Monday, October 01, 2012

Snap Reaction to the New Noda Cabinet

Noda has picked three former friends of Ozawa, Makiko Tanaka (68), Wakio Mitsui (69), Ikko Nakatsuka (47), which obviously makes sense from a party-unity perspective. But are there any downside risks to that?

As Minister of Health, Labor and Welfare, Mitsui would be flagged for conflict of interest in the United States. He owns a pharmaceutical and household goods wholesale business, which gives him a vested interest in the wellbeing of independent drug stores and, more generally, constraining online pharmaceutical sales. Moreover, he owns three hospitals and two nursing homes, setting him up as a natural opponent of efforts to keep costs down in the public healthcare system. A case could be made that he should recuse himself from any decision that affects payments under the public health insurance system and more specifically the item-by-item price control system. Prime Minister Noda will sell his background as expertise and competence, and that just may fly in Japan. We’ll see… if the new Noda cabinet survives deep into 2013.

Nakatsuka has spent his entire political career in the field, on the HOR Financial Committee* and most recently as Parliamentary Vice-Minister for Financial Services. Noda must have seen this as the safe choice, even as he denied the assignment to the People’s New Party, whose previous choice for the portfolio and a novice on financial services, Tadahiro Matsushita, committed suicide.** The misfortune for Matsushita and his family must also have given Noda an opportunity to see Nakatsuka in crisis mode. Noda certainly could have done worse on the eve of the first annual IMF-World Bank meeting in Japan since 1964, when Tokyo also hosted the Summer Olympic Games.

* The official translation notwithstanding, the Financial Committee covers both financial services and government finance.
** The PNP keeps the postal reform portfolio while being compensated for the loss with an extra parliamentary vice minister position.

Tanaka has been put in charge of the Ministry of Education, Culture, Sports, Science and Technology. A second-generation sinophile as the privileged daughter of former Prime Minister Kakuei Tanaka, she can assure Noda that she is not going to cause any problems around textbooks and history issues at MEXT. However, her previous experiences as Minister of Science and Technology and Minister of Foreign Affairs in LDP administrations were fraught with personality clashes; the MOFA tour in particular was an unmitigated disaster. I now believe that the main cause of the turbulence was the insecurity of a rank amateur unused to being contradicted. This time, she comes with a couple of years as Chairwoman of the Committee on Education, Culture, Sports, Science and Technology under her belt (as well as another year as chairwoman of the House of Representatives Committee on Committee on Foreign Affairs) so she comes equipped with some experience. Let’s also see if, at 68, she shows more maturity.

Other notable appointments? Koriki Jojima (65) as Minister of Finance and the replacement of Motohisa Furukawa by heavyweight Seiji Maehara as Minister for National Policy (among other things). Jojima is the second consecutive MOF head with no political (or bureaucratic) background in fiscal or monetary policy. His appointment, just as the Noda cabinet is about to tackle the FY2012 supplemental budget and the FY2013 budget in earnest, must be an indication of Noda’s trust in the MOF bureaucracy.

Maehara should be playing a more prominent role than his predecessor on comprehensive taxation and social security reform. I’m not sure that this is a positive for Noda, particularly in the context of the twisted Diet, since Maehara has not fared well in situations that require compromise. Of more immediate interest is the removal of pro-renewables, (at least since 3.11) anti-nuclear Furukawa as the point man for energy policy. This will be balanced out somewhat by the replacement of Goshi Hosono by pro-renewables, pro-Kyoto Protocol Hiroyuki Nagahama (53) as Minister of Environment. But Nagahama is one of Noda’s personal allies, and clearly is a political lightweight compared to Maekawa (as well as Hosono) and will not be in charge of the overall debate. This must be a plus… if you are thinking like Keidanren.

And for what it’s worth, the media notes that the other three candidates in the leadership race and their supporters were shut out from the cabinet.

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