The Sun Also Sets

What will Japan be like without Junichiro Koizumi?

| Thu Jul. 15, 2004 3:00 AM EDT

Japan's ruling Liberal Democratic Party (LDP), suffered a setback on Sunday with a weak showing in the country's upper-house parliamentary elections. The LDP held onto only 49 of its 50 seats up for re-election, while the opposition Democratic Party of Japan added 12 seats, prompting DPJ leaders to call the election a "major upset." At long last, the conservative DPJ is beginning to look like a serious alternative to the long-dominant LDP.

For the time being, the LDP still holds a majority in the more influential lower house, and Prime Minister Junichiro Koizumi is expected to keep his post until 2006. But papers like the Asahi Shinbun are already wondering how much longer the prime minister will survive. The key question now is: What would Japan be like without Koizumi?

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To answer this question, the current situation needs to be put in historical context. In April of 2001, after promising wide-reaching economic and banking reforms, the charismatic Koizumi and the LDP won a landslide electoral victory. Koizumi's platform included vows to force the banks to call in bad loans, reorganize the rickety pension system, and privatize the $2 trillion postal service. But as he settled into office, he found that promises were a lot easier to make than actual reforms. As BusinessWeek reported, the prime minister had to contend with overwhelming opposition from his own constituents:

Construction workers in rural Japan don't want to turn off the spigot of public-works spending. Postal workers, who turn out the vote for the LDP, don't want to trade in cushy government jobs for private-sector positions. Fix the banks? That means turning the screw on loads of small and midsize construction companies, retailers, distributors, and others that employ 80% of the workforce.

To make matters worse, Japan is still struggling after a disastrous economic decade -- including a plunge in land prices, three recessions, and ruinous bouts of deflation. With his most drastic reforms thwarted, Koizumi's popularity continued to plummet.

Nowadays, Japan's economy is doing a bit better. Most of this is due to structural reasons, including surging demand from China, an increase in consumer spending, a renaissance of foreign investment. But Koizumi deserves some credit. His financial minister, Heizo Takenaka, has headed up a one-man crusade to force banks to identify their non-performing loans. In the coming weeks, Koizumi can expect the opposition to call for a cabinet shakeup. But Takenaka is probably safe, after a strong poll showing over the weekend. This bodes well for Japan's economic prospects.

Indeed, The Japan Times argued that voters are still keen on Koizumi's grand vision. They just want to see more reforming and less compromising:

In effect, they sharply rebuked Prime Minister Junichiro Koizumi for making light of public opinion, but stopped short of punishing him so severely that he would be forced to resign. They will likely respond differently in the next general election, depending on how Mr. Koizumi's reform initiatives progress.

Of course, some of Koizumi's opposition came from the postal and construction workers he angered. Having angered his base, he has no choice but to press on with reform. As the Times put it, "There is no turning back, for reviving the political influence of these lobbies is not an option." Indeed, according to the Daily Yomiuri, after the election Koizumi told his advisors to move full speed ahead with privatization reforms. Already, Japanese stock markets are responding positively to Koizumi's steadfast stance.

On the international front, Koizumi has enacted a subtle shift in Japan's foreign policy. He has aligned himself with George W. Bush, going so far as to send 500 troops to help rebuild Iraq. Moreover, he has called for a change to Japan's pacifist constitution, which currently permits the country to send peacekeepers only in areas where a ceasefire has been declared. As The Economist argues, these moves reflected a larger shift in Japan's attitude towards war and military strength:

His foreign policies reflect clear and reasonable national interests and draw support from the broad Japanese public, which shows little desire to remilitarise and start strong-arming neighbours. Mr Koizumi displayed his popular touch in May, for example, by visiting North Korea and trading food aid for the release of five children born to former abductees from Japan. This upset the nationalist right, but mainstream Japanese voters agreed that it was better to be pragmatic than tough. Mr Koizumi's poll ratings shot up by ten percentage points.

Since then, domestic issues, a looming election and other factors have combined to reverse that trend. Indeed, the poll numbers for Mr Koizumi and his cabinet, below 40% in some surveys, have rarely been lower (see chart). This week, as voters prepared to replace half of parliament's upper house in elections on July 11th, his ruling coalition seemed in danger of retaining its majority by an embarrassingly narrow margin. But the recent slide largely reflects a domestic row over pensions policy, combined with a sense that Mr Koizumi's political style has crossed the boundary from confident to cocky. It is not proof of a sudden and broad-based change of heart about foreign policy.

Of course, it's far from clear that Koizumi's Iraq deployment had the same level of support. His approval rating dropped after the deployment. The opposition DPJ has been vocal in its demands to bring the soldiers home, and at least one anti-war candidate won a surprising electoral victory. Still, outside of anecdotal accounts, it's difficult to determine how significant the move was.

If Koizumi leaves office in 2006, the most significant result could be a distancing of Japan-U.S. relations. On Monday in The New York Times, Jason Shaplen and James Laney argued that Japan may be edging closer to China, as the latter country becomes the dominant power in Asia:

While Mao once claimed that power grows out of the barrel of a gun, today's leaders in China know it also grows from trade. Tokyo and Seoul know this, too. Aware that China is now vital to their economic well-being, they are no longer willing as they once were to position themselves opposite Beijing, even if this means going against Washington. Put another way, while the Bush administration still thinks of the United States as the sole superpower in a unipolar world, Tokyo and Seoul do not share this view. To them, the United States and China are both powers to be reckoned with.

In the face of this impending upheaval of Asia's political order, Koizumi has gone out of his way to maintain close ties with the U.S. But if his party were to fall out of power, there are no guarantees that this long-standing alliance would maintain its present form. Unthinkable? Perhaps. But it goes to show just how radically different the post-Koizumi era in Japan could be.

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