Some More Thoughts on the DPJ Slippage. Plus, a Kan Story

The flap over Shizuka Kamei’s resignation from his cabinet post in protest over the Kan administration’s decision not to pass the postal reform bills during the regular Diet session* did not help. But mostly, it appears to be Prime Minister Kan’s handling of the consumption tax issue that is responsible for the precipitous fall in the DPJ’s electoral fortunes.

* The DPJ’s promise to do it ASAP when the Diet reconvenes after the election and Kamei’s replacement by his PNP cohort Shozaburo Jimi give the impression that it was more of a pre-election stunt than a show of genuine dismay.

Three days ago, on our way home from a talk given by the esteemed Professor Koichi Hamada, a journalist raised the question: If the majority of the Japanese public favors a consumption tax hike, why were Kan and the DPJ catching so much flak? My short answer in essence was that they alienated the entire anti-hike crowd while they had to share support from the pro-hike folks with the LDP, so they ended up getting bad marks from a majority of the whole*. That’s broadly what the subsequent polls are revealing in painful (to the DPJ) detail. And it’s also true that the consumption tax has always been the third rail of Japanese politics—just ask Prime Ministers Ohira, Nakasone, Takeshita, Hosokawa, and Hashimoto. There was the added stigma of the DPJ’s failure to come up with the massive savings that it had appeared to promise the Japanese electorate in the 2009 election. So there were caution lights everywhere calling for a very careful rollout plan. Instead, he seems to have had only the haziest of game plans if any, tossing out ideas about tax rates and timelines and exemptions as if he was engaging in a brainstorming session.

* So I can’t understand what we’re hearing from the media, that Kan and his associates intended to take away the issue from the LDP, which is advocating a 5 percentage point hike, to 10%. This isn’t rocket science; it’s really simple fractions.

One other takeaway: If the election plays out like the media surveys say that it’s trending, the DPJ will have to add a half dozen seats or so after the election for a simple majority (and, for a coalition majority, make up for the loss of two, perhaps all three, PNP seats at stake). Finding LDP defectors is the preferred option, but the low-hanging fruit have already been picked. One or two more perhaps, but half a dozen? That looks like part of a broader realignment, and only the DPJ can kick-start that process. The big bang, of course, is Ozawa’s game, but so is cherry picking. Kan and his team do not have the contacts and the expertise.

Coalition partners? The LDP? Ozawa came close to engineering a grand coalition in 2007 after the Upper House election that year. But is the cabinet large enough to share? Would the LDP want to? Both Komeito and most likely Your Party will each have enough seats to bridge the gap without the PNP’s help—good-bye postal reform bills?—but it will be a hard sell right after the Upper House election. Komeito is better equipped to enter a coalition, as I’ve explained here before, but media reports on the campaigning tell us that there has been substantial Komeito-LDP cooperation going on at the prefecture-chapter level.

I suspect that it’s going to take time to craft a stable DPJ-led regime. In the meantime, the extraordinary Diet session right after the election is likely to be limited to taking care of housekeeping matter such as committee assignments, so the postal reform bills will have to wait, perhaps substantially reengineered. And if all the opposition parties hold out long enough, Kan will be very vulnerable in the September election for the DPJ presidency.

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Finally, an anecdote from Professor Hamada’s talk. During the Q&A, Kazuyo Katsuma, a do-it-all consultant (from personal finance to management and everything in between) and high-profile talking head, claimed that she briefed Kan and found that he didn’t know the difference between nominal and real interest rates. This comes on the heels of another piece of information that I gathered last previous week. During a conversation only tangentially related to the Kan administration, an unimpeachable source told me that Kan hadn’t known about the multiplier effect when he became Finance Minister. For someone with such limited economic literacy—RS tells me that Dick Cheney for one showed similar ignorance as Vice President, which I guess should be reassuring—Kan shows uncommon conviction in the righteousness of his big government approach.

Addendum: Anonymous reminds me that the multiplier mishap Finance Minister is “very old news.” So true.