FROM THE EDITOR

DRUBBING AT THE POLLS A month has passed since the July 29 election for the House of Councillors, which resulted in a crushing defeat for Prime Minister Abe Shinzô’s Liberal Democratic Party. Since then, Abe’s poll figures have recovered to a certain extent. According to an August 27–28 survey conducted by Nikkei Inc., publisher of the daily Nihon Keizai Shimbun, the rate of approval for the Abe administration was 41% (against a disapproval rate of 40%), 13 points higher than the figure as of the end of July. This may be due in part to favorable assessments of his activities since the election, including his August 19–25 trip to Indonesia, India, and Malaysia, and his appointment of new LDP officers and a new cabinet (including heavyweights in key posts) on August 27. Note, however, that 49% of those surveyed in late August still disapproved of Abe’s decision to stay in office following the election defeat, with only 40% saying they approved.

The essay below by Takenaka Harukata offers a thorough analysis of the LDP rout. Here I would like to make just one point in this connection. The drubbing that the Liberal Democrats took was clearly due in large measure to the record-keeping mess in the public pension system and scandals involving senior politicians and money. But Takenaka notes another important factor: In the summer of 2005 a number of LDP legislators held out against Prime Minister Koizumi Jun’ichirô’s proposal to privatize the postal system, and they were expelled from the party. But after he came to power last year, Abe decided to admit a group of these "postal rebels" back into the LDP fold. With this move he distanced himself from Koizumi’s structural reform agenda and left much of the general public with the impression that the LDP was heading back to its old ways. This, as Takenaka observes, was another important factor contributing to the party’s election defeat.

POLITICAL PROSPECTS Next I would like to touch on some of the key domestic and international issues that Abe and his new cabinet face. First of all, the domestic political picture is now quite different. The opposition Democratic Party of Japan led by Ozawa Ichirô emerged from the July election as the biggest party in the upper house, and Ozawa has made it clear that he will be working to force Abe to dissolve the lower house and call a general election. Logically, however, it is not likely that this will happen soon. The LDP won a landslide victory in the 2005 lower house election, and whenever the next election may be held, it is almost certain to result in a decrease in the number of LDP seats. Furthermore, even if a general election were held in the near future and the LDP somehow managed to win another big victory in the lower house, the DPJ would still be dominant in the upper house. The term of the current House of Representatives membership does not expire until 2009; in other words, there are almost two years until the deadline for the next election. Since Abe cannot hope to break the stalemate in the National Diet through a lower house election, it is hard to imagine that he will call one. More important is whether he can survive as prime minister.

One result of the Diet stalemate may be to block action on important policy issues, such as tax reform. For example, the idea of increasing the consumption tax from the current rate of 5% has been postponed. Last month the head of the LDP’s Research Commission on the Tax System acknowledged that it would not be feasible to include such a move in the tax reform package for fiscal 2008 (April 2008–March 2009), since the DPJ wants the rate to be left unchanged for the near future. If the upper house rejects the government’s budget bills, the ruling coalition can still get them enacted by having the lower house pass them again by a two-thirds majority. But using this approach to force through a consumption tax hike would be difficult as a practical matter. And if the consumption tax cannot be increased, it will not be possible to move ahead with a sweeping reform of the system, including cuts in corporate taxes. It may also be hard to come up with the revenues needed to meet the government’s commitment to increase its contributions to the public pension system (currently one-third of the cost of the basic pension benefit is covered by the national treasury and the rest by contributions from participants; the government’s share is supposed to be increased to one-half by fiscal 2009). In addition, the deadlock may jeopardize prospects for the government’s plan to eliminate the deficit in the primary balance (the general account balance excluding debt service and new borrowing) by fiscal 2011.

THE DPJ’S DUBIOUS AGENDA Another key area is farm policy. The policy of the LDP-led administration is to provide direct payments to farming households whose operating scale is above a certain level. The DPJ, by contrast, wants to devote a sum on the order of ¥1 trillion to provide income guarantees to all commercial farmers. This was one of the planks of its election manifesto, and it is expected to submit a bill for this purpose to the Diet this fall. The farm vote used to be solidly for the LDP, but it is said that many farmers picked the DPJ in the July election, believing that the current government has turned its back on disadvantaged farming households. But as University of Tokyo Professor Honma Masayoshi noted in a recent article (Nihon Keizai Shimbun, August 27), even though Japan’s farms may be tiny, that does not mean that farmers are disadvantaged. Almost 60% of them have farming sales of ¥1 million or less a year, but their average annual income is a substantial ¥7.71 million, 20% higher than the average for workers’ households (as of 2003). The average ¥1.10 million a year that they make from farming accounts for only 14% of their total income.

Japan’s farmers, in other words, are not weak or disadvantaged. Their farms may be small, but the land they own is an asset, and they have higher average incomes than ordinary workers’ households. The DPJ wants to provide all of them with income guarantees. This is the worst sort of policy, aimed at preserving the status quo. What the government needs to do at this point is implement farming policies consistent with trade liberalization under economic partnership agreements (comprehensive free trade agreements) with other countries. This means pursuing structural reform of the farming sector. There is a danger that the heightening of calls for protection of farming as a result of the July election outcome will block progress in pursuit of the country’s trade strategy, including the move to conclude an EPA with Australia.

Another issue is the fast-approaching expiry of the Antiterrorism Special Measures Law on November 1. This law allows ships from Japan’s Maritime Self-Defense Force to refuel naval vessels from countries including the United States, Britain, and Pakistan in support of their activities fighting terrorism in Afghanistan. The government wants to extend this legislation, but the DPJ’s Ozawa has come out against it. The DPJ has reportedly established an internal consensus on opposing extension of the law during the upcoming Diet session, and Ozawa is suggesting that Japan should focus its assistance on the fight against poverty, which he says is the root cause of terrorism.

The stance that Ozawa has taken on this issue clearly runs counter to the strengthening of the Japan-US alliance and represents a step backward from Japan’s commitment to helping in the war against terrorism. In its drive to win power, the DPJ seems ready to shake the foundations of Japan’s foreign policy. This approach may backfire, causing voters to decide that the party is not fit to rule.

R.I.P. MIYAZAWA KIICHI On June 28 former Prime Minister Miyazawa Kiichi passed away. Miyazawa was a prominent figure for decades, consistently supporting the policy line adopted by Prime Minister Yoshida Shigeru shortly after World War II, holding down defense spending and giving priority to the economy. He served as prime minister from November 1991 to August 1993. Opinions differ about the economic policies he pursued during that period and his subsequent term as minister of finance in the late 1990s. But the idea that Japan must not exercise military force overseas, which was one of his basic principles, should continue to be the foundation of Japan’s foreign policy, and the appraisal of former Prime Minister Nakasone Yasuhiro, who called him the greatest intellect among Japan’s postwar politicians, seems sure to endure. May he rest in peace. (Shiraishi Takashi)

© 2007 Japan Echo Inc.