The Dow-Jones industrial average on the New York Stock Exchange broke through the barrier of 10,000 March 16. Following the overnight rally, the benchmark Nikkei average on the Tokyo Stock Exchange regained the 16,000 level for the first time in seven and a half months. The advances appear to signal economic recovery — or do they?
The United States is enjoying an unprecedented economic boom while the rest of the world continues to experience depression. Japan is still troubled by economic uncertainties. The government’s pump-priming package is beginning to have some effect, but the nation’s attempts to reform its economic structure are moving at a snail’s pace. There are widespread fears that the effects of the package will be only temporary.
There is no denying that the administration of Prime Minister Keizo Obuchi is enjoying smooth sailing in terms of its political and economic management — a sharp turnaround from last August, when it was inaugurated. At that time, the outlook for the administration looked grim.
Since the opening of the ordinary Diet session in January, the government has been successful in steering the Diet, thanks in part to the ruling coalition of the Liberal Democratic Party and the Liberal Party. The fiscal 1999 budget passed the Diet March 17, two weeks ahead of the fiscal yearend March 31, marking the earliest Diet enactment of a budget in the postwar period.
Meanwhile, the economy is showing some signs of improvement. The Economic Planning Agency, in its monthly report for March, said the economy is “slowing its downward momentum.” The EPA first noted signs of “embryonic movements” of recovery in its December report.
Reflecting these incipient signs of economic recovery, the Obuchi Cabinet’s approval ratings have risen to around 35 percent from the dismal 20-25 percent it registered in its early days. Still, the disapproval ratings are in the 40-50 percent range, exceeding the approval ratings by 10 points. There is widespread speculation that Obuchi will be re-elected unopposed in the LDP presidential election in September and will retain the prime minister’s post.
The political outlook is clouded, however, by three elements of uncertainty: economic trends, control of the Diet in the second half of the session and the Tokyo gubernatorial election.
Let us begin with the last of these factors. The Tokyo election will be contested by six men: former U.N. Undersecretary General Yasushi Akashi, backed by the LDP; former Democratic Party of Japan deputy leader Kunio Hatoyama, supported by the DPJ; Mitsuru Mikami, endorsed by the Japan Communist Party; former LDP lawmaker Shintaro Ishihara; former Foreign Minister Koji Kakizawa; and the political scientist Yoichi Masuzoe. The last three are all conservative independents.
Polls indicate that Ishihara, the last entrant in the race, is leading, followed by Kakizawa and Hatoyama in that order. The other three candidates are facing an uphill battle.
Party-by-party voter bases may make the election seem like a close race between the LDP-backed Akashi and the DPJ-backed Hatoyama, but that will not be the case in the Tokyo metropolis, where floating voters constitute the No. 1 voter segment. The unpopularity of Akashi, who was brought into the race from outside Tokyo, is widely blamed on the miscalculation of LDP leaders. Should he lose the election, LDP executives could be held responsible, and the Obuchi Cabinet could come under pressure to resign.
A victory for Ishihara, who is known as an anti-U.S. nationalist, would have far-reaching international repercussions and would cause tensions between the LDP government and the Tokyo metropolitan government.
Meanwhile, the second half of the Diet session is likely to be more difficult than the first, since it will deal with controversial legislation: bills for implementing the updated guidelines for Japan-U.S. defense cooperation and those for separating the Finance Ministry’s fiscal and financial functions. However, I believe that the ruling and opposition forces will agree to pass the bills.
Eventually, economic trends are likely to have a decisive influence on national politics. If more companies than expected reveal serious financial problems in their statements of account for the business year that ends March 31, the present slight economic lull and the Obuchi Cabinet’s complacency would end. There would be a rising call for Obuchi’s resignation, followed by bruising rivalries in the LDP presidential election in September.
On the other hand, should prospects improve for economic recovery toward June, when the Diet closes, Obuchi would have little trouble winning re-election as LDP president. Riding a wave of popularity, he could even dissolve the Lower House for a snap election.
One thing is certain: the three months between March 31 and the end of the Diet session will be critical for Japanese politics.
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