An expert on US politics has emailed me, telling me that the Obama administration should want to put off a domestic fight over a Japanese bid to join the TPP negotiations between US businesses in general and trade officials, who favor it, and opposition from the AFL-CIO, who played a major role in the presidential election, and the American Automotive Policy Council. True, concessions that the Japanese side appears to be preparing to make on inspection of auto imports do not address the real if unstated concerns of the opponents. I’m further downgrading the notion of an Abe bid on the occasion of the Washington visit.
Monday, December 31, 2012
I have not addressed the potential impact of a deal on a more thoroughgoing reform, scheduled for the next (2013) Diet session, of the House of Representatives (HoR) electoral system including the reduction of the number of seats. To be honest, I had somehow forgotten about it till now. How does this change my previous calculations? I should do a full rewrite, incorporating this fact and an intermediate post as well. Is there someone out there who’ll pay me to do it? In the meantime, the following takes up the implications of the reform, not necessarily to my satisfaction.
The DPJ, LDP, and Komeito cut a deal on thoroughgoing reform on November 16, one day after the Diet had adopted legislation that addressed the most immediate constitutional concerns by eliminating five seats in the most overrepresented prefectures. However, the 2011 Supreme Court decision that ruled the current state of affairs a violation of the Japanese Constitution—a ruling that will certainly be repeated with regard to the December 16 election—came down hard on the one-seat set-aside per prefecture as a fundamental cause of the structural imbalance that constantly threatens to tip marginal districts over the (admittedly arbitrary) 2-to-1 threshold that the Supreme Court has taken up as a rule of thumb for the HoR. This creates significant political pressure to adopt a formula adopted that eliminates the set-aside or otherwise significantly alleviates the constant threat of slipping into unconstitutionality. Two years lapsed between the last significant reform in 1994, which also occurred partly in the wake of similar concerns over the constitutionality of a HoR electoral system that produced 3-to-1 vote-value disparities, and the first election held under the new (current) system in 1996. If all goes well in the next Diet session and history repeats itself, the first general election under the new system will be held in the bottom half of 2015.
How soon can an election be held under the new system? It should legitimately take a year after legislation is passed to lay the actual groundwork for a new general election, half a year to carve out the new districts and another half a year for voters and potential candidates to familiarize themselves with the new arrangement. That would take us deep into 2014. At that point, there is likely to be significant public pressure for a Diet with a mandate under the new system. Specifically, the consumption tax hike kicks in on April 1 of that year—and the second installment on October 1, 2015—and there is irresistible public pressure on the political class to shed their own pound of flesh in the process. This will surely take the form of a permanent reduction of the annual stipends for Diet members as well as their generous expense accounts, and almost as surely include a substantial reduction of the number of HoR members, which currently stands at 480. The latter, of course, is only possible to effect through a general election.
The 1994/96 experience tells us that the political class could push off an election under a new formula for some time, possibly even up to the end of the full four-year term, even when the constitutional circumstances remain unrepaired. The timing of the election would depend very much on ever-present factors, foremost being the relative electoral prospects of the incumbents and the opposition and the legislative leverage of the opposition to disrupt the incumbents’ ability to govern. However, in the case at hand, the public demand for self-sacrifice, peaking around the 2014 consumption tax rate hike and to a lesser extent the 2015 hike, will add its weight on the side of an early political resolution, complicating the task of forecasting the actual timing of the election and, by implication, the duration of the Abe administration. I’m going to wait and see how the reform process unfolds during the 2013 regular Diet session—it’s not even unthinkable that the political parties fail to come up with a solution that can make it out of the Diet on that occasion—in the hopes that I’ll have more material and better thoughts on which to base my judgment. In the meantime, I’ll keep my forecast as is.
Sunday, December 30, 2012
You won’t want to take me too seriously; I’m the one who predicted several months ago that Masaaki Shirakawa would be reappointed as the governor of the Bank of Japan. The LDP and Shinzo Abe laid out a direct challenge to the BOJ, demanding a 2% inflation target (with 3% nominal GDP growth, which, though no one seems to notice, is a pretty modest growth rate to aspire to) and a government-central bank policy accord and threatening legislative action if need be. Although Dr. Shirakawa has indicated his willingness to accommodate both demands, the Abe administration appears to be intent on finding a replacement. Several names of academics, as well as the usual coterie of former top MOF officials have been floated, with Professor Kazumasa Iwata being the favorite among Abe’s close associates, if this Yomiuri report is to be believed. The reason given in the report is that his policy recommendations are closely in line with the LDP’s and that he has worked for DPJ administrations as well, which would make it easier to secure the consent of the House of Councillors, where the LDP-Komeito coalition does not have a majority.
The need for consent from both Houses may yet earn Dr. Iwata the ultimate prize for academics who work closely with the government over the years amassing political capital. But what happens in the future if there is a significant disagreement between the government and the BOJ? Dr. Iwata is a person who follows his own council. Besides, is there a professional upside to bending ones complying with the government’s demands when one has already reached what must be the upper limit of your extra-academic career? By contrast, a BOJ or MOF official has the interests of his/her institutions to consider. If Dr. Shirakawa has a chance of reappointment, that’s where to look.
Of course, some academics—I’m not naming names—will also bend.
I normally do not inflict my reading habits on others, but I feel compelled to recommend Daniel Kahneman’s Thinking, Fast And Slow. I knew it would be a good read because I’m a great fan of Dan Ariely, and Ariely regards Kahneman as one of the most important figures in the behavioral sciences. (Ian Bremmer, who is not prone to plugging authors, also recommended the book to Eurasia Group clients.) I’ve only finished three chapters—it has 38, plus an 11 page “Conclusions”—but I can already tell that it will help me think clearly. Just one, brief example:
“…when people believe a conclusion is true, they are also very likely to believe arguments that appear to
be truesupport it even when these arguments are
Maybe I like this line because I’ve always believed it on some level to be true—and it appeals to be because I like to think that I recognize it in others but that I am above it all and always search thoroughly for counterarguments. In fact, I probably do, and I’ll more likely than not read about the phenomenon later in the book.
Whatever the case may be, I expect it to be a great thinking aid.
Saturday, December 29, 2012
The following is tentative. For starters, I haven’t explained at length why I trust that the Supreme Court will not declare the December 16 House of Representatives election null and void, and the text looks a little cluttered. But I’m going to put it out there now, as I have other matters to tend to and it looks useful if only for anyone interested in the issue to think it through and come up with something better.
I’ve been reminded that a Supreme Court ruling on the current House of Representatives is likely to be coming down in another year and a half. Upon further consideration, I feel compelled to alter my prediction for Abe’s tenure to over two, not three, and a half years. Here’s my reasoning.
