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Despite widespread anxieties about potential Y2K disasters, the world greeted the new millennium without trouble. Volatility in the New York and Tokyo stock markets since the beginning of the year should not cause undue concern about the economic future at home and abroad.

The Japanese political situation remains calm for now, but is likely to see some turbulence this year, when the Lower House must be dissolved for a snap election.

First, the ruling Liberal Democratic Party is in utter confusion over the nomination of a candidate for the upcoming Osaka gubernatorial election. Top LDP executives have decided to back a former trade ministry official for the election, while the party’s Osaka chapter supports a different candidate. The former bureaucrat is also backed by the LDP’s coalition partners — New Komeito and the Liberal Party — and the opposition Democratic Party of Japan.

It is understandable that the LDP, which has a fragile voter base in Osaka, prefers to field a joint candidate with other parties. However, the intra-LDP division over the Osaka election, Japan’s second most important gubernatorial race after the Tokyo battle, reflects the lack of cohesion in the party and is highly deplorable.

Second, another LDP rift has emerged between the leadership group under Prime Minister Keizo Obuchi and a rival group under former Secretary General Koichi Kato.

Kato recently urged the LDP to dissolve its coalition with the LP and New Komeito before the general election, saying the LDP would lose if the opposition forces made the three-party alliance into a campaign issue. Deputy LDP Secretary General Hiromu Nonaka denounced Kato for his remarks, and Chief Cabinet Secretary Mikio Aoki and other top government and LDP officials joined in the criticism. In my opinion, serious intra-LDP differences exposed by the fray could hurt the LDP’s chances in the general election.

The trouble reflects differences over economic policy between Obuchi’s leadership group, which has been pushing deficit financing to push economic stimulus measures, and Kato’s antileadership group, which has expressed grave concern over the possibility of serious fiscal difficulties. Among other critics, former Chief Cabinet Secretary Seiroku Kajiyama, who lost to Obuchi in the 1997 LDP presidential election, says Obuchi’s policy would doom Japan to financial failure.

Debate on the tripartite coalition involves political strategies, while that on economic and fiscal issues is related to basic policies. Both types of debate reflect serious differences of opinion that have emerged when a general election is approaching.

When the election will be held and how they should establish campaign issues, political strategies and party policies are the major questions faced by Japanese political leaders.

Political pundits have mentioned these possible time frames for the dissolution:

* late December to January.

* April (immediately after the Diet passes the fiscal 2000 budget), for an election in May.

* July (immediately after Japan hosts the Group of Eight summit in Okinawa), for an election in August or September.

* sometime in autumn (before the sitting Lower House members complete their terms), for an election in October.

The first possibility has practically disappeared. The possibility of a dissolution at the outset of an ordinary Diet session, which opens Jan. 20, is slim. The three coalition partners have promised to pass a legislative package to cut Lower House proportional representation seats by 20 in the new session. The session is also scheduled to start debate immediately on the all-important fiscal 2000 budget.

I believe that there is a 40-50 percent chance for a dissolution immediately after the Diet passes the budget. It is doubtful, however, that Obuchi will decide to dissolve the chamber at that time, because the public nursing-care insurance system to be introduced in April has received strong public criticism.

There is also a 40-50 percent chance for an election in August or September, following a dissolution immediately after the G8 summit. Obuchi is likely to try to make the summit a high-profile success and take advantage of it in the election. However, Obuchi could pass up this chance if political trouble occurs over the U.S. military presence in Japan and other issues.

The only remaining possibility is an election in October, before the Lower House members complete their terms, but this will deprive Obuchi of his power to select the most opportune time.

In my view, Obuchi will consider a dissolution in April or July. His decision is likely to hinge on economic trends and his Cabinet’s popularity ratings.

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