Saturday, June 5, 2010

Leaderless Japan It used to be the envy of the world; now the hope is that things have got so bad that reform is finally possible

Leaderless Japan

SINCE 2006 Japan has had no fewer than five prime ministers. Three of them lasted just a year. The feckless Yukio Hatoyama, who stepped down on June 2nd, managed a grand total of 259 days. Particularly dispiriting about Mr Hatoyama’s sudden departure is that his election last August looked as if it marked the start of something new in Japanese politics after decades of rule by the Liberal Democratic Party (LDP). His government has turned out to be as incompetent, aimless and tainted by scandal as its predecessors.

Much of the responsibility for the mess belongs with Mr Hatoyama. The man known as “the alien”, who says the sight of a little bird last weekend gave him the idea to resign, has shown breathtaking lack of leadership. Although support for his Democratic Party of Japan (DPJ) has slumped in opinion polls and the government relied on minor parties, the most glaring liabilities have been over Mr Hatoyama’s own murky financial affairs and his dithering about where to put an American military base. The question for the next prime minister, to be picked in a DPJ vote on June 4th, is whether Mr Hatoyama’s failure means that Japan’s nine-month experiment with two-party democracy has been a misconceived disaster.

The answer is of interest not just within Japan. Such is the recent merry-go-round of prime ministers that it is easy to assume that whoever runs the show makes no difference to the performance of the world’s second-largest economy. Now Japan’s prominence in Asia has so clearly been eclipsed by China, its flimsy politicians are all the easier to dismiss.
But that dangerously underestimates Japan’s importance to the world and the troubles it faces. With the largest amount of debt relative to the size of its economy among the rich countries, and a stubborn deflation problem to boot, Japan has an economic time-bomb ticking beneath it. It may be able to service its debt comfortably for the time being, but the euro zone serves as a reminder that Japan needs strong leadership to stop the bomb from exploding.

What’s more, stability around South and East Asia depends to a large extent on Japan’s 50-year-old security alliance with America, which acts as a counterbalance against Chinese military expansion. The nine-month stand-off between Japan and America over a marine base in Okinawa, a fight which Mr Hatoyama picked himself and has now done for him, is a glaring example of how poor leadership can muddy the waters.

Shogun to Japan’s head

With Mr Hatoyama out of the way, it is tempting to hope that the DPJ will put its problems behind it and quickly rebuild its credibility with the electorate and Japan’s friends abroad. There are two reasons for misgivings, however. The first is the role of Ichiro Ozawa, the Svengali-like figure who stood mischievously behind Mr Hatoyama. The second is the calibre of the candidates to become Japan’s next prime minister.

Mr Ozawa resigned as the DPJ’s secretary-general alongside Mr Hatoyama, but he, unlike his boss, has not promised to bow out of politics. Moreover, he has such influence over the party that he could continue to pull strings from behind the scenes, especially ahead of upper-house elections this summer. That would be inexcusable. Like Mr Hatoyama, Mr Ozawa has been caught up in campaign-funding scandals that have reeked as badly as they ever did under the LDP. He has meddled with good policies and failed to stop bad ones, such as the attempt to roll back the privatisation of the postal system. The “Shadow Shogun” represents the worst side of the old politics. If Mr Ozawa remains influential, he will only undermine any future party leader in the eyes of voters.

Whoever that leader is will have plenty to prove as it is (see article). As The Economist went to press, the most likely replacement for Mr Hatoyama was Naoto Kan, the finance minister. He has shown more financial nous than Messrs Hatoyama and Ozawa in arguing for fiscal reform in Japan. But he has kept so quiet about the DPJ’s failing leadership that it is hard to imagine him putting Mr Ozawa in his place. Other potential candidates, who have stood up more firmly to Mr Ozawa, will be opposed by many in the party who are under the man’s sway. And sadly, none looks like he has enough of the right stuff to restore Japan’s standing in the world.

Look up, Japan

For many voters, this all smacks of Japan’s earlier attempt to escape the LDP’s shadow, in 1993. The coalition government that replaced it—also under Mr Ozawa’s spell—lasted barely 11 months. But a lot has changed since then. Today the LDP has only slightly benefited from the DPJ’s woes, and is itself in danger of splintering. The legacy of two lost decades has left voters with little nostalgia for old habits. Having finally broken the mould of Japanese politics, it is almost inconceivable that they will vote the old lot back into office.

However far-fetched it seems at this sorry juncture, Japan’s leadership crisis presents a chance to progress to a new sort of politics, based more around policies than personalities. Besides its fiscal problems, Japan has an ageing population that will be a draw on the public purse. Its stock of savings is diminishing, and though it is riddled with misgivings about the presence of American troops in Japan so long after the second world war, it can hardly pay for its own defence. Factional politics has failed utterly to deal with these problems. But divisions within the political duopoly have produced splinter parties, some of which have sensible ideas for putting Japan’s economy back on track. The new DPJ leadership, however badly it does in this summer’s upper-house elections, should capitalise on that by forming coalitions with its ideological peers, rather than with the mavericks it has relied on so far. Getting rid of Mr Ozawa would be a sign of real change.

There is hope therefore that things are beginning to get so bad that reform really will appear relatively soon. But the main impression at the moment is of drift. The sad fact is that the world’s second biggest economy, home to companies that have changed industries around the world, is being kept out of dire trouble only by the loyalty of its own savers. The Economist

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