Shakedown, or… Shakedown? The First Days of the Coalition

The following is my response to Mark’s comment here. Personal circumstances have forced me to neglect my self-assumed obligation to people who comment on my blog. I’ll cover them all in due course, but now that I have a little more time (for today at least), I’ve decided to adopt the LIFO principle for my backlog. (Sorry, Matt, etc.)

And I promise to get back to those writing proposals of mine as soon as I can. Sorry, GD, NF.

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Mark: Sadly for those of us who need a major Japanese politic theater fix, given the huge DPJ victory in the 2007 HOC election, nothing short of a miracle will give the LDP-Komeito coalition an HOC majority in the 2010 election. That being said, the main bumps on the road so far:

Minister of State for Postal Reform Shizuka Kamei’s turf fight with MIAC Minister Kazuhiro Haraguti, as Haraguti dares to opine on the future of Japan Post, an institution over which he, as MIAC Minister has formal jurisdiction and knows inside out.

Minister of State for Financial Services Kamei’s turf fight with MOF Minister Hirohisa, as Fujii expressesd reservations over Kamei’s 3-year moratorium for bank loans to small and medium enterprises. The MOF Minister has partial or total jurisdiction over all financial Japangos, and will have to cough up the fiscal resources necessary to compensate the banks in the event the Hatoyama administration decides to implement the PNP proposal.

PNP leader and representative for the Intra-Cabinet Party-Leader Trilateral Shizuka Kamei’s verbal jousting with MOF Minister Hirohisa over the DPJ’s promise for an across-the-board child allowance. Kamei wants to set an income ceiling, so as not to benefit the wealthy…

…do I see a pattern emerging?

BTW, in the last endeavor, Kamei is joined by:

SDP leader and representative for the Intra-Cabinet Party-Leader Trilateral—as well as Minister of State for Social Affairs—Mizuho Fukushima.

Speaking of the Intra-Cabinet Party-Leader Trilateral, the third party will not always be the Prime Minister. In fact, the DPJ participant is more often than not likely to be Naoto Kan, Deputy Prime Minister and Minister of State for National Strategy, who happens to be p!ssed off (if media reports are to be believed) because his DPJ policy base has been kicked out from under his other foot as Ichiro Ozawa (and Hatoyama) abruptly decided to abolish the DPJ Policy Research Council—not a bad decision per se, considering the new setup replacing it that will potentially tighten the hold of the Cabinet over the policymaking process. (Here, I disagree with some of the MSM thinking on this measure.) The idea (again according to media reports) was to have Kan assume the PRC Chair, which would have made him the Policy Czar, the double-headed eagle as far as substance was concerned.

MLIT Minister Seiji Maehara’s public works woes assumed as the consequence of including the cancellation of the Yanba Dam construction, in Maehara’s words “because it’s in our manifest” (in my view carelessly inserted), as well as JAL’s business woes precipitously dumped in his lap. I didn’t see these two coming, and neither of these lend themselves to easy solution. Yanba Dam reminds me of Tokyo Governor Yukio Aoshima’s fulfillment of his campaign promise to shut down the Tokyo Expo—a very unpleasant precedent for the past and future DPJ would-be-king.

There may be more, but I think that’s enough. I have no idea if these are portents of things to come—in which case the whole of the Hatoyama Cabinet will be much smaller than its parts—or merely a shakedown process of an untested policy vehicle that will soon hit its stride.

Stay tuned, folks.

Quick Note: More on Hatoyama Cabinet Trouble Spots

Bad week for me; so, from my latest email:

Nagatsuma's body language was all wrong. If he'd come in smiling and waving, he would have received a standing ovation accompanied by a collective sigh of relief. In personal relationships, it's easy to get what you wish for, I guess. Just as troubling if not more so has been the report that he wanted the public pension so badly he was willing to take the Deputy Minsister's post. The Hatoyama administration needed him as one of the faces of the administration, so it forced a switch on Sengoku, who had to take the administrative-reform at-large portfolio instead. This, if true—indeed Nagatsuma is only a 4th-term HOR (I like this abbreviation)—highlights Nagatsuma as an obsessive, insensitive figure. It enhances my fear that he will be unable to make the transition from crusader to administrator. That, and Kamei's bully instincts, then Kan, is how I rank the Hatoyama administration's potential fault lines.

