Watershed election for Japan

by Hugh Cortazzi

LONDON — The results of the Japanese general election on Sept. 11 will be important not only for the future of Japanese parliamentary democracy but also for the Japanese economy and Japan’s foreign relations.

Prime Minister Junichiro Koizumi called the election earlier this month after the Upper House rejected his proposals to privatize postal services. To the uninitiated outside Japan, this seemed like an odd reason to call an election. But Japanese postal services, due especially to the privileged position of the postal savings accounts and life insurance policies, have competed unfairly with Japanese banks and insurance companies by providing government-guaranteed deposits and insurance services.

More importantly, the postal deposit system has resulted in the buildup of a huge government-controlled fund that has been used to finance public works projects of dubious long-term economic value. The main beneficiaries have often been construction companies that bid for the projects under the potentially corrupt dango (collusion) system. Reform of a system that has long distorted the Japanese economy is overdue.

Other economic issues face Japan in 2005 besides postal privatization. The budget deficit continues to rise and will have to be tackled in due course by further economies in government expenditures and by tax rises, including almost certainly an increase in the consumption tax.

At the same time, there will have to be some increase in spending on social security and pensions for an aging population in which many people are unable to find work or are underemployed in temporary positions. Decisions on these issues will have to be taken just as Japan’s economic recovery looks better than it has for some time, although it is still not assured.

Throughout the developed world, there are strong arguments for the growth of central government as well as the need for “smaller government.” There are also pressures for the devolution of more powers to local authorities and for more effective deregulation. It is much easier to talk about these issues than to take effective action to deal with them.

Vested interests can always find persuasive arguments in favor of the status quo. The most cogent of these is that strict and comprehensive regulations are needed to protect consumers and to ensure “fairness.” The precept of “buyer beware” (caveat emptor) is not regarded as adequate by bureaucrats who assert that decisions delegated to local authorities will inevitably lead to inequalities between regions. An English axiom says that “all is fair in love or war,” but in fact absolute fairness can never be attained anywhere.

The likely decline in the population is a major cause of concern. Japan’s net reproduction rate is down to 1.29 when population stability requires a rate of at least 2.1. More family-friendly policies require not only more money but also a change in attitude among Japanese male chauvinists in government and business.

Japanese agricultural protectionists argue against further liberalization on the grounds that Japan’s food self-sufficiency ratio is less than 50 percent, but Japanese protectionism is an obstacle not only to the conclusion of bilateral trade agreements that could benefit Japanese industry but also to world trade negotiations. It also keeps Japanese costs high and limits Japan’s overall ability to compete.

Foreign policy issues play a secondary role in most elections and are unlikely to be crucial in this election. One question concerns the role of the Self-Defense Forces in Iraq. No Japanese government can afford to get too far out of step with the United States, and any decision over the future role of Japanese forces in Iraq needs to be handled sensitively. If a decision were made to withdraw from Iraq, it should not be allowed to appear as a response to the threat of terrorist attacks in Japan or against Japanese interests around the world.

The fact is that, whatever decision the Japanese authorities make on Iraq, Japan and other democratic states will remain under threat from Islamic extremists.

Another electoral issue arises from friction with China and Korea over Koizumi’s visits to Yasukuni Shrine, Japan’s memorial to its war dead. The visits have shown the prime minister’s lack of sensitivity to foreign opinion and his streak of obstinacy and arrogance. But there are more important issues than this involving China and the two Koreas. One of these is how to make progress in the six-party talks over North Korean nuclear activities.

Constitutional reform will eventually have to be tackled, but it is not yet ready to become a major electoral issue as no consensus exists on which clauses need to be amended and how they should be changed.

Foreign observers hope that the election will represent a major step on the way to a two-party system in Japan. But an effective two-party system requires that both parties present a wide range of different policies. It is not yet clear to most foreigners where the LDP and the DPJ really differ.

Koizumi has tried hard to undermine factionalism in the LDP and to alter the basis on which the LDP governs. The DPJ, for its part, has attempted to set out different policies, but many of the differences appear cosmetic to outsiders. Personalities matter greatly in politics everywhere. They have been particularly important in Japan, and it is not yet certain whether Koizumi has banished personality issues to the sidelines and effected a fundamental change in the Japanese political scene.

The September election will be important for Japan but, regardless of who wins, the system will change slowly — not least because the Japanese electoral system continues to be weighted in favor of rural constituencies over urban ones. Moreover, neither of the main parties is united and a further regrouping may be necessary. In the meantime, the next government may have to depend on support from the New Komeito party.