The Diet was put on notice on March 23, 2011 by a Supreme Court decision that ruled that the allocation of electoral seats for the August 30, 2009 House of Representatives (HoR) election had “reached a situation in which it contravened the demands of the Constitution for the equality of the value of votes at the point of the election” and stated the need to “take legislative measures…within a reasonable amount of time necessary for correction…that meet the requirement of equality of the value of votes.” Let’s assume that the lawsuit against the December 16 election takes a similar course through the courts with the Supreme Court decision coming in late June-early July 2014, around the end of that year’s regular session, give or take a couple of months. This will put significant public pressure on the Diet to preempt or soften the SC ruling by coming up with a formula that eliminates the one seat-per prefecture set-aside or otherwise eliminates the likelihood of generating a ratio larger than 2:1 for the value of individual votes. The fact that the Diet has so far failed to do so after the 2011 ruling in the second half of the 2011 regular session and through the entire 2012 session, not to mention the extraordinary sessions that have been summoned from time to time and instead came up with a last-minute minus-five emergency patch that would only go into effect in 2013 suggests that it is likely to dawdle again until the Supreme Court comes down with yet another, possibly more harshly worded ruling.
Assume, though, that the Diet does come up with a formula that musters a majority in both houses—this is the last kind of legislation for which you want to resort to a HoR supermajority override—during the 2014 regular session as originally scheduled. Another sixth months, minimum, will be required for the actual redistricting process under the new formula, then at least another few months for the public communications process, and only then could a HoR election be called. This should take us into the early months of 2015; at two years and some months after the Dec. 16 election, not nearly the three and a half that I’ve predicted, but certainly much longer than the one-year-and-out that many people are holding out for. In the unlikely event that the legislation dictates the districts so that no further redistricting is necessary, there will be a need for a public communications and preparations process, one that will require six months or more—if only because the majority incumbents, who will want to put off the day of reckoning, will demand it. That will still take us to the end of 2014 or thereabouts.
In the earlier, dawdling scenario, the Diet really gets serious—by that I mean really get serious about doing something fundamental about the situation—only after the SC ruling, which means another several months, maybe more, added to the timelines in the previous paragraph until the stage is set for any new HoR elections.
So that gives me several points on the timeline, two years, two and a half years, maybe three years from the election, where I could situate plausible over-unders. Right now, I’m more comfortable with the two-and-a-half and three-year ones, in that order, than the three-and-a-half one for which chose the over.
The signs are pointing away from a Japanese commitment to TPP negotiations when Prime Minister Abe visits Washington, most likely in January. Yesterday (Dec. 28), an anti-TPP LDP rally drew over 180 out of its 378 Diet members. Meanwhile, the same day, Shigeru Ishiba, the LDP secretary-general, stated that the LDP would have to make up its mind by the House of Councillors election in July while Abe himself stated in a Yomiuri interview that he would consult with President Obama on the matter during the January visit.
Abe could still commit the Japanese government on the occasion while making a more specific domestic promise to protect rice farmers and other “national interests”—maybe throw a sop to small medical clinics?—throughout the negotiations, but I’m not seeing the usually cautious prime minister laying the groundwork for such an event. The timing is crucial because the US Congress will take up to three months to decide whether to confer authority on the president to enter into negotiations with Japan. Any further delay means that there is a good chance that all or most of the outstanding issues will have been settled by the time that Japan is allowed to join the negotiations, leaving it with a take-it-or-leave-it, done deal.
This no-decision scenario has several negative implications for the Abe administration.
First, it will disappoint Japanese manufacturers, who find themselves disadvantaged vis-à-vis their South Korean competitors, who can export their products to the US market duty-free. It will certainly ease their conscience as they shift ever more of their business activities overseas.
Second, the mainstream media, reliant on the metropolitan markets, will largely fault him for kicking the can. This issue is unlikely to be the decisive reason for all but a few urban voters, but few issues are, as we learned in the House of Representatives (HoR) election, where, for instance, the parties most closely identified with an anti-nuclear stance did poorly. Nevertheless, it will be an early and substantive negative regarding leadership that becomes part of the individual voter’s media cloud in which that voter makes up his decision come election time.
Third, it will surely disappoint the White House, which would be left with an inconclusive outcome on the one issue that could make the January summit something more than a courtesy call. Abe’s enthusiasm regarding collective self-defense will be welcomed in the abstract, but the Japanese authorities will certain require much more time bringing coalition partner Komeito around before they actually make up their mind on that.
Fourth, it will put a damper on the FTA negotiations with China and South Korea, who already have more than enough domestic issues around any formal undertaking with Japan and will be even less motivated to move forward if an early Japan-US deal on the TPP negotiations appears unlikely.
But Abe is not a strong prime minister. The conventional wisdom is that the LDP won despite Abe, and the polls leading up to the election and the actual vote tallies back that up. Thus, his political capital is much smaller than the HoR supermajority that the LDP-Komeito coalition enjoys. It is looking increasingly likely that he will accept the less definite negatives flowing from a non-decision rather than face open rebellion from the DP rank-and-file so early in his administration.
Personally, I hope that he proves me wrong.
Friday, December 28, 2012
Support for the new Abe cabinet in national polls taken on December 26-27 is at a near-historical high: Yomiuri 65%, Nikkei-TV Tokyo 62%, Kyodo News 62%, Asahi 59%, and Sankei-FNN 55%. Moreover, support for the LDP appear to be up more than a dozen points from poll numbers taken just after the election was officially announced (December 4), which in turn had been slightly higher than the percentage of the regional proportional district vote total that the LDP won (December 17).
First, the rally-around-the-winner mentality of the crowd.
Second, the generally favorable press that a new cabinet gets, a media courtesy extended to even the most obviously incompetent, incontinent, or undisciplined.
Third, the existence of a continuous, all-encompassing socio-political middle ground free of the tribal, ethnic, religious, and regional cleavages that allows the public to shift easily to and from support for the incumbent powers that be.
Fourth and the only situational one, the highly favorable short-term economic news—falling yen, rising stock—that Abe has been able to generate with his public spending and inflation targeting talk.
But “to and from”, indeed. Yomiuri has a nice little chart that reminds us that six of the eight highest support figures for new cabinets since the 1978 Ohira cabinet (21 in all, not counting the “second” and “third” cabinets where the prime minister is retained) belong to the post-Koizumi era. In fact, the only post-Koizumi cabinet that fails to place in the top eight is the ill-fated Aso cabinet (2008-2009).
First, avoid cabinet appointments that have to be retracted because of incompetence, incontinence, or simple lack of discipline.* Embarrassment after embarrassment from his cabinet appointments really sapped the political capital of Prime Minister Noda, an otherwise popular and well-regarded figure.
Second, maintain party coherence, and be the first mover when you can’t. This is my main (though not only) takeaway from the contrasting fates of Prime Minister Koizumi (2005) and Noda (2012).