Preliminary Thoughts on the Hatoyama Administration

My life has been taking/may be about to take some dramatic turns, so I don’t have enough time to generate meaningful stuff for this blog right now. So for the time being, much of what you see here will be material produced for other purposes. Such as following, which is my end of a Q&A as the response to an email that I received last night soliciting my comments regarding the Hatoyama Cabinet, typos corrected:

1. Very solid Cabinet, the strongest across the board that I've seen in a long time, if ever. Remember, Hatoyama, Kan, Okada, and Maehara are in a sense a throwback to the LDP faction leaders of the 50s and 60s, men who built, not inherited, their power bases from scratch. And old-school Kamei and SDP Fukushima are just as powerful personalities, if not more so. I'm not aware of any weak spots, though Toshimi Kitazawa came as a total surprise to me, with one year as the Chairman of the Foreign Affairs and Defense Committee in the House of Councilors as his only significant exposure to the field. I did go through a few Committee records, where he came across as calm and collected, competent. I was also mildly surprised at not seeing Yoshihiko Noda, the other center-right leader, in the Cabinet*. But otherwise, it's a very Ozawa-Not Cabinet.

2. I don't know enough about the appointees to rank them. I'll give you the following instead.

Nagatsuma and Maehara will generate the most important headlines because they will be going after big game: the healthcare and pension systems, and public works. On the MHLW portfolio, Nagatsuma must remember that it's more than going after the missing pension accounts and the people responsible for that. He must show that he is more than a crusader, that he has the policy chops and leadership skills to bring the two systems in line with our future needs and fiscal constraints. Maehara's job is to slash public spending--a difficult task that is sure to alienate local powers. But he has to do it, if only to go some ways to finance all the spending promises and tax cuts that the DPJ has promised. I see two potential trouble spots: a restless Naoto Kan clashing with the Ministry Ministers, and a turf battle between Haraguchi—by all accounts one of those articulate, new-school policy wonks—and Kamei over the Post Office. Both the DPJ and PNP oppose the Koizumi privatization, but beyond that, I'm sure people like Haraguchi have a rather different view of where to go from that. Also, Kamei's heterodox views regarding financial services, his other portfolio, has a chance of bringing him into conflict with other Cabinet Ministers and the BOJ. I think Kamei is the joker in the pack, particularly since he has less to lose than the other Ministers. Fukushima has a safety portfolio, I think.

3. None of the people that I have an opinion on is "weak." That will be the weakness if Hatoyama is unable to keep everyone on message. He's probably as good as anyone else in the DPJ for that role.

4. It's Hatoyama's Cabinet, and Ozawa's party. Am I the only one that thinks it looks a lot like the Nakasone-Tanaka LDP of the 80s? That didn't turn out too badly, did it? Personally, I don't think Ozawa will meddle on the policy side. I think he has his dream job, another crack at sticking the knife into the LDP heart without the distasteful job of being accountable to the media.

That's it. Back to work. And preparing a late dinner.

Jun Okumura

Perhaps I should have also referred to Fujii in 3. That may have been my contrarian streak kicking in. Let me add that I’m pretty impressed with the way the Hatoyama administration is handling the administrative appointments as well. The message seems to be: If you’re okay with us, we’re okay with you. He trusts (but will verify) that the bureaucracy will follow where his administration leads—which is something I’ve been predicting for a while. He looked klutzy and indecisive throughout the lead-up to the election, but I’m impressed by the javascript:void(0)post-election process. For my sake—as far as I see it, I’m stuck with Japan—I hope the rest of his regime goes at least half as well. Otherwise, there are plenty of floater voters like me, if you catch my drift.

Sorry about your comments. I’ll get back to them later. Honest. I really, really feel bad about not responding, since dialogue is the point of it all.

* Noda is reportedly being taken care of with the Deputy Chief Cabinet Secretary’s job on the HOR side, not exactly a political embarrassment, especially for a policy wonk like him.

