It was a humiliating blow for Prime Minister Junichiro Koizumi.

Naoto Kan, leader of the Democratic Party of Japan, came out looking the stronger of the two following a recent Diet debate in which he slammed Koizumi for breaching three key policy pledges, including one to keep the issuance of government bonds below 30 trillion yen. Koizumi was left licking his wounds after being forced to apologize for countering that the breaches were “no big deal.”

Koizumi’s about-face, however, comes as no surprise to many observers, with some saying it is simply indicative of today’s politics.

A glance at Diet debates of the past decade reveals a series of twists and about-faces; policies swinging like a pendulum between pump-priming measures and austere fiscal reform.

“(Lawmakers’ economic policies) have been day-to-day patchwork,” said Junichi Makino, senior economist at the Daiwa Institute of Research Ltd. “When business conditions deteriorate, they just start calling for economic stimulus measures (despite their earlier support for fiscal austerity).”

For many politicians, attacking opponents and surviving the next election seem to take precedence over maintaining consistent policies.

The ruling Liberal Democratic Party, which Koizumi heads, is by no means the only culprit. The DPJ, the largest opposition force, has also been divided, if not fundamentally confused, over key economic policies. It has also failed to present viable alternatives to the ruling camp’s economic strategies, and has flip-flopped depending on what the ruling camp does.

In 1998, the DPJ criticized the austere budgetary policy of Prime Minister Ryutaro Hashimoto’s Cabinet and argued that the Fiscal Structural Reform Law, enacted in November 1997 to cap government spending, should be lifted to prop up the economy.

The Cabinet of Hashimoto’s successor, Keizo Obuchi, switched to massive spending on public works projects, freezing the fiscal structure law in November 1998 and introducing a series of pump-priming measures.

The largest opposition party subsequently dubbed Obuchi “the world’s debt king.”

When Koizumi took over from Obuchi’s successor, Yoshiro Mori, in April 2001 and advocated fiscal discipline, then DPJ leader Yukio Hatoyama expressed support. Koizumi enjoyed extraordinarily high approval ratings in media polls at the time, offering a fresh approach on the heels of the highly unpopular Mori.

Then came the realization that Hatoyama’s praise for Koizumi, and his lack of aggressiveness in Diet debate, only served to accelerate the decline in popularity of the DPJ. This led the party to eventually turn against the prime minister.

Even Kan has bitter memories of endorsing ruling-party policies. In 1998, he was harshly criticized for striking a compromise with the LDP on bills dealing with a financial crisis. This time around, he appears determined to clearly oppose the ruling camp.

“I now have my back to the wall, so I’m determined to do everything I can to realize a change of power,” Kan told the annual DPJ convention in Tokyo earlier this month.

Easier said than done.

The biggest opposition to Koizumi’s reform plans currently comes from within his own party.

A majority of LDP members are calling for more pump-priming measures to save construction-related firms, and hence their vested interests, effectively dwarfing the DPJ as the No. 1 opposition party.

Faced with this dilemma, one tack the DPJ took recently was to try to differentiate itself from the ruling bloc by presenting a different strategy on how to spend tax revenues.

While the DPJ admits supplementary spending is needed to stimulate the economy, it now argues that the focus of spending should be shifted from public works projects to service-related sectors that generate more jobs, including building nursery schools and elderly homes, and employing more police officers to improve public safety.

The Daiwa Institute’s Makino basically agrees with the new DPJ policy, saying the budget’s contents, not its size, matters most for the economy.

“Koizumi advocates ‘structural reform’ of fiscal spending, but he has failed to change the structure itself and merely reduced the size of some public works budgets,” Makino said, adding that more emphasis should be put on strategic infrastructure, including investments for hub airports and urban areas, instead of traditional rural public works projects.

On Friday, Koizumi is scheduled to deliver a key policy speech, and heated economic debate in the Diet is expected to begin next week.

“Being the ruling power is the ‘glue’ that keeps us in one party” an LDP executive said in explaining why Koizumi is still at the party helm despite the huge internal policy rift.

Observers, however, say the DPJ, without such a binding force, will have difficulty hanging together when divisions emerge and it fails to convince voters that its policies merit it taking the reins of power.

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