Third, be lucky.
* I’m increasingly of the view that Nobuteru Ishihara is the weakest link. He declined the customary handover, photo-ops and all, from the preceding Minister of Environment and instead went straight to work with his new subordinates. Is that being commonsensical—the handover does not really serve any practical purpose—or just plain rude? Always casual about his appearance, he looked disheveled, hair askew, during the LDP leadership campaign and disappointed audiences with listless performances. Couple that with a recent history of odd pronouncements and he looks quite vulnerable. The Ishihara connection should shelter him from the heaviest shellfire from Mayor Hashimoto and his Japan Restoration Party, but it will not save him from the rest of the opposition looking for an easy kill.
Do you remember how Toru Hashimoto, as Osaka mayor, threatened to cut off the municipal government’s subsidy to the traditional puppet theater unless the non-profit Bunraku association engaged him in a public debate? Do you remember how the association kept stalling and asking to meet the major in private—inexplicable, since they had literally nothing to lose, and tell me how Hashimoto could “win” the debate—but ultimately came around and the mayor duly restored the subsidy after confirming measures that essentially amounted to more accountability? On December 26, the municipal and prefectural governments, both firmly in the Hashimoto camp, have jointly bestowed the fourth annual Osaka Cultural Award on: Kanjuro Kiritake, a top-flight Bunraku puppetmaster for his contributions in taking the art to children and overseas.
So our plucky little hero quakes in fear at first, but finally musters the courage to face the evil overlords and not only prevails, but manages to melt the hearts of his tormentors and secures their blessing and public acclaim? Does that sound like the beginnings of a plot for a Bunraku script or what? (RPG, perhaps?) I’m not saying the two sides had this all planned out—for one, the decision on the Osaka Cultural Award is made by a panel of prominent local figures, not by the mayor and governor—but the media attention garnered along the way through all the theatrics certainly must have been drawing more eyeballs to the puppets, which was Hashimoto’s point, in the first place, wasn’t it?
Thursday, December 27, 2012
Here's a related point that came to mind while writing a response to an email regarding Abe's prospects.
It is easy to forget, also, that 1) the other side of assuming that Abe is in good health now is that all the signs in 2007 that he intended to carry on but had to resign for health reasons were not some aimless, ill-designed pretext, 2) Fukuda willingly relinquished the office even though his poll numbers had been on a steady if unspectacular rise in the belief that Aso would be better equipped to fight an election campaign, and 3) Aso spent a year building a legacy instead of homing in on the election. With good health, Abe could easily have hung on at least until the next LDP leadership election, and we would be dealing with a very different LDP narrative.
I’m not ready to give up the search for a common thread and I’m aware that I have a strong bias for “small” explanations, but I am definitely less convinced that we’re stuck in a Groundhog Day remake.
I'll take the “over” on a 3-1/2 years over-under as long as Abe remains in functional health. The outcome of a 2016 double election will determine whether or not he'll beat Koizumi's record.
Let’s tackle this issue by asking the following question: How could Abe’s term be cut short?
First, Prime Minister Abe may call a snap election in order to break through a legislative impasse. That is highly unlikely to happen until the next House of Representatives (HoR) general election, since the LDP-Komeito coalition—a durable coalition between two broadly likeminded parties—has a HoR supermajority.
Second, he may feel compelled to resign after a disastrous LDP showing in the 2013 House of Councillors (HoC) election. However, that is not going to happen unless the Japan Restoration Party, Your Party, and the DPJ can plan and execute a single member district-by-district pooling of votes. You only need to look at the results of the 2007 and 2010 HoC elections to see that. And what are the chances of the three main opposition parties doing that?
Third, he may feel compelled to resign or, more plausibly, defeated in the 2014 LDP leadership election, because his poll numbers fall through the political floor, and it is true that the previous six one-year administrations have seemed to wither and die, like annual plants. It is his competence and leadership and not his position on any specific issue that he must worry about. Here, he is protected on the legislative flank by the supermajority, while the LDP itself, already more disciplined than the DPJ, must have learned from the lessons of the DPJ. He has also been lowering expectations on potentially incendiary issues during and immediately after the election campaign and has assembled what appears to be a solid list of cabinet ministers. Loose lips sink ships, of course, and Nobuteru Ishihara and, to a lesser extent, Taro Aso have the potential to chime in with the odd false note. However, they have served in the past without much incident (or much distinction, but that’s another story), so I’m not betting on them doing anything too foolish any time soon.
Of course there’s the matter of Abe himself, specifically, “his political skills, or his tin ears, or his grasp of language and issues”, as one usually astute observer of the Japanese political economy scene puts it*. Now my friends and acquaintances know that I have never thought much of Abe as a politician. In fact, I’ve been mystified by his original rise to power as well as his sudden, unforeseen comeback. But then, I never understood Koizumi’s charms either, and I’ve always worried that I could be underestimating Abe because he got all his schooling in an escalator school system for rich kids. Prejudging Shinjiro Koizumi is a perfect example of how that kind of “misunderestimation” can lead you astray, and Abe has been judged to be worthy by his LDP peers, the very people who know him best professionally and also have plenty of personal skin in the game. I do not understand him, I never may; but he does have my respect. (I am aware that there are people who think that the people who selected him are just plain stupid. I have long shed belief in my own such omniscience.)
* If you want to know the identity of this person, please subscribe to the SSJ Forum. You should be able to find his comment in the archives.
Now it is useful to remember that Abe’s gaffes, in my opinion, have not been of the off-the-cuff, weird stuff that someone like Nobuteru Ishihara sometimes emits but expressions of deeply held views—especially unpopular in China and South Korea—or attempts to explain them. He would obvious do better if he had the Koizumis’ natural talent to know the right thing to say at the right time, but he doesn’t. But he can learn from his mistakes, and he has had the lead-up to the election to get some potential snags out of his system or at least air them and then put them into mothballs.
Note also that he is assembling an impressive array of political appointees, beginning with Yasutake Tango (ex-MOF), Shotaro Yachi (ex-MOFA), Koichi Hamada (economist, Yale), and Isao Iijima (Prime Minister Koizumi’s political majordomo extraordinaire) as senior advisors. I’m a little worried about Professor Hamada—whom I like and very much respect—because he is not a political player to the best of my knowledge Also, this does not appear to be the beginnings of a team for radical change. However, it does look like a pretty good firewall in the making as far as navigating around potential pitfalls is concerned.
* The media has also taken note of the presence of several METI officials, current and former, who caught Abe’s eyes during his first administration and also when he served under Prime Minister Koizumi. One of them will serve as Abe’s political secretary, which technically puts him charge of the administrative secretaries seconded from MOF, MOFA, the National Policy Agency, and METI. Prime Minister Ryutaro Hashimoto was the last prime minister to do that when he picked the METI official who had been his secretary when he was METI minister. The official is Kenji Eda, who is now a HoR member for Your Party.