Quick Note: The Ozawa Party and the Ozawa-Not Administration

I may have touched on this before, but take a look at where the names fingered by the media for the Hatoyama Cabinet were when the Hatoyama-Kan DPJ, the Ozawa Liberal Party and lesser mortals merged to create the bigger, better DPJ in 2003:

Hirofumi Hirano, Chief Cabinet Secretary: independent from moderate labor union and close associate of Hatoyama
Naoto Kan, National Strategy Bureau Chief: DPJ
Hirohisa Fujii, Finance Minister: premerger Liberal Party, but bad blood between when he went public with his desire to see the latter step down during the political finances scandal
Katsuya Okada, Foreign Minister: The People’s Voice, parted ways with Ozawa when the latter split the New Frontier Party
Masayuki Naoshima, METI Minister?: DPJ
Yoshihiko Noda, ?: DPJ
Seiji Maehara?: DPJ
Tatsuo Kawabata?: DPJ

If you think that this looks a lot like the DPJ leadership minus Ozawa’s people—say, Diet whip Kenji Yamaoka and House of Councilors DPJ Chief Azuma Koshiishi—you’re right, it does. So Ozawa and his people run the party while the rest of the party runS policy? The resemblance to the old LDP becomes more than passing if you remember that Hatoyama beat Okada only with Ozawa’s help—shades of the unholy Nakasone-Tanaka union—and that Ozawa’s rivals lead their own group of likeminded Diet members, in contrast to the caretaker faction heads of today’s—yesterday’s?—LDP.

This isn’t necessarily a bad thing. The DPJ leaders reportedly joining the Cabinet are more than just political players. They are mainly first-generation politicians who have shown genuine policy chops over their careers. And Yasuhiro Nakasone turned out pretty well for the DPJ—and Japan.

I won’t be surprised to see surprises tomorrow, when Hatoyama and Ozawa come to an agreement on Cabinet and major party assignments, but this looks like the shape of things to come, so I thought I’d mention it here.

Incidentally, I now think that tomorrow’s assignments will be completed without a major hitch. I still believe the second and third-tier Diet member assignments to the ministries and agencies as well as to secondary party posts is going to be a messy affair—unless Ozawa directs the traffic.

Now, back to work.

Quick Note: DPJ Decision to Let Cabinet Ministers Choose Their Own Political Appointees Will Come Back to Haunt It

I called the looming political challenge over the DPJ rollback of the FY2009 supplementary budget. The next problem in my view is the reconciliation of the Ministers’ right under the Hatoyama edict, the Cabinet’s pro forma right to choose political appointees, and Ichiro Ozawa’s free hand in selecting DPJ members for party and Diet posts? If deciding how to make the Ozawa group swallow Hirohisa Fujii’s candidacy for the MOF portfolio, imagine how difficult it is going to be to decide what to do simultaneously with 17 Cabinet posts and more than 80 other Diet member political appointees, as well as… You see the point.

Quick Note: “Right-Wing” LDP Looks to Tanigaki to Lead It Out of the Wilderness? Figures

The most recent reports have metrosexual, preternaturally youthful sexagenarian—and notable dove—Sadakazu Tanigaki declaring for the LDP Presidency with party elders’ blessings. It’s somewhat depressing, if, with 20/20 hindsight, inevitable that preternaturally youthful baby Nobuteru Ishihara wimp out, but it’s more distressing that his fellow quinquagenerian Shigeru Ishiba continues to dither on the sidelines. Their reluctance to challenge their elders continues even after the historic defeat.

The silver lining is that a Tanigaki leadership will lay to rest once and for all imbecilic pronouncements such as, “Analysts say the party seeks to reverse Japan’s growing isolation in the region under decades of right-wing Liberal Democratic rule.” Any report that is able to ignore all of Japan’s relationship with its Northeast Asia neighbors since no later than its historical accord with China in 1972 under Prime Minister Kakuei Tanaka except the fallout from Prime Minister Junichiro Koizumi’s stubborn insistence on visiting Yasukuni Shrine is not to be trusted. More to the subject of this post, I cannot help but point out, the LDP switched leadership from a dove (Kozumi) to a hawk (Shinzo Abe) to a dove (Yasuo Fukuda) to a hawk (Taro Aso) before it yielded the stage to the DPJ—which, incidentally, is the closest thing to the old-school, Sankakudaifuku LDP in Japan today, with its own Darkseid overlord and powerful faction leaders—unlike the desiccated “LDP” that desperately needs a business model remake. More about this later, I hope.

Quick Note: Is It the LDP Who Cannot Afford an Alliance with Komeito?

I’ve speculated before that Komeito might be better off without the LDP as its main squeeze—policy-wise, the DPJ would be a more natural ally—and the Komeito leadership has been doing nothing to dampen such speculation. Increasingly evident Komeito antsyness suggests that it’s time to ask, Can the LDP afford an alliance with Komeito?

