Rocky road ahead for Kan as DPJ addresses economy

by Alex Martin

The top priority for Prime Minister Naoto Kan and the Democratic Party of Japan during the extraordinary Diet session Friday will be to clear a supplementary budget to kick start the feeble economy.

But the two-month session, expected to wrap up Dec. 3, is bound to be a rocky one as the DPJ takes its first shot at managing a divided Diet after losing its Upper House majority in the July 11 election.

With no major elections on the horizon, analysts agree the session will be a touchstone for the DPJ’s ability to work with the opposition camp in enacting legislation.

Nihon University political science professor Tomoaki Iwai said the extra Diet session will be a test for the next regular Diet session and that observers will want to see how far the ruling and opposition camps are willing to negotiate and compromise.

“It’s a pilot study, a test case to foresee what may be expected in the next ordinary Diet session,” Iwai said.

While the DPJ will be reaching out hard to enact bills, the opposition will have to carefully calibrate its stance to appear neither weak nor stubbornly uncooperative, he said.

But however the DPJ plays it, the recent diplomatic spat with Beijing over the arrest of a Chinese fishing boat captain, as well as DPJ heavyweight Ichiro Ozawa’s ongoing political money scandal, may bring Diet deliberations to a standstill.

While the trawler captain, whose boat collided with Japan Coast Guard cutters in disputed waters near the Senkaku Islands, has been released, the incident has put Japan-China relations under huge strain.

The main opposition Liberal Democratic Party was quick to slam the government as knuckling under to Chinese pressure, while also criticizing the Naha Prosecutor’s Office in Okinawa Prefecture for exceeding its authority in releasing the captain and for commenting that the decision was made in “consideration of future Japan-China relations.”

“It’s not something an investigative authority should say,” LDP President Sadakazu Tanigaki said Sept. 24, the day it was announced the captain would be released. “The government should be responsible in making political decisions considering diplomatic situations.”

Furthermore, the issue of money and politics will likely resurface once the inquest body currently reviewing Ozawa’s prolonged political funds scandal reaches a conclusion, likely by the end of October.

If the panel decides that the dragged out case merits indictment, Ozawa, who lost to Prime Minister Kan in the recent DPJ presidential election but still holds tremendous clout within the party, will automatically be brought to court.

Iwai of Nihon University said that with the Senkaku dispute still on the front burner and Ozawa’s case looming, the DPJ has a difficult road ahead.

“The DPJ will have a hard time focusing until the results of Ozawa’s case comes in,” he said.

Meanwhile, the economy has been suffering from deflation, high unemployment and sluggish consumer and business spending. The yen’s recent rise against other major currencies also has been hurting exporters, who drive most of the growth in the Japanese economy.

Amid such dire straits, Kan has ordered that a supplementary budget be drafted to finance a stimulus package to fight deflation and keep the economy growing. He is expected to refrain from issuing new government bonds to finance the package, which could be as large ¥4.6 trillion.

The LDP, however, is calling for an extra budget worth ¥5 trillion, with roughly ¥1 trillion of it financed by construction bonds. Its former coalition partner, New Komeito, wants the extra budget to be ¥4 trillion, with ¥1.5 trillion of it funded by government bonds.

The DPJ aims to draft its version of the budget as quickly as possible while opening negotiations with the opposition so it can be submitted by the end of October and cleared by the Lower House by early November.

This would give it enough time to be enacted automatically during the session, even if the opposition applies the brakes in the Upper House. By law, supplementary budgets are enacted within 30 days of being sent to the Upper House.

But with the opposition in control of the Upper House, the DPJ’s chances — if any — of enacting any of the other bills on the table — including the one on the postal reform bill it promised junior coalition partner Kokumin Shinto (People’s New Party) — will be slim.

The bill, considered Kokumin Shinto’s top priority, aims to roll back the planned privatization of Japan Post Holdings Co. but was scrapped in the previous Diet session.

Considering the limited time and the divided Diet, experts say the ruling coalition will have a hard time pushing the bill through both chambers, which is sure to irritate Kokumin Shinto.

Toyo University economics professor Satoru Matsubara said the DPJ at this point has no option but to concentrate on clearing the extra budget and leave other bills on the back burner.

“The ruling and opposition camps will be in heated debate on where to spend the extra budget, its scale, the amount of tax revenue to spend, and whether or not to issue government bonds,” Matsubara said.

But he said that, considering the urgent need for economic stimulus, the opposition can’t afford to take a hardline stance and will likely compromise.

Lacking an Upper House majority, the DPJ plans on seeking “partial alliances” with opposition parties on a policy-by-policy basis.

Matsubara said the focal point of the session may be whether the opposition can force the DPJ to swallow some of its requests in return for their cooperation.

“For example, the opposition could reach a compromise by asking the DPJ to spend the funds planned to be distributed for next year’s child care allowances in other areas,” he said.

Despite initially promising to dole out a ¥26,000 monthly allowance per child for families with children up to age 15, the DPJ managed this year to supply only half that amount due to financial constraint. It plans to make up for the shortfall by offering goods and services instead of cash.

The LDP has slammed the DPJ’s monthly child care allowances and says that ¥700 billion could be saved by suspending the policy entirely.

“I believe it is possible that the opposition will make such tradeoffs with the DPJ,” Matsubara said.