Of course there’s always the unknown unknown, like the abductee revelations and Fukushima Daiichi, which are probably more likely than an asteroid hitting the Earth and finally making Francis Fukuyama’s prediction come true. But guessing at black swans is difficult and is something that I have little aptitude for.
Finally, some people wonder about Abe’s actual health. In fact, that was the first thing that I heard at an evening get-together of mostly corporate executives and a smattering of academics when the question turned to the political scene. But people raising that question are essentially implying that there is a conspiracy involving at least one doctor, one nurse, and one apothecary and the process of locating them without disclosing said fact to third parties. Like most conspiracy theories, it just doesn’t make sense. In the absence of evidence to the contrary, Abe is like so many other people in developed countries: a person with a chronic health problem whose symptoms he avoids by taking up-to-date medication and otherwise following doctor’s orders. Besides, he’s visibly more animated and robust than the last time we saw him at length.
I have not addressed the possibility that demands for a “constitutional” House of Representatives will become irresistible, forcing Abe to call an early election. I’ve come to the tentative conclusion that the likelihood is pretty small. I’ll try to remember to address it at some length.
No, you most likely will not be hearing this exchange, unless, say, you’re in Africa and you have a strong interest in Asia.
1. Japan’s economy has been experiencing major contractions. Was 2012 economically overshadowed by Fukushima or are the problems this year broader than that?
It was actually the third quarter, I believe, and I’m not ready to call it a major contraction. Now the consensus is that it was driven by the global economic downturn, or slowdown, including China. In any case, it’s worrying, and we’re looking at a large supplementary budget to tide us over, and an inflation target as well. Fine, but we need to ultimately face up to the long-term challenges, or we’ll be stuck where we were before we pumped the money into the economy.
2. Japan has raised regional tensions with China this year over disputed islands, will Japan look back on this decision as hurting their role in the region and their economic future
I would argue that China has raised regional tensions with Japan over the islands. But this is not the place to settle that argument. Instead, let me remind everyone that, yes, Japanese businesses have been hurt. But their Chinese joint venture partners have also been hurt, their Chinese suppliers have been hurt, their Chinese employees have been hurt, the Chinese consumer has been hurt. It hurts everyone. Now, Mr. Abe is making some important overtures to the United States, South Korea, Russia, and, of course, China. But it takes two to tango. I am a cautious optimist, so I am hopeful that the two sides will work together to contain negative spillover from the issue.
3. Political chaos has gripped Japan for years, with the Eelection of Shinzo Abe is the country finally moving forward in a more united way?
I could spend hours talking about the several important issues on which the LDP-Komeito coalition and the DPJ are quite close and could cooperate, collaborate in attacking them. But I’ll skip that and instead mention that the Abe administration will have a supermajority in the lower house that it can use as a last resort to get over any legislative obstacles that the opposition puts in its way. Prime Minister Abe is in a good position to sustain his administration until the lower house must face its next election.
4. My Name is (your name) and the most influential person of 2012 is (your choice) because….
My name is Jun Okumura and the most influential person of 2012 is “No one” because we are in a G-Zero world, as Ian Bremmer at Eurasia Group says, where no one is in charge. The presidency of the United States is not what it was cracked up to be, the presidency of China is not there yet and may never be. President Putin has his own problems, and Europe’s problem is collective, and the solution will be collective. No one: that’s my answer.
Wednesday, December 26, 2012
It’s official; it’s 10 of 19 cabinet members including Prime Minister Abe, or 47%. If you insist on counting a great-grandchild or Ishihara, it’s 10 of 19, or 53%; add both and it’s 11 of 19, or 58%. I would count Ishihara but not the great-grandchild, but maybe that's just me.
Two cabinet members are women. In a more significant gender-related move, two out of the three major LDP political assignments have gone to women, and one of them has been seen as potential prime minister material. Abe is trying, trying hard.
The post-apocalypse Tomorrow Party of Japan got together on Christmas Eve, where party representative and governor of Shiga Prefecture Yukiko Kada nominated Tomoko Abe, recently defected from the Social Democratic Party, as co-representative. The Ichiro Ozawa side demurred and made a counterproposal for Ozawa co-representative. Kada refused, referring to an agreement with Ozawa that he would not seek party office. That was then, though, and she turned out to be anything but the antinuclear talisman that would salvage his minions in the House of Representatives general election. The one-issue Kada will be more of an albatross around Ozawa’s neck as he inevitably begins casting about for potential allies. I’ll be surprised to see TPJ more or less in its current configuration—minus Shizuka Kamei, who has already left, disgusted with all the commotion—make it to the House of Councillors election in July and will not be surprised to see it fall apart by the end of the 2013 regular Diet session. Not that it will matter politically, one way or the other.
One other typically Ozawa move: he was absent from the get-together. In fact, if Kada is to be believed, he doesn’t even call back.
And with that, I suspect that I won’t be referring to Ozawa again for a long time, if ever.
Find the LDP-Komeito Coalition Government Policy Agreement here, if you can read Japanese and are prepared to be mostly unsurprised. It reaffirms the Nuclear Regulation Authority’s supremacy on reactivating reactors and passes on constitutional amendment for further discussion. IT adopts the LDP’s 2% inflation target and 3% or more nominal GDP growth rate—1% real growth; that’s a pretty modest figure, but not out of line with typical per capita, developed country expectations, I assume.
Two things come across as notable. First, there’s no reference to a government-BOJ policy accord. I doubt that this means anything, but it was one of Abe’s headline campaign promises. Second is the following (my translation):
“Seek to reinforce the Japan-US alliance, reconstruct the relationship between the two countries, and seek to increase trust with neighboring countries such as China, South Korea, and Russia.”
The only other “neighboring countr[y]” that I can think of is North Korea—Taiwan is not a “country” in officialspeak. But that’s not my point. South Korea was supposed to be one cornerstone of then Foreign Minister Aso’s “Arc of Freedom and Prosperity” * and it is being mentioned in the same breath as China and Russia. It’s not about the overall relationship; things are not bad between Japan and Russia. The common thread seems to be the territorial disputes.
More generally with regard to “Diplomacy and Security”, there’s no fancy talk about global leadership, international contribution and the like. It’s focused on the national interest in the narrow sense. And speaking of national interest, it says:
“…with regard to TPP, we shall seek the best path that is in accord with the national interest.”
Noncommittal, but the non-commitment is certainly phrased in a way that is less negative than the LDP’s corresponding headline campaign “promise”:
“We shall oppose participations in the TPP negotiations as long as ‘elimination of tariffs without sanctuaries’ is the premise.”