The DPJ may be Komeito’s more natural ally, but as Ozawa’s aborted efforts at a Grand Coalition in 2007 show, the DPJ is also the LDP’s more natural ally. In fact, a permanent alliance with ideologically narrower—and perforce smaller—parties is inherently confining in that it requires perpetual accommodation of such coalition parties’ defining positions. Thus there is something to be said for the discretion to fight an election on its own undiluted platform, leaving the compromises for later maneuvering.

But what about the Komeito tithe? True, 10 percentage points represent a lot of votes. But it wasn’t that long ago that the bedrock support for the LDP was, say, 10 percentage points higher than the same for the DPJ. And media polls suggest that 1/3 of the voters are floaters. Keeping Komeito in the fold is likely to call for a lot of concessions, new and old, concessions that the LDP cannot afford too many of if it is to position itself opportunistically against the DPJ while lying in wait for the accumulation of a host of DPJ gaffes and errors, the kind of gaffes and errors that, over a period of 3 years and Prime Ministers, consigned the LDP to a severely truncated opposition bench. The odds might be better for the LDP if it went off on its own for the time being, honing its own message; the better to attract the floater vote, which will be looking for the next political black, ready to abandon the DPJ, the same way that it jilted its long time flame, the LDP.

I’m not ready to hazard a guess one way or the other, but it’s at least useful to remember that the coalition entailed costs for the LDP as well.

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I’m seriously behind on counter-comments. Sorry, later. Things happening.

Would It Make More Sense to Translate It as “Conventional State”?

You know, that “normal country” thing. I do believe that post-WW II Japan has been an “unconventional state,” constitutionally speaking. And it worked. But “abnormal country”? I think not.

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No time for anything else today. Tomorrow for sure.

“A More Perfect Death”?

Mortality has absorbed more of my attention lately…

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Richard Ross (one wonders if this was not some kind of Freudian slip) Douthat makes an ingenious argument against assisted suicide in this NYT op-ed. In place of the usual death-panel argument of the slippery slope, “especially under government-managed health care, to some sort of death-by-bureaucrat,” he offers the idea that “in the profligate, Promethean United States, it probably won’t lead to rationing-by-euthanasia. It’s just as likely to become one more ‘intervention’ that we insist every health insurance plan should cover — on our way, perhaps, to a rendezvous with fiscal suicide.” On the way, he argues that American “instincts run so strongly toward unlimited spending that it’s much easier to imagine the government going bankrupt paying for extreme life-saving procedures than it is to imagine a suddenly cost-conscious bureaucracy pressuring doctors to administer lethal overdoses.” In other words, assisted suicide is the cherry on top of the exploding fiscal cake of nationalized medicine—America the profligate, in death as in life.

Douthat’s argument against assisted suicide sets aside the familiar, ethical objections and ventures into the culturalist realm. As such, it immediately sends my skepticometer readings through the roof. Still, it’s more logically consistent than any death-panel argument I’ve heard so far from opponents of universal healthcare with a public option.

Choices for Komeito

I think that Komeito has three plausible choices in the run up to the next HOR election:

1) Stick with LDP and hope that the changing winds will blow a few HOR SMD seats their way.
With Komeito’s 10%+ available for LDP SMD candidates, it remains a plausible option for at least one more HOR election.

2) Go with the DPJ and get a seat (or two) at the cabinet table.
As your comment implies, this yields immediate benefits for the Komeito leadership. And like you, I can’t figure out a way for the DPJ to help Komeito in the 2010 HOC election either. Moreover, the DPJ will have a hard time making concessions in the next HOR election because it will have incumbents in all the SMD seats that Komeito covets.

3) Go independent and become an HOC/HOR-PR party, offering its support for policy concessions.
Be the party of conscience, standing up for the little guys and keeping the big boys honest. Who knows, non-Sokagakkai voters may decide to give it a second look. Come to think of it, that’s what the Komeito game plan used to be. With two major, middle-of-the-road parties to choose from, Komeito could be the ultimate swing party. It could even join an administration or two if it thinks it’s getting enough concessions. And the DPJ might need them sooner rather than later, depending on the outcome of the 2010 election.

I think I remember Gerry Curtis suggesting something like 3) between the 2004 and 2005 elections.

