FROM THE EDITOR

THE SUCCESSION ISSUE In the previous issue of Japan Echo we presented a summary of the November 2005 report of the Advisory Council on the Imperial House Law recommending revision of the rules concerning succession to the imperial throne. We also attached an introductory editorial comment, which I wrote. As I noted in this comment, I served as a member of the council, and since I was deeply familiar with the contents of the report, I ended up writing the comment myself.

Having been directly involved in the formulation of the council’s recommendations, I must recognize that what I wrote about the report unintentionally turned out to be of a favorable bent, although I tried to base my comments on the document’s contents and press coverage of the report. In this respect, I must also acknowledge that my decision to write the comment myself rather than delegate the task to a third party was a lapse of editorial judgment. I intend to take care to avoid similar lapses henceforth and will do my best to fulfill my responsibilities as editor in chief of Japan Echo, delivering the best possible variety of articles to our readers. For this I request your kind ongoing support.

The imperial succession is a matter on which there is considerable diversity of opinion within Japan. The present Imperial House Law limits the succession to males in a male line of descent. The council called for eligibility to be extended to females and to offspring in female lines of descent, but there are various opposing views, and public opinion in general has not yet converged on any clear consensus. And now the nation is rejoicing at the recent announcement of the happy news that Princess Akishino, consort of the emperor’s second son, is expecting a baby this September. Quite naturally, this auspicious development has added a new element to discussions of the succession.

We plan to offer a selection of articles presenting a variety of views on this matter in our next issue.

HAUNTED BY HORIE Koizumi is due to step down in September, when his term as president of the Liberal Democratic Party will end. Though relations with Japan’s immediate neighbors have become rocky over the last few years, until recently it seemed likely that he would have smooth sailing at least on the domestic front through the end of his term. But a number of developments have clouded this prospect. One is the latest Livedoor flap; another is the problem of buildings failing to meet minimum earthquake resistance standards; a third is discovery of prohibited content in imports of US beef; a fourth is the bid-rigging scandal involving the Defense Facilities Administration Agency. This string of problems has drawn attention away from the race within the LDP to succeed Koizumi and has exposed the top party to attacks from the opposition in the Diet.

The biggest problem for the prime minister and his party is the Livedoor issue. Last year Horie Takafumi, a 32-year-old entrepreneur who had won immense wealth and renown as the chief executive of Livedoor Co., an up-and-coming Internet business, ran for a lower house seat with the backing of the LDP. But on January 23 he and three of his senior colleagues were arrested, and in February they were charged with securities law violations.

We carried an article introducing Horie in Japan Echo last August. He seemed to represent a blast of fresh air that could shake up Japan’s stodgy business establishment, and his success served to inspire other young people. But his “money is almighty” line rubbed many people the wrong way, particularly those who believe that slow, steady efforts at making good products are the proper way to do business. And the government has moved to plug loopholes of the sort that Horie exploited in the rules concerning stock purchases.

The charges against Horie focus on release of falsified information and reporting of inflated corporate profits in connection with a takeover bid. It is also rumored that he will be accused of tax evasion. The opposition has attempted to capitalize on this affair with suggestions of LDP involvement. But the Democratic Party of Japan found itself coming under public criticism when it made accusations in the National Diet on the basis of information that turned out to be unfounded.

Illegal behavior must of course be thoroughly prosecuted. But many have nonetheless credited Horie with challenging a business establishment that is tied up in a web of vested interests and lacks the courage to reform itself. Also, we must avoid the temptation to return to excessive regulation in reaction to the deregulatory moves that allowed Horie to thrive. The top priorities are transparency and a free stock market that operates by the rules.

BRIGHT PICTURE, DARK SPOTS When prosecutors first searched Livedoor’s headquarters and Horie’s home in mid-January, the move triggered a plunge in the stock market, which had been on a steady upward trend until then. But the market recovered within about a week. Meanwhile, the economic indicators for October–December 2005 have been showing a bright picture, with gross domestic product growing at an annualized rate of 5.5% and strong consumer spending and capital investment by manufacturers.

Against the backdrop of this solid economic performance, the Bank of Japan decided at its March policy board meeting to end the highly extraordinary policy of quantitative easing that it has been implementing since 2001 to counter the deflationary spiral in the economy. The central bank reached its decision on the basis of indices showing that prices have stopped falling. In order to avoid disrupting the market, however, the BOJ will implement the change cautiously. It will leave its target for banks’ current account balances at the present level of about ¥30 trillion for now and move gradually to lower the target range to the vicinity of ¥6 trillion. This will normalize the volume of money flowing through the economy.

In the central sections of Tokyo, the economic recovery has caused local governments’ tax revenues to swell beyond expectations, making it possible for some wards to come out with new measures aimed at countering the falling birthrate. For example, Shinagawa has announced that it will provide dependent children’s allowances to families whose incomes are too high to qualify for the allowances paid by the national government, and Minato has decided to supplement the lump-sum maternity benefit provided under the public health insurance system (generally ¥300,000) so as to cover maternity expenses up to a maximum of ¥500,000. It is good to see moves like these to address the baby-bust issue, an area where efforts have lagged behind those directed at the growing population of senior citizens.

Both the growth of consumer spending (including strong sales of high-priced items) and the generous benefits to encourage births are, however, limited to Tokyo and a few other metropolitan areas. Much of Japan is still mired in recession, and the incomes of workers’ households with children have been lagging. Debate in the Diet has recently focused on the gaps that have become evident in incomes, savings, employment, education, and other areas, and the DPJ has been asserting that the Koizumi administration’s policies have been exacerbating these gaps. But we need to avoid a return to the pursuit of equality to an excessive degree, as seen in Japan in the past; this sort of thinking rejects even healthy competition. We plan to carry some articles addressing this topic in our next issue.

In closing let me touch briefly on the matter of beef imports. Japan banned imports of beef from the United States following the discovery of mad cow disease there in December 2003. After prolonged negotiations, the ban was lifted late last year, but in January a delivery of veal was found to contain clearly visible spinal cord parts, which were prohibited under the agreement. There seem to be significant differences between Japan and the United States in private-sector behavior—specifically, the extent to which businesses are punctilious in observing government rules and the quality of the communication within corporate organizations. These are matters that probably neither government had in mind in the bilateral negotiations. (Iwao Sumiko)

© 2006 Japan Echo Inc.