I’m more convinced than ever that Prime Minister Abe will come back with an agreement with President Obama on this. The trick will be to find wording that minimizes noise from LDP dissenters while enabling Obama to put the question to Congress without the political costs outweighing the benefits.
* I misremembered this, and I’m beginning to see why.
Tuesday, December 25, 2012
Today’s online Mainichi has a list of 14 prospective cabinet members (CMs) and two deputy chief cabinet secretaries as (DCCSs) well as four prospective members of the LDP political leadership team. nine (10 if you count Nobuteru Ishihara as a NHINO—non-heritage in name only) of the 14 CM and the two DCCS candidates are second-or-more generation Diet members. That’s a 64% heritage rate (69% if you count the DCCSs). That rises to 67% (71% including DCCSs) when you count Shinzo Abe. So far, we are out-princeling China. At least we have a princessling on the list, Yuko Obuchi, the daughter of a former prime minister. Note also that one of the non-heritage candidates is slated for the obligatory Komeito slot.
Well, only one, which means that the Y-chromosome index of the list of prospective CMs clocks in at 93 (94 counting the DCCSs) against a perfect all-male score of 100. To be fair, the article mentions two other women being talked about for a political leadership position, Sanae Takaichi and Yuriko Koike, who incidentally did not inherit their Diet seats. The personal histories of the two women are instructive. Takaichi is a relatively rare female graduate of Matsushita Seikeijuku, the launching pad for many a non-LDP, non-heritage centrist career, while Koike was a popular newscaster, a great situation for jumpstarting a non-heritage career. They are both well-travelled politically, having at one time been members of Ichiro Ozawa’s old New Frontier Party.
Finally, of the four party leadership candidates, two are heritage-farmed while the other two come from prominent families in local (prefectural) politics.
It obviously helps to be a princeling, but it may be even better to be a princessling. Obuchi, at 39, has already been ministered, at the politically tender age of 34 by then Prime Minister Taro Aso. Actually, just being a woman can’t be that bad. Takaichi, 51, held a cabinet post in Abe’s 2006-2007 cabinet while Koike, 60, has held three cabinet positions including the environment and defense portfolios. But first you have to be nominated by your friendly local chapter, and how good are the chances for that? The alternative is to start off on the national candidate list for the House of Councilors, which in principle is the slow-track to power, with limited upside to boot.
More generally, the lesson here is that you need to start early if you want to get ahead. Seniority matters, particularly in the LDP (and Komeito, I presume). It obviously helps to be heritage-farmed, but a high-profile media career is also useful in this respect. There was also a point in time where the Matsushita Seikeijuku helped launch many a centrist political career against a backdrop of political ferment as the post-1955 LDP grip on political power loosened.
Monday, December 24, 2012
First, the short: Did anyone think that there was any meaningful difference between the LDP-Komeito coalition and the DPJ ? Or the Hashimoto-Ishihara JRP for that matter? Yesterday (Dec. 23), Abe appeared on Fuji TV and stated that he would seek Diet confirmation of the four commissioners appointed by the Noda administration to the newly established Nuclear Regulation Authority. I’m pretty sure that not even the electric utilities ever thought that any of the other nuclear power plants could be turned on again without receiving a seal of safety approval from the NRA under yet-to-be-written new safety standards; Abe’s decision merely confirms it. That also means that any reactor sitting on a live fault is definitely going to be mothballed and eventually decommissioned. The irony here is that the Noda administration had used the nuclear emergency to appoint them pro tem—perfectly legal to be sure—because he feared debilitating consent proceedings. Whatever his personal inclinations or the LDP’s stated position regarding nuclear power, he’s going with the doable, as he always has.
The long? Not so good, if you’re pro-nuclear. Two weeks ago, Professor Hiroshi Tasaka, a nuclear engineer with significant industry and policy experience, gave a talk where he made the following point: Sooner or later, we’ll have to face up to the fact that we’ll be unable to find a location for final disposal of nuclear waste. This means that the nuclear waste will have to be stored in situ in perpetuity, which a) puts a physical limit on nuclear power production and b) adds storage costs in perpetuity, significantly raising the cost of nuclear power. This is also part—the more important part, I would argue—of Shigeaki Koga, the ex-METI official-turned policy advocate/ombudsman’s anti-nuclear argument. But if I had to put a tag on the nonpartisan Professor Tasaka, he’s rationally pro-nuclear, if anything. And he’s been there and done that and knows NIMBY intimately, so his words fall heavily and equally on all sides of the political argument. Is there a way out of this? Professor Takao Kashiwagi, a thermal engineer who strongly supports energy efficiency and renewables and has worked closely with the government for many years, believes that nuclear power has a meaningful role to play in Japan’s energy profile. His solution? He didn’t say it outright in a recent Yomiuri interview, but it was clear that he was looking to overseas locations—I’ve seen talk elsewhere about stable geological formations in Mongolia—for final disposition. I know barely enough to realize that this will face massive political, legal, and IR challenges. But like it or not, that’s where the discussions will be going. But not during this administration; I think that they’ll kick the can down the road on this one.
Sunday, December 23, 2012
RD asks: “I've often noticed when I attend events or read stuff on creating [globalized manpower] or sending Japanese to study abroad, the speakers or authors emphasize that prior to going overseas young Japanese should increase their knowledge of Japan and strengthen their Japanese identity… Where do you think this comes from? I've never seen this mentioned in discussions about foreign study in other countries.”
Never knew that. The “other countries” part, that is.
The most obvious answer—the one that the speakers and authors surely have in mind—is that the Japanese students are embarrassed by not have much to say when people put those questions to them, in contrast to Chinese and Korean students, who are supposed to have loads of national myths to tell in which we Japanese reportedly play a major if unwelcome role. By contrast, we do not have those emotive national myths; they were leached out of the curricula when we lost the WW II, and which BTW most of us are cool with that. The speakers are not, though, which leads to the last-minute exhortation. But then, a sendoff speech is not the best occasion to make the point, is it?
Now, that’s the easy answer, and I’m pretty much convinced that there’s plenty of truth to it. However, this being one of those subjects that are hard if not impossible to falsify, I am indulging myself (instead of avoiding it altogether) and offering what I hope is a more amusing if not necessarily more plausible answer.
My guess is that it all goes back to the Meiji Japanese who went to Europe and the United States to study. (Or, if you want to reach all the way back, to the 7th century envoys to the Sui dynasty.) Unlike the poor, mostly poorly educated, masses that made their way to Hawaii, California and other destinations for indentured servitude/a better life, they must have been told by the Japanese government that they were representing their country so they had to act accordingly. Now, customs that have little practical value but do little harm as well not only tend to endure but also accrete over time to produce elaborate sets of protocols that are baffling to outsiders. (For example, no US politician can make a speech without reminding everyone of the greatness of America and the blessing that God has bestowed on them all. Then there's Tebowing...) I think that those exhortations are just that, an incantation, a piece of Latin mass if you will, that has been passed down over the years (and passes over the heads of most of the students) but is repeated on such occasions to lend legitimacy to the taking of public or corporate money to spend a couple of years abroad.