The Cabinet Begins to Take Shape

Naoto Kan, National Strategy Bureau chief (he will do double duty as the DPJ policy council chairman); Hirohisa Fujii, Finance Minister; Katsuya Okada, Foreign Minister—that’s definite, according to the media. No surprises there if you’ve been following rumors the last few days. The Foreign Ministry is not much of a consolation prize if you want to be at the heart of DPJ policymaking, where the domestic agenda will scarf up all the political capital that the Hatoyama administration can muster. Foreign policy and national security issues will be unwanted distractions to Ichiro Ozawa’s 2010 plans. The silver lining for Okada is that he’ll be insulated from the fallout if the economy and/or DPJ manifesto goes bad, which would put him in a place to pick up the pieces in the event of a 2010 House of Councilors election disaster, not yet a likely event by certainly a plausible one.

I expect Fujui to acquit himself well; Kan’s performance depends, I’d say, on the quality of the staff that he manages to assemble around himself.

Ozawa, for Better or Worse and Other Hatoyama Thoughts

The political world continues to revolve around Ichiro Ozawa as he is tapped by Yukio Hatoyama to take over the DPJ Secretary-General post. Several things indicate that Ozawa is not going to make it easy for anybody, including the Prime Minister in-waiting:

1) Hatoyama had planned to hit the ground running by pick the head of the National Strategy Bureau, the Finance and Foreign Ministers, and the Chief Cabinet Secretary as soon as the election was over, but quickly gave up the idea when allies SDP and PNP objected for fear of being marginalized in the policy formation process. Now, he has settled on a Chief Cabinet Secretary—close associate and reputed troubleshooter Hirofumi Hirano—as well a new Secretary-General, both decisions precipitated at the instigation of the Ozawa crowd if media reports are to be believed.

2) This slap in the face to incumbent Secretary-General Katsuya Okada undermines his authority just when he needs all the support that he can get from the party leadership in the ongoing negotiations with his SDP and PNP counterparts for a policy agreement as the prerequisite to a coalition government. From their point of view, why bother negotiation with a lame duck when the real power has shifted elsewhere—assuming that it had ever been otherwise?

3) Ozawa already held sway over much of the Diet rank-and-file through his domination of the election process from choosing and grooming candidates to managing their campaigns. As Secretary-General, he will hold the keys to the burgeoning party coffers—the DPJ’s government subsidy alone leaps from 11.832 billion yen (2009) to 17.32 billion yen (2010) while the LDP drops from 15.733 billion to 10.467 billion. Registers—as well as handle appointments to party positions. For most practical purposes, it’s his party now.

4) According to the Yomiuri,, on August 3, Ozawa arrived at party headquarters around 10:30PM to meet Hatoyama. He went into the party President’s room with a frown and came out with a smile because he had received a request—accepted—from Hatoyama to be the Secretary-General. As he is leaving the room, in full view of the press, he says to Hatoyama, “I was having dinner; so, I’m sorry I was late.” It may be nothing more than just another gauche moment for Ozawa; if this were a movie, it would be a classic “I made you, I can break you” putdown.

The Hatoyama-Ozawa storyline is a godsend for the post-election media, and Ozawa is not exactly starving the beast. Other incidents such as Hatoyama’s flip-flop over the impromptu, burasagari-clinger interviews, where the interviewee talks to the reporters in the corridors, in transit and his notorious ”anti-globalism screed*, not to mention the looming political financing prosecution of his ex-aide, suggest that Prime Minister Hatoyama, like his most recent predecessors, will be generating his due share of distractions.

* I am aware that there is a much longer text on his website, and that the condensed version distorts his views. Indeed, the original is prefaced by a lengthy explanation of the democratic impulses that gave rise to the concept yūai. However, I’m not sure that explaining yūai as a response to “totalitarianism, which tried to achieve equality at all costs, and capitalism, which had fallen into self-indulgence m which according to his people,” then depicting Japan as a nation “caught between the United States, which is fighting to retain its position as the world's dominant power, and China which is seeking ways to become one” is not overly impolitic. Note also that the original text repeatedly calls the United States a hegemon (覇権国家) and China as a nation seeking to become one. That is not the language of fraternité.

A New Excuse for That Midnight Snack

“Because it’s good for you.”

Money quote: “A low thigh circumference seems to be associated with an increased risk of developing heart disease or premature death.”

“Japan's new government and its first tough call”

This Foreign Policy post* grew out of a memo that I wrote in anticipation of the DPJ victory. One part of the memo will be incorporated in a document that goes to Eurasia Group clients and another became the seeds of what you see there, on the call, which is basically a Eurasia Group blog. (The rest lies undead, in a hard disk here, hard disk there; such is the fate of the unwanted children of our feverish imaginings.)

