not going after Mr. Furukawa — used the February 23 Diet questioning session to attack Mr. Obuchi's policy of funding huge stimulus packages by adding to the mountain of government debt. Both Mr. Hatoyama and JCP chief Tetsuzo Fuwa charged that the prime minister and his economic advisers lack a clear vision of how to reduce Tokyo's red ink, which is expected to boost the public debt to ¥645 trillion ($5.9 trillion) by the end of FY 2000 (see JEI Report No. 2A, January 14, 2000).

But, as often has been the case when the DPJ chief has been asked to explain how his party would do things differently and more effectively, Mr. Hatoyama was at a loss. Rather than clarify the Democrats' own fiscal reform plan, he simply reiterated the importance of scaling back costly public works projects. Such a failure to provide a credible leadership alternative does not win the DPJ new supporters — no matter how fed up people are with the powers-that-be.

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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