Sorry, Abe haters, he has a game plan. And it has things like this.
1. Special Envoys
China: Masahiko Komura, chairman of the Japan-China Parliamentarian Friendship Association.
South Korea: Fukushiro Nukaga, secretary-general of the Japan-ROK Parliamentarian Association and former finance minister.
Russia: Yoshiro Mori, former Prime Minister.
United States: The real thing.
2. Issues to avoid
Public servants on Senkaku Islands, Takeshima Day, comfort women.
He also lucked out on Dec. 19 (Wed), when Park Geun-hye won the South Korean presidential election. Had Moon Jae-in prevailed, he would have flicked away any and all Abe overtures to the until the latter had given in on Takeshima and comfort women. (Moon also would have attempted an unconditional outreach to Kim Jong Un, an act that would have disappointed Abe…and President Obama even more.)
And he bagged the stock and currency markets (and the BOJ governor) with his 2% inflation target. And he’s not even prime minister yet. He’s either very, very good, or very, very lucky or, more likely, a little bit of both—and well prepared. I’ll suspend judgment, though, until I see how he handles TPP when he calls on President Obama when the new year dawns.
Friday, December 21, 2012
And This Is for the People Who Believe that Abe’s Heart Is on His Right and His Brain Is Time-shared with a Zebra Mussel
I have never been impressed by Shinzo Abe, but I was never impressed by Junichiro Koizumi either, so I assume that the LDP members that have been supporting Abe know something that I don’t know and proceed on that assumption. And that is why I’ve been dismissing all the hopes and fears in liberal happytalk around what Abe might do around the Senkakus, history issues, Yasukuni and the like as poppycock. Abe does have a long-held strategic outlook, Ian Bremmer reminds us. and the Japan-US and Japan-South Korea relationships are, in that order albeit at quite a distance in levels of importance, key elements of that perspective. And that is why Abe is not digging into the LDP not-quite-campaign-promise policy potpourri to hold an official Takeshima day ceremony on February 22, according to Asahi Shimbun.
Could Asahi be wrong? Yes. And an incoming asteroid could destroy most life on earth. But I’ll eat a Texas Hat if I’m wrong. And an asteroid could render that wager irrelevant.
If media reports are to be believed, the Bank of Japan will agree to adopt a 2% inflation target and upgrade the October 31 Government-BOJ joint document to a formal accord. Add these to the so-far highly positive market response—a falling yen and spiking stock prices—and the Abe administration is off to a fine start even before it has begun. Note also that Abe will then have the option of reappointing a cooperative BOJ Governor Masaaki Shirakawa and avoid a potentially debilitating battle to install a more compliant successor in April, when Dr. Shirakawa’s five-year term expires. So, is Shirakawa a craven coward thinking only of saving his neck come April for falling in line with the LDP and the presumptive prime minister, as some pundits (and tabloids and weeklies) will surely be claiming in the coming days?
Of course not. The uncertainty generated from a Shirakawa refusal would make the BOJ governor an instant, four-month lame duck, at odds with the incoming administration, and plunge the market into disarray. Plus, the BOJ under any successor would be seen as the handmaiden of the Abe administration, a perception that is bound to debilitate the central bank’s credibility. Abe went one way, the market followed. It would have been futile, indeed harmful, to go countercyclical on the political-economy trend-line. Shirakawa decided to make omelettes, and who can blame him?...or the institution, of which he, as an alumnus, is a personal embodiment.
Or so one line of thinking goes. I cannot prove it, but it’s at least more plausible than the craven coward theory that you may begin hearing any time now.
It’s a choice between a government divided as you stand by your principles and a government united what you think is something within tolerable limits. And that, more often than not, is what governance is about.
Yomiuri Shimbun is the first MSM with a post-election (December 17-18) opinion poll. Here are the numbers that caught my fancy:
The LDP and DPJ numbers tell you that people love winners and dislike losers—behavioral social scientists must have written extensively on this—while the JRP/YP numbers tell you how reliant they were, to different degrees dependent on their maturity, on the floater voters. And the (New) Komeito numbers remind us of the enduring reluctance to reveal Sokagakkai membership, even anonymously. It must be part of what they call the DNA of an institution at work.
Over the long-run, the Japanese legislature mainstream will only accommodate one or two large political parties plus Komeito over the long run. Smaller mainstream parties must go big quickly, by merger or endogenous growth; otherwise, they will wither and go away. Let me explain:
In an industrialized economy, it is difficult to carve out a set of distinct policies that appeal to the political mainstream across the wide range of issues that command public attention. Mainstream parties tend to look in substance like modest variations of each other. Moreover, the Japanese electorate is relatively free of religious, ethnic, tribal, historical and other enduring, visceral cleavages that allow small political parties to operate and thrive in the policy mainstream. This means that mainstream voters and prime candidate material will gravitate over the course of multiple elections towards parties that have a reasonable chance of capturing, then dominating the policymaking and implementation process. That means the ruling party/coalition, plus at most one dominant opposition party. The combination of one or more charismatic political figures and destabilizing circumstances may generate new parties and breakouts, but those creations will dissipate over the long run if they cannot outgrow their initial respective raisons d’ être and become the next big thing.
The LDP will maintain its position as a dominant mainstream party by virtue of its 1/4 bedrock share of the voting electorate plus an enduring coalition with Komeito (and its 1/10 bedrock support base) that includes intimate coordination at the SMD level (making Komeito the virtual pacifist-wing of the LDP). Moreover, the coalition has a House of Representatives supermajority that must be used sparingly from a media-management perspective but will enable it to pass annual tax legislation, which, coupled with the ~FY2012, blanket deficit-bond authorization, will enable it to keep the government running without regard to the configuration of the House of Councilors. This means that if the LDP does badly in the 2013 HoC regular election, it can jettison Abe in favor of a baby face and continue in power without calling a HoR election until December 2016, when its current term ends. The outcome of the 2013 HoC election is crucial for Abe’s long-term survival as prime minister, but is only a speed bump for the LDP.