You won’t see much of me there; I rarely offer my opinions unless asked. Besides, Ross Schaap knows and understands far more than I do the arcana of Japanese politics and—crucial to the Eurasia business—its interaction with the economy. Also, there’s the little matter that Japanese politics did not have much of an effect on the economy. To put it another way, Japan was not a significant source of political risk for investors and more broadly the markets. Until now. You can actually see the side effects of the lack of interest in the quality of the hastily cobbled together post-election coverage in the English-language media.

In any case, the call*, as the subtitle “political futures from Ian Bremmer and Eurasia Group*” suggests, the posts are about the likely, not the should be.

* Ian skipped so many grades he’s known as the Doogie Howser of political science. The side effect of that is that he never learned to use capital letters properly.

Sw!nger Komeito?

Komeito went into to the 30 August House of Representatives election with 31 seats and came out with only 21. Not satisfied with giving the junior coalition member a haircut, the Japanese electorate kicked out the Komeito leadership—all the single-member-district candidates including the party leadership had declined to take out insurance policies in their local proportional representation blocs, and were summarily rejected by their SMD constituents—in the bargain. Media reports carry understandable grumbling from the rank-and-file about the wisdom of the current relationship with the LDP.

As the proprietor of the Shisaku blog has pointed out in another forum, Komeito supporters, i.e. 8,000,000 or so eligible Sokagakkai voters, swung roughly 10 percentage points of the overall vote to the LDP in the proportional representation blocs*. This appears to have also been the case in past HOR elections under the current mixed membership-single non-transferable vote system. That’s a 20 percentage-point wing that the Komeito-Sokagakkai team can engineer at will, if their steadfastness within the coalition during the maelstrom was any indication. I also note that the DPJ majority’s center-left leanings are closer to Komeito thinking—pro-Asia, pro-individual, pro-handout—than the somewhat more rightish LDP core. Look at the manifestos, and the old Sokagakkai-Ozawa liaison.

Speaking of Ozawa, Gakkai-Ozawa animosities are widely considered the biggest obstacle for a potential DPJ-Komeito matchup. Perhaps. But this is politics. From the DPJ’s point of view, Komeito is a more natural ally policy-wise than the Social Democratic Party to the left and the People’s New Party to the right. And still has 21 seats in the House of Councilors after two election losses of its own, a baseline number that in a coalition would give the DPJ a wide margin of error in the 2010 HOC election. From Komeito’s point of view, the downside of a pre-HOC election deal is that after the switch, it may have to wait as many as 3 years before it receives the payoff in the next HOR election. An HOC payoff is just about impossible to engineer because there are only 29 single member districts in the HOC and none of them favor Komeito, predominantly urban party.

* If you can read Japanese, it’s easy to make this out from the third table in this Wikipedia entry (source: Jiji Tsūshin). Shisaku does more arithmetic here.

Shūchoku Nakagawa Please Stand Up…

…and please…leave the room?

Page one of the evening edition Yomiuri is putting up, as I expected, Masuzoe, Ishiba and Ishihara—the headline belongs, of course, to Hatoyama, but at least they made it to page one without committing a crime, and that should count—and…do my eyes deceive me? Sadakazu Tanigaki? Oh well, so much for my predictive powers. At least Hidenao Nakagawa’s ambitions have been relegated to page two.

What those four men—Masuzoe, Ishiba, Ishihara and Tanigaki have in common, of course, is that none of them lost an SMD election—Masuzoe is an Upper House member. And Big Nakagawa lost. It’s as simple as that. But where’s the right-wing shift that experts have been looking for post-election? Why Tanigaki’s—yes, I find even the speculation hard to believe, though I find him personally so likeable—LDP old school-left to Ishihara’s LDP technocrat-center?

In a word, face. The LDP right does not have a convenient babyface on deck. You can bet that if the LDP right had a Hiranuma in waiting, it would have forced him on the rest of the LDP, and the rest of the LDP would have gone along.

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As if we shouldn’t have expected this from a party that was willing to elect in succession a nativist-moderate (Yoshiro Mori), an opportunist-dove (Junichiro Koizumi), a nationalist-conservative (Shinzo Abe), old-school-dove (Yasuo Fukuda), and a nationalist-moderate (Taro Aso) after the first one turned out to be a PR disaster.

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I’ll get back to that, Ross. But for today, I am whacked, it’s 10 PM already.

