Now that the electorate has overthrown the old guard, worries are growing that the nation’s new leaders lack a long-term vision to turn around the hobbled economy.
The Democratic Party of Japan promised in the recent election to expand the social safety net with handouts for families with children and farmers, toll-free highways and a higher minimum wage.
But critics say such programs were mainly designed to woo voters and fall short of mapping out a road to growth or tackling deeper issues like the aging, shrinking population and ballooning national debt.
“In short, what they are going to do is unclear,” said Koetsu Aizawa, an economics professor at Saitama University. “They were out to win an election. And they have barely addressed the issues of structural reforms and economic growth.”
Adding to the concerns is a widely circulated opinion piece by DPJ leader Yukio Hatoyama that sharply criticizes the U.S. business model for growth that Japan had emulated during the postwar period.
In the piece, Hatoyama promises a Japan free of what he calls the “unrestrained market fundamentalism and financial capitalism, that are void of morals or moderation” to better protect the finances and livelihoods of the Japanese people.
Aizawa and other free-market advocates worry that the party may step away from deregulating the economy, a process that began under Prime Minister Junichiro Koizumi. The DPJ hasn’t clearly come out against deregulation, but the party has said it wants to review Koizumi’s program to privatize the postal system, which works as a bank and could potentially funnel money into the private sector.
A move away from deregulation, critics argue, would stunt Japan’s long-term growth prospects and disengage it from the global economy by discouraging competition and foreign investment. The DPJ says its proposal to give families ¥26,000 a month per child through junior high school is meant to help consumer spending and encourage women to have more babies. But some worry it will be expensive and only bloat the national debt, which is nearly 200 percent of the economy.
Giving cash to households won’t necessarily boost consumption because the money could merely end up as savings, and the DPJ could fuel people’s fears about heavier taxes, according to Tetsufumi Yamakawa, chief economist at Goldman Sachs Japan.
Equally skeptical is the business world, which has long thrived on ties to the ruling party. Some have expressed worries that the DPJ’s promise to ban the hiring of contract workers in manufacturing.