Tuesday, November 14, 2006

My Take on the Implications of the Gubernatorial Races; Also, a Line of DPJ Attack on the Public Pensions Issue

I will be blogging infrequently over the next month, since I will be doing a lot of for-real-money work under a tight schedule.

The Fukushima Prefecture gubernatorial election ended in a landslide victory for the DPJ candidate. The media though is downplaying national implications, much in the way that the JPD had done itself, and there will be few political reverberations outside Fukushima. Besides, the DPJ candidate was an old-style, strictly behind-the-scenes political operator with deep local roots who wound up getting the overwhelming support of the local construction industry, which was no small part of the problem in the first place. And Shinzo Abe, latest pride of the Meiji Restoration victor Choshu daimyo fiefdom, sensibly expended absolutely zero political capital in the old Aizu fiefdom, arguably the biggest loser in the Restoration.

Local politics being what they are, the Abe administration will brush off another likely gubernatorial loss in Okinawa (Okinawa just being Okinawa), and even a possible loss in Okayama, where DPJ undeniably shares the blame for a bipartisan ex-governor in disgrace. So, for Mr. Abe, everything will still hang on next year's general election in the Upper House. However, two more gubernatorial races lost to the DPJ will give the troops cause to grumble, while reminding them that the media will not hesitate to knock Mr. Abe down, after they'd set him up so willingly in accordance with the public mood of the times.

And Mr. Abe has not been showing much political muscle lately. If Mr. Abe is exerting deft leadership on his desire to bring back the eleven Diet member exiles and their ex-member allies, it is not showing. He has at times seemed to be at odds with his LDP right-hand man, Hidenao Nakagawa, and has generally let the debate play out in the open, with benefactors Yoshiro Mori and Junichiro Koizumi chiming in publicly. Nor has he managed to placate a small but noisy handful of dissenters among the "assassins". The nuclear-debate debate must have also been doubly distressing to Mr. Abe, as Mr. Nakagawa and friends (Abe's friends?) kept talking in the face of public censure (including from the dovish wing of his own party) and also wound up damaging the cause of forward projection itself.

Always good at getting along, Mr. Abe has not shown that he can discipline the troops if need be. If he really can't, this will become a serious problem as the perception of a lack of domestic leadership begins to spread. It's too bad for the DPJ that they seem to lack the cohesion and coherence, as well as an articulate public face, to exploit such an opening.

For Mr. Abe, the Okinawa race will be important much more in the long run than for any immediate implications. A loss to the DPJ candidate will raise further obstacles before the long-delayed redeployment of US troops (as well as some Japanese ones). The downfall of Donald Rumsfeld will give the Abe administration a little breathing space. But it's highly unlikely that Robert Gates, the new Defense Secretary, will revisit the deal. Redeployment is not a winner for Mr. Abe, or any prime minister, for that matter. But he will be trapped between a rock and a hard place a year or two down the line if he must face a DPJ governor over the next four years, giving his enemies further material to attack his leadership with.

This bit of news, that fiscal conservative "Health, Labor and Welfare Minister Hakuo Yanagisawa indicated Friday that it would be difficult for the government to meet its pledge that pension benefits would not fall below 50 percent of the take-home pay of the average male worker", could be exploited to the DPJ's benefit in a specific attack on the Abe administration. (There's potential for exploiting a rift within the LDP itself on the overall fiscal reform package. But let's stick to the public pension system…)

As I've written before, Mr. Abe is something of a policy wonk, and he talks at length in his Beautiful Japan (aside: it doesn't sound as flaky in Japanese) on the public pension system, and cites some numbers, and says there's no need to worry because the public pension system can't fail. I quote: "The pension will be received for sure, and is constructed so that it can't fail." But the argument that he offers to back that up is, and I again quote from the book: "If everyone covered by the pension system is determined that he/she "will not let it fail", then the pension system will not fail." Moreover, the calculations he provides to show us that the much-maligned National Pension (poor sister to the Welfare Pension) is worth your money completely ignores the difference in present value between the same nominal amounts of money you pay in now and money you receive 20-40 years down the line. His arguments seem an awful lot like clicking your heels together three times (if it doesn't work, you raise taxes or lower befits; simple ain't it?) and some bad arithmetic.

Demographics dictate that the DPJ doesn't have a good plan of its own either. Still, coupled with his unwillingness to confront the fiscal burden head on, this could provide an opening for attack for which there is a receptive public.

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