Recomendations for a DPJ Administration: The Sequel

I met Tobias Harris last night, when he reminded me that he had responded on his blog to this post on my blog. It did point to a serious technical error in my original comments at the very beginning, so perhaps an acknowledgement of my mistake is overdue...

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1. Oops, I forgot about the FY2009 budget. Remind me not to contest the numbers from a Japan strategist. Of course, you are right, Ms. Fink, that was not the core of my argument, which is that, basically, much of the “large pool of capital, much of which has yet to be dispensed, ripe for spending to boost the economy,” may in fact be gone or will be hard to revisit, as the DPJ says that it intends to do. To put it another way, “Mr. Hatoyama and other party leaders’ chances of boosting “their credibility by offering a more realistic stimulus plan, which will establish more concrete funding,” appears to be low and very risky as far as FY2009 is concerned simply because half the fiscal year will be gone before the DPJ can put a hold on things and another month, minimum, before it can put its own plan into action. Much of the money will be gone, or as good as gone well before the next FY.

2. I’ve always had grave personal reserves about dipping into the FX Special Account profits. The Account looks very much like the biggest second biggest carry-trade operation on the planet. Unless you ignore currency risk, I don’t understand how it can be considered less costly than borrowing from the market. Between tax revenues and government bonds, it is much closer in nature to the latter than the former. I don’t see that as “buried treasure” at all. But maybe that’s just me. (Note also that not all of the 4 trillion—in a good year!—will be available for stimulus, since a large chunk of those profits has more or less become incorporated into the annual revenue for the General Budget.) The budgetary effect of lending the money to JBIC depends on the spread between JBIC borrowing from the market and the interest rate on the loans to JBIC (LIBOR+0.3%, for 5 years, apparently). My guess is that it’s a drop in the bucket compared to the 88 trillion yen General Budget.

3. I have no quarrels about the long-term desirability of balancing the budget. I had grave doubts about the desirability, policy- and politics-wise, of your suggestion that “the DPJ should offer measurable annual targets for deficit reduction” ahead of the polling. Making up numbers out of thin air in the last ten days of the political campaign appeared not only to be a act of technocratic folly but would also put a big fat “kick me” on the DPJ butt for the LDP aim at for the next 4 years. I think I made my case sufficiently clear in the original post, but there you are.

4. Going forward, I have no objection to the points that you make here to the extent that arguments regarding FY2009, 2010 and beyond are properly distinguished.

5. A “promise to postpone indefinitely any increase in the consumption tax” is a political, not economic statement. As such, it will be judged politically. Now the DPJ has pretty much said so in exactly if not in exactly those terms (as properly translated into Japanese). I think we should agree to disagree now about the political implications of explicitly putting “indefinitely” into play while at the same time setting primary balance targets.

6. As for widening the tax base, eliminating/cutting back on special tax measures, even under revenue-neutral constraints, is technically not that difficult to do, though it will encounter political resistance from vested interests. I will not offer any substantive comments on your suggestion stricter enforcement of existing guidelines, since I know next to nothing about the laws and regulations—how strictly they are enforced, in whose favor ambiguities are resolved, and whether the tax authorities have enough underutilized human resources to make the extra effort—to guess what kind of impact such action will have on government finances, and how soon.

7. Regarding your final counterpoint, my answer: Yes, but. All op-eds, at least in media outlets for general consumption, occur within a commonly shared context (or a commonly shared set of conflicting contexts). I see your op-ed as basically a call for the continuation of the wholesale reform that Koizumi politically and Takenaka technocratically set in motion yet left woefully uncompleted—or its logical extension. But, with ten days to go between your op-ed and the election, the K-T reform had been rejected in rhetoric and manifesto by the leaderships of all the parties except perhaps the Your Party (whose tentative feelers for a post-election coalition were summarily rejected by the DPJ Secretary-General). Now, Ms. Fink, you are an economist. You have the right to say, “Well, this is the best course of action for the DPJ and possibly Japan. You comments occur within the political realm, which is not where my opinions in this instance are unfolding.” But Tobias, you are a political scientist. Do you really think that an op-ed that does not give any recognition to the basic political context into which your recommendations are being injected is appropriate? In fact, you do acknowledge the political context of your technical opinions when you write of the DPJ/Hatoyama’s “credibility.” I do not believe that you can reject the consideration of the political and likely technical difficulties and impossibilities of your recommendations and argue for their political efficacy at the same time.

That’s about it.