Aso losing grip on power as LDP faces crisis over budget problems

by and

Prime Minister Taro Aso signaled last week his readiness to depart from austere fiscal policies ardently defended by then Prime Minister Junichiro Koizumi and his successors.

The about-face was immediately seen by politicians and observers as another sign of Aso’s rapidly weakening power: It appears he is no longer capable of controlling ruling bloc Diet members who want larger stimulus budgets out of fear they could lose their seats in the next election.

“As many as 70 percent to 80 percent of Liberal Democratic Party lawmakers are wary of whether they can remain the ruling party under the Aso administration,” acting LDP Secretary General Nobuteru Ishihara said Friday in a speech in Tokyo.

“(Aso’s administration) is on the edge of a cliff both politically and in terms of the economy,” Ishihara was quoted as saying by Kyodo News.

Traditionally, LDP lawmakers have brought public works projects to their home districts to win more votes and campaign contributions.

But Koizumi, in 2006, set down budget rules that automatically reduce spending on public works and social welfare in order to hold down the deficit, which has been growing at an alarming rate since the late 1990s. Government debt is equal to 170.9 percent of Japan’s gross domestic product in 2008, the worst among developed states.

Koizumi managed — barely — to fend off demands from lawmakers for more pork-barrel spending by appealing directly to voters, who regarded him as a robust reformist.

But only two months after becoming prime minister, Aso, who has repeatedly flip-flopped on a number of key policies, not to mention his many gaffes, is looking like a lame duck. His support rate among voters is dwindling and some LDP executives are in open rebellion.

Takashi Sasagawa, chairman of the LDP General Council, has even indicated that the LDP’s top-decision making body may stop supporting Aso unless he clearly abandons Koizumi’s austerity policies.

“In return for the General Council’s all-out support for the Aso Cabinet, (the prime minister) should make a change (in the fiscal policy) to compile a budget with his own colors,” Sasagawa told a news conference Tuesday, part of which was broadcast nationwide.

Bowing to pressure from ruling lawmakers, Aso pledged in a new policy paper Wednesday to “take courageous actions flexibly and resiliently in accordance with (unfolding) situations.”

LDP executives have also floated the idea of creating extra allocations separate from Koizumi’s budget caps. Some even advocate spending ¥30 trillion over the next three years in this fashion.

Asked about it by reporters, Aso did not rule out extra allocations outside budgetary caps.

Aso’s compromise underlines the seriousness of the historic crisis facing the LDP, which is locked in a neck-and-neck race for popularity with the Democratic Party of Japan.

Aso had been leading DPJ leader Ichiro Ozawa in opinion polls as the most desirable politician to hold the office of prime minister, one of the few hopeful signs for the LDP heading toward the next Lower House election, which must be held by September at the latest.

Ozawa, however, managed to overtake him earlier this month.

According to a joint poll by the Sankei Shimbun and television station FNN, Ozawa beat Aso by 1 percentage point as 32.5 percent of the respondents identified Ozawa as their top choice for prime minister.

Former Defense Minister Yuriko Koike, who ran against Aso for the LDP presidential race and is an advocate of Koizumi’s reforms, said on a TV program videotaped Friday that the Aso is losing his grip on LDP lawmakers and the LDP is in danger of falling apart.

“Next year, a number of new parties may pop up one after another,” Koike reportedly said, adding that some lawmakers may bolt from the LDP to look out for their own survival in the upcoming Lower House election.

Economists meanwhile have urged Aso to ease long-standing public concern over social security and to strengthen Japan’s economic competitiveness, rather than focus on short-term stimulus measures.

“The government only has (temporary) funding sources such as the special accounts or foreign currency reserves,” Hiromichi Shirakawa, chief economist at Credit Suisse, said.

“People are no longer fools. . . . Tax cuts or public works won’t have sustainable effects to help livelihoods,” Shirakawa said.

Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management, also pointed out that Aso’s Cabinet has been inconsistent and indecisive on economic policies, including flip-flops on funding for the basic pension system, and the budget for next year.

The unpredictability of, and uncertainty over, Aso’s policies have left consumers less than eager to spend, Muto said.

“(The government’s executives) are making remarks that heighten uncertainty over the future, and that is causing consumption to keep declining,” he said.

He argues that government economic measures need to focus on strategic areas to improve the country’s long-term competitiveness, not short-term projects as advocated by lawmakers in the ruling camp.

“It would be a plus (for the government) to essentially strengthen the competitiveness of the Japanese economy, or develop a clear schedule for handling the pension issue to ease public concern,” Muto said.

Watanabe may bolt

Kyodo News

Former administrative reform minister Yoshimi Watanabe hinted Sunday he may leave the Liberal Democratic Party to form a new party

Recent comments by Watanabe criticizing Prime Minister Taro Aso have drawn a backlash from senior LDP lawmakers.

“If there are growing voices that I should leave the LDP, I am not ruling out the possibility of doing so,” he said on Fuji TV.

Arguing that Aso’s policies are not coherent, Watanabe said there is a prevailing mood within the LDP that it cannot competently face the next general election under his leadership.