The DPJ, which was outvoted by the JRP in the proportional reginal districts in the December 17 House of Representatives general election, is in worse shape. A solid, if not bedrock, 3/20 support base still appears to be in place, but it is significantly smaller than the LDP support base and has a much shorter history. Then there’s the Komeito/Sokagakkai vote, which is like spotting the LDP a 10-meter handicap in a 50-meter race. In other words, the DPJ is highly reliant on the volatile mainstream floater vote, which currently has two attractive alternatives on the Third Force movement front: the Your Party—and the Hashimoto-Ishihara JRP. If these two can reconcile their mostly non-policy differences and coordinate their political efforts in the 2013 HoC election, they could overtake the DPJ as the dominant mainstream alternative. If the DPJ’s performance under these circumstances is anything near the most recent HoR results, it will wind up a distant third, and likely pulled apart in the not-too-distant future by the gravitational pull of the two dominant mainstream parties. Thus, in the case of the DPJ, the 2013 HoC election will be an existential battle for its survival.
Tuesday, December 18, 2012
There are two schools of thought around how Japan-China relations will fare under the second Abe administration. Some point to his “nationalist” inclinations—actually quite moderate, and moderated, compared to anything that the Chinese or even mainstream US political spectrum offers; I’m using that term in a Japanese context—and think that he will exacerbate it while others think that he won’t, pointing to his past behavior as well as some very real constraints. I’ve always been in the second camp, but I do acknowledge that Abe has a strategic vision around concern over China’s regional presence and the reasons for that concern has certainly grown since his last tour. Moreover, the likelihood of an unplanned incident around the Senkaku Islands is growing, an incident that is sure to elicit a stronger response from Abe than from any of his seven predecessors, including Abe 1.0, with the attendant potential for escalation. I’ve looked to what appears to be superior second-track and backdoor diplomacy resources to help contain the spillover. But it so happens that three significant LDP figures in the pro-China wing are retiring, willingly in the case of former Prime Minister Yasuo Fukuda and former Secretary-General (Koizumi’s right-hand man) Hidenao Nakagawa, or not, in the case of former Foreign Minister Koichi Kato, who lost in his single-member district election and was denied the proportional-regional-district zombie insurance because of his advanced age. Out of diedt does not mean out of mind, but they will no longer have a personal power base, carrying less authority and disadvantaged as it were to demand the ear of what may be a prime minister that would be reluctant to listen to their more constraining voices. This may be an avenue worth pursuing.
Okay, back to work.
I prided myself over a forecast of a likely LDP majority (241 seats or more) with just 30% of the popular vote in the proportional regional districts (PRD), which is the best measure of the underlying national support for a political party, when conventional wisdom was looking at a LDP-Komeito coalition majority. It turns out that the LDP won 294 seats (296 if you count Kunio Hatoyama and another independent whose name escapes me at this moment) with just 27.6% of the popular vote, down slightly from 2009, when they dropped to 119 seats with 27.73% of the popular vote. That’s right, the LDP got a smaller proportion of the popular vote this time and won in a landslide than they did in 2009, when they lost in a landslide. The difference was that the Third Force movements took the better part of the volatile floater voters away from the DPJ. I was merely less wrong than most people.
Now, there is no way that the LDP can claim to have gained a popular mandate. They have to earn the public’s confidence and claw back some of those floaters before they coalesce under a single countervailing movement. And I think that the LDP leadership understands that. (Shinjiro Koizumi, who I think is evolving into a leader very quickly, certainly understands the seriousness of the situation.) That means that Abe must shed his natural caution and be willing to buck vested interests for causes that enjoy broad media support. Specifically, I believe that he should kick off his policy agenda by launching Japan into the TPP negotiation process when he visits Washington next January—seriously, what else does he think he can get out that trip if he fails to go there?—and go on from there.
And what of the DPJ? Assume that their bedrock, habitual-voter support is around 15%—they won 16% of the PRD vote. That puts tehm at a significant disadvantage against the LDP, which has bedrock support of, say, 25% and an extra 11% courtesy of Komeito/Sokagakkai (which is somewhat like running a 40-yard dash with a 10-yard head start). But it’s something to build on. Moreover, most of the core policy leadership in their 40- and 50-somethings was reelected, most of the members by winning their single-member districts. I’ve been telling people that their best bet is to go with Goshi Hosono, the articulate, telegenic 41 year-old, a uniter who came out unscathed from the post-3.11 process.
I’ve been doing a lot of talking and some listening, and my thoughts have been evolving from those two notes that I put up the last couple of days and I’d like to share them here, but that’s all that I have time for now.
Monday, December 17, 2012
Can you guess what that is?
TV Tokyo asked 100 political reporters who the most effective politicians were and they came up with that list, that’s what. Noda was the favorite by a mile, while Kan managed to finish in a tie for fifth. Abe, the prospective prime minister, clocked in at fifteenth, a fact that came out in a sidebar. The reporters respect politicians who prioritize making policy over getting reelected and ideals over expediency, policy.
Think about that.
* Shinjiro, not Koizumi. And so far, they’re right as far as I’m concerned.
Sunday, December 16, 2012
1. Public reaction to the results
There is not as much enthusiasm as there was in 2005 or 2009, when the Liberal Democratic Party, or LDP, and the Democratic Party of Japan, or the DPJ, won similar landslide victories. Voting is noticeably lower this time around. An unbroken string of six one-year-and-out prime ministers has left the Japanese public disillusioned with the political process.
2. Abe says he'll use public spending to end 20 years of economic stagnation, is it going to work given Japan's already high level of debt?
Reputable economists are divided between those who believe that the Japanese economy needs a kick start to snap it out of its deflationary doldrums and those who fear the prospects of runaway inflation and soaring interest rates. I’m not even going to try to choose sides on this. But I’ll say this. The LDP and Abe’s talk around the infrastructure buildup and monetary policy coordination with the Bank of Japan have brought the yen down, pleasing exporters, so it’s arguably had immediate, positive repercussions for the Japanese economy. However, unless they come through on domestic reform, not just on social security and taxation but also on the employment environment and land use, and take Japan further into the growing global network of interlocking regional free trade agreements, you cannot expect the Japanese economy to overcome the long-term demographic challenges that it faces.
3. What influence can the upstart right-leaning Japan Restoration Party and the smaller ally the New Komeito Party have on the new government?
Komeito will continue to influence the policy agenda regardless of the outcome of individual elections because there’s always the next election, when the LDP will need the 10 percent or so of the popular vote that Komeito supporters can reliably deliver for LDP candidates in the single-member districts. The Japan Restoration Party will vote with the LDP-Komeito coalition where it suits its own policy agenda. It may have opportunities to provide a lower house supermajority to override opposition in the upper house, getting some concessions in return. But I doubt that they will join a formal coalition, since that is the quickest way to oblivion for a relatively small party that has not established a clear identity and a secure support base.
4. During his campaign, Abe took a strong stand against China in the ongoing territorial dispute in the East China Sea, how is that stance going to be reflected in his policies?
