FROM THE EDITOR (SHIRAISHI Takashi)

CHRONOLOGY (January – February 2008)

THE DIVISION IN THE GOVERNMENT (TAKENAKA Harukata)

Tax Reform Runs into a Legislative Logjam (ABE Yasuhisa)

With the opposition now in control of the upper house in the Diet, the process of enacting this year’s tax reform package has become clouded. One major issue is the handling of tax measures slated to expire in the near future, particularly the provisional tax rate on gasoline. The opposition wants to let the gas tax measure expire. Now that the ruling coalition is unable to pass tax reforms on its own, the ruling and opposition parties should engage in a proper debate about the future shape of the tax system.(Ronza, February 2008)

Gloom in Kasumigaseki (Editorial Department, RONZA)

The civil servants at the headquarters of the central government ministries in Kasumigaseki have traditionally cultivated close ties with the politicians of the ruling Liberal Democratic Party, but now they are being forced to devote greater effort than before to dealing with opposition legislators. They complain of legislative grandstanding in connection with issues like the Social Insurance Agency’s slipshod handling of pension records. Lawmakers’ demands for all sorts of background materials have been imposing a heavy burden on the bureaucrats. (Ronza, February 2008)

Rethinking the Role of the Upper House (MACHIDORI Satoshi)

The House of Councillors is a peculiar sort of upper house. Sometimes it claims to represent the will of the majority, while at other times it tries to be the “seat of good sense”, acting as a break on the majority. Over the decades since the end of World War II, political parties have competed and at times formed alliances, but they have never reached a proper agreement on the basic characteristics of the House of Councillors. This has allowed the upper house to have an unduly large influence. (Ronza, January 2008)

Don’t Turn the Clock Back (TAKENAKA Heizô)

Japan is at a critical juncture, faced with a shrinking, aging population and intensifying global competition. Prime Minister Koizumi’s administration addressed this situation with a bold program of structural reform. But the disastrous performance of the LDP in last summer’s upper house election has put the reform drive on hold. Under the administration of Prime Minister Fukuda, reactionary policies have come back like political zombies raised from the dead. Such policies will only lead the country to ruin. (Bungei Shunjû, December 2007)

REASSESSING JAPAN’S DIPLOMATIC OPTIONS (Shiraishi Takashi)

Sino-Japanese Relations: Pursuing Mutual Benefits (FENG Zhaokui, OKABE Tatsumi)

Relations between China and Japan, which turned frosty during Koizumi’s term of office, have warmed up since Prime Minister Abe’s ice-breaking visit to China in October 2006 and Premier Wen Jiabao’s well-received visit to Japan the following April. The two countries have now agreed to pursue a “mutually beneficial relationship based on common strategic interests.” And since Fukuda succeeded Abe, the Japanese government has stopped pushing the idea of “value-oriented diplomacy,” which some took as being aimed at containing China. The two countries must build a cooperative relationship in which they can peacefully resolve the conflicts that are bound to arise. (Chûô Kôron, February 2008)

Diplomacy for Japan as a Middle Power (SOEYA Yoshihide)

Japan’s postwar diplomacy has been a record of patient, low-profile efforts to contribute to regional and global prosperity and stability through means other than the use of hard power, with a focus on the middle-power level of the international scene. This should continue to be the country’s diplomatic priority. Japan should seek to weave its existing bilateral relationships into a network of middle powers that can maneuver successfully in the space between the United States and China. (Ronza, February 2008)

THE SHIFTING BALANCE OF ECONOMIC POWER (Nariai Osamu)

Lessons from the Subprime Crisis (TAKEMORI Shunpei)

The subprime mortgage meltdown in the United States has sent shock waves rippling around the world. Financial wizardry led to the creation of hybrid products containing subprime risks that were sold to investors in Europe, Japan, and elsewhere. Lenders, which were able to pass on the risks in their loans to third parties, were tempted into neglecting to screen borrowers properly. The situation is grave, but at least the parties involved are taking head-on action, unlike the evasive moves by Japanese institutions after the collapse of Japan’s land bubble. (Bungei Shunjû, January 2008)

Japan’s Place as a Peripheral State (NISHIMURA Yoshimasa)

Japan’s position in the global ranking of per capita gross domestic product has plunged from first place in 1993 to fourteenth place as of 2005. And if GDP is measured by purchasing power parity, Japan’s economy is not the second largest but the fourth largest, behind the United States, China, and India. Japan has a long history of success as a peripheral state, projecting a unique presence while maintaining an appropriate distance from the hegemonic power of the day. The challenge now is to play a positive role in an East Asia where China looms increasingly large. (Chûô Kôron, January 2008)

SOCIAL SECURITY IN AN AGING JAPAN

Ideas for Pension Reform (KOJIMA Akira)

LOCAL DIPLOMACY

Saving Asia with the "One Village One Product" Movement (HIRAMATSU Morihiko)

The top issue for local government leaders in countries around the world is how to invigorate their regions in the face of the concentration of political power and economic activity in metropolitan areas. The One Village One Product movement that originated in Japan’s Ôita Prefecture is now attracting international attention, and similar movements have been launched in other countries. The aim is to find distinctive local products and services that can hold their own in national and even world markets. (Voice, January 2008)