Do not expect the Abe administration to establish a permanent public presence on the Senkaku Islands any time soon, if that’s what people are worried about. Japanese businesses don’t want that, and Washington will not welcome such action. However, the Chinese authorities, deliberately or not, misinterpreted the Noda administration’s actions and the Noda administration grossly underestimated the Chinese response. The outcome has been a significant escalation of Chinese activities around the islands. If that continues, the Abe administration will have no choice but to make some kind of response, probably by beefing up patrolling activities in the vicinity, and more ships and planes to do so over the coming years. So the potential for an unplanned incident increase. But I suppose that it would happen under any administration. My understanding is that the LDP has broader, deeper ties with the Chinese political elite than the DPJ does, particularly after Ichiro Ozawa defected from the DPJ. Let’s hope that it can put those connections to better use in backdoor and second-track diplomacy to contain any spillover if something of the sort occurs.
There’s another election going on today (Dec. 16), for the Tokyo metropolitan governor’s office. Normally, it would be national news, even rating front page headlines on a slow day. Instead, it’s a near-forgotten afterthought to the same-day, House of Representatives general election, and that’s bad news for Akira Matsuzawa (as well as for the armful of thrill seekers who are willing to forfeit their deposits as consideration for airing their views in public), the capable former governor of neighboring Kanagawa Prefecture, who gave up running and supported Shintaro Ishihara when the latter decided to run for a fourth term in order to improve his son’s prospects to lead the LDP. A little over a year later, Ishihara resigns to help his seventy-something friends, tossed out of the LDP in 2005 by then-Prime Minister Koizumi, gain closure for their stunted political careers, giving Matsuzawa a second opportunity. However, Ishihara anoints Deputy Governor Naoki Inose, the reformist writer and a key member of the Koizumi reform team, his successor, and the HoR election sucks up most of the media attention, destroying any chance of Matsuzawa grabbing public attention and giving Inose an unimpeded path to victory.
I have no beef with Ishihara’s choice of Inose, given the latter’s reformist credentials. Still, it would have been nice to see how Matsuzawa would have measured up in a real race, as I think that he would have been a better campaigner than Inose.
As for the national referendum on the Supreme Court justices, that’s the first thing that I want Abe to scratch from his new constitution. It’s a total waste of taxpayers’ money and debases the notion of national referendums.
One other thing before I go and vote: I think that the turnout will be noticeably low compared to the last two elections. You know the large number of undecided voters in the opinion polls? I think many of them will remain just that: undecided. That’s probably marginally bad news for the DPJ, and Hashimoto-Ishihara’s JRP too.
Let me put it this way: For my single-member and regional proportional choices, I am going to split my vote today. I never seriously considered abstaining, but I am definitely not stoked up for the event. In the meantime, here’s a memo in the form of answers to questions that have been put to me for use tomorrow. It’s a work-related memo, but I’m not getting paid for it, so I don’t think I’m in danger of committing an ethical breach if I post them on my blog today. Let’s hope that I won’t get an egg facial come tomorrow, January, April, or 2014.*
* You’ll see what I’m talking about when you read through.
1. What do you expect from the elections?
I expect the outcome to be more or less what the newspaper surveys tell us, the LDP-Komeito coalition should score a landslide victory and return Shinzo Abe to the prime minister’s office. The coalition will have a much better chance of breaking the cycle of annual prime minister turnovers if it wins a supermajority so that the upper house cannot veto key legislation. A twisted Diet, with Prime Minister Abe? Who’d have thought that we’d see this again, three years ago?
2. What policy changes afterward?
The most significant change in the immediate future will come on macroeconomic policy. On fiscal policy, the Liberal Democrats are pushing a 10-year, 200 trillion infrastructure buildup plan to make Japan more disaster-resistant. On monetary policy, the Liberal Democrats will seek an explicit 2% inflation target, and a policy accord between the administration and the Bank of Japan to implement it. It will seek legislation, and very likely, a more cooperative BOJ governor when Masaki Shirakawa’s term is up, in April. I expect Abe to grease the political wheels at home to push Japan into the Trans-Pacific Partnership negotiations when he visits Washington next month. Don’t expect Abe to change course on nuclear power. I am certain that he will respect decisions made by the new Nuclear Regulation Authority. The Liberal Democrats may be the pro-nuclear party, but they know which way the political winds are blowing on this one. Do not expect any drama near-term on the constitutional reform or external relations despite what you’ve might have been hearing from in recent months, but keep an eye out for Chinese escalation on the Senkaku Islands, since Abe is the last person that can afford to look conciliatory is and when that happens. This can have a significant impact on the economy.
3. How important will these be for the strength of the economy and the yen, what are the challenges and risks?
Personally, I don’t think that first putting a number on infrastructure spending, then deciding where to spend afterwards, is a wise course of action, but that’s the usual politics at work, and there is a genuine need to refurbish and upgrade infrastructure that we built over the years. More immediately, it should help keep the economy afloat as the LDP-Komeito coalition and the Democratic Party, now in opposition, spend the next year working on the social security and tax reform and launch the consumption tax hike in fiscal years 2014 and 2015. I don’t see how much better an explicit 2% inflation target is than the implicit 1% one that we have now is, but I’m not an economist. And this expansive macroeconomic talk from Abe and the LDP has already been pushing the yen down, and that must be good for the Japanese economy in the short run. We’ll be importing a little inflation with this, but that again is a macroeconomic plus at this juncture.
The challenge on the infrastructure buildup is to plan and spend wisely, but that’s a long-term issue. Pushing on the monetary string is more problematic. I’m not an economist, but there’s a fine line between a) reinforcing policy coordination, which in principle is a good thing, and b) undermining central bank authority, which is a no-no, at least in industrialized democracies. Abe could pass the legislation if the LDP-Komeito wins a lower house supermajority, but he needs the consent of both houses to appoint the BOJ governor, and the opposition parties will resist more fiercely if he forces the legislative question. That’s a few months down the line, though. More immediately, if he yields to dissenters in his own party and fails to put Japan into the TPP negotiations when he visits Washington, I don’t think he’ll have a second chance, partly because of the negotiation schedule, but more significantly because this is the best opportunity to cash in on his political capital and show that he can lead. Further down the timeline, he needs to level with the Japanese public about the benefits side of the social security and tax reform issue. Missteps on these issues will deplete Abe political capital quickly, and prime ministers have been on a short leash in recent years. The reluctance, or inability, of the LDP—and the DPJ as well—to speak clearly on the last two during the election campaign is a little worrying.
Speaking of political capital, the one danger unique to Abe is that he’ll follow his values-conservative heart and concentrate on non-economic issues such as rewriting the constitution, renaming the Self-Defense Forces, and fighting the teachers union. And there will always be China, and whether or not the two sides largely keep the Senkaku issue from spilling over again to the economic relationship, as the wild card.
Those are the main known risks. Most of them will be easier to negotiate around if the coalition wins a supermajority, but overconfidence can also be dangerous.