Returning to Asia

To a certain extent, Japan’s political year ended in August when the Democratic Party of Japan defeated the Liberal Democratic Party in a landslide. From the vantage point of December, 100 days into the Hatoyama government, the Aso government and LDP rule already seem distant.

But from another perspective, it is not so easy to draw a line in Japan’s political history.

The DPJ’s victory represents not so much a break as an experiment. Beset with difficulties at home and abroad — naiyu gaikan, in the Japanese — the Japanese public opted to change captains after giving the LDP opportunity after opportunity to right the ship of state. This is not to say that the LDP and the DPJ are interchangeable. The DPJ’s new model of government does mark a departure from the LDP system. Discussion about turmoil within the Hatoyama cabinet or the role of DPJ secretary-general Ozawa Ichiro in the government ignores the obvious conclusion that disagreements within the cabinet actually matter under the DPJ — and that it is the influence of one party official that is being debated and not the veritable army of subcommittee chairmen who wielded influence under the LDP. The bureaucracy, far from sabotaging the Hatoyama government, has largely acquiesced to “political leadership.” The transformation of Japanese governance that is well underway is significant and overdue.

The question, however, is what the DPJ-led government is doing with its newfound capabilities. When it comes to policy, the evidence of change is mixed. It is far too early in the new government’s tenure to draw definitive conclusions about its successes and failures, but in both economic and foreign policy it is possible to sketch the Hatoyama government’s achievements and consider the extent to which the new government has parted ways with the LDP.

Foreign policy: I will start with foreign policy because it is foreign policy that has grabbed the headlines for most of the past three months.

In foreign policy, it certainly looks like the DPJ is taking Japan in a new direction. Washington certainly thinks that the Hatoyama government is doing so — an recent article in the Washington Post by John Pomfret says that U.S. officials see Hatoyama Yukio as “mercurial,” “befuddling” analysts, who wonder whether the prime minister is engineering a “significant policy shift” away from the U.S.

There are two questions to consider here. First, is the DPJ shifting from the U.S., and if so, how (and how is its foreign policy approach different from the LDP’s)?

I would answer the first question with a “yes, but.” Talk of a shift implies that there are but two choices for Japan in Asia: siding with the U.S. or siding with China. The reality, however, is that Japan is choosing both (or neither). The DPJ’s foreign policy approach, which will continue to evolve in the New Year, is grounded in the recognition that Japan cannot afford to be overly dependent on either the U.S. or China. Japan is hedging, against the U.S. by ensuring that the country enjoys a constructive political relationship with China, against China by continuing to stress that the U.S.-Japan alliance is, in the words of Kan Naoto, the deputy prime minister, “the most important relationship” for stability in the region and the world. The Futenma question is entangled with this shift. As power within Japan shifts from bureaucrats to politicians — and as Japan shifts from a US-centered foreign policy to a more flexible foreign policy — it is hardly surprising that the new government has raised objections to an agreement foisted on the public by alliance managers. It is unclear to me why Washington is so surprised that the Hatoyama government is doing precisely what the DPJ said it would do: push for a revision of the 2006 agreement. (It is also unclear to me why the DPJ should be more concerned about breaking promises to Washington — if that it is indeed what the Hatoyama government is doing — than about breaking promises made to the Japanese people) The DPJ is showing that its new realism means that it will make decisions on the basis of Japan’s national interests. It will not simply accept decisions made by previous governments or embrace the U.S. line, no matter how strenuously US government officials, senior military officers, and former government officials bemoan the “befuddling” actions of the new government.

“New realism”: perhaps the “new” is not necessary, because the DPJ is following in the footsteps of Meiji oligarchs and Yoshida Shigeru in trying to maximize Japan’s foreign policy options and limit the degree to which it is dependent on others. It is also, incidentally, following in the footsteps of the LDP prime ministers who succeeded Koizumi Junichiro. After Koizumi attempted to center Japan’s foreign policy on the US-Japan alliance, even conservative successors like Abe Shinzo and Aso Taro recognized that they could not afford to alienate China in the way that Koizumi did for the duration of his premiership. Fukuda Yasuo went further than both his predecessor and his successor to acknowledge that in the evolving Asian order Japan could do treat the US-Japan alliance and Japanese foreign policy as interchangeable, but the three prime ministers were consistent in recognizing that Japan needs to expand its freedom of actions in the region.

In this sense, the Hatoyama government is building upon the work of its predecessors. Hatoyama, with his talk of an East Asian Community, may be more enthusiastic in this pursuit than LDP prime ministers, but the thrust is the same: Japan needs to build new relationships and modify its relationship with the US, making it less about security cooperation and more about other forms of cooperation. Regarding the former, while most observers view the Hatoyama government has focused on forging a closer relationship with China, I think we should see its actions as driven by a desire to avoid having to choose between the US and China. Much like other countries in the region that have strong ties with both great powers, the Hatoyama government is trying to develop a “third way” composed of multilateral cooperation among all countries and bilateral ties with countries in the region other than the US and China.

Hatoyama’s recent trip to India is particularly revealing in this regard. Building upon initiatives developed by Abe and Aso, Hatoyama met with Indian Prime Minister Manmohan Singh to discuss developing the Indo-Japanese global partnership, deepening cooperation on security, and promoting Japanese investment in India. The difference between Hatoyama and Abe, for example, who in 2007 visited India to promote security cooperation with India in the context of a quadrilateral that included the US and Australia, is that Hatoyama is promoting a strictly bilateral relationship. Unlike the Abe government, the Hatoyama government’s approach does not look like the encirclement of China by a “league of democracies.” It is not robed with the rhetoric of “universal values” but rather appears to be driven by the Hatoyama government’s desire to expand its freedom of action. By the same token, the agreement to create an Indo-Japanese two-plus-two by which Indian and Japanese foreign and defense sub-cabinet officials can meet regularly looks different when it is not accompanied by rhetorical volleys aimed at China and is not linked to a wider network of security cooperation among democracies.

The same desire to forge relationships independent of the US and China drives the new government’s approaches to South Korea, ASEAN, Russia, Australia, and others.

Of course, the Hatoyama government — or the DPJ, considering Ozawa’s giant mission to China in December and Ozawa’s leaning on the Imperial Household Agency to arrange an audience with the Emperor for Chinese President Hu Jintao’s likely successor — has symbolically focused attention on the relationship with China that contrasts with the friction in the relationship with the US. But it is worth noting that the Hatoyama government has not moved beyond symbolic gestures in the Sino-Japanese relationship, while focusing on concrete cooperation with other countries in Asia. And as for the US, if US officials were not so short sighted they might recognize that there will likely be benefits for US-Japanese cooperation in the medium and long runs from the Futenma dispute. The DPJ is airing grievances about the alliance that had been muffled around the LDP: that while the US will bear the lion’s share of the burden in the (unlikely) event of war, the Japanese people bear the more immediate costs of hosting US forces in peacetime and that the central government in Tokyo has in turn shifted an unreasonable share of the burden of hosting US forces onto Okinawa. Meanwhile, given that the Hatoyama government is even more determined than the Obama administration to forge a realignment agreement that balances security concerns with the environmental and social concerns of the citizens of Okinawa and Japan more broadly, as well as the DPJ and its coalition partners, it may be worth waiting the extra five months that the Hatoyama government will spend devising an alternative. Furthermore, by saying no to the US, the Hatoyama government may have done more to force a discussion on the form and functions of the alliance than years of LDP rule.

The Japanese people seem to prefer some sort of “Goldilocks consensus” in Japan’s foreign policy. Unease with the Hatoyama government’s handling of US-Japan relations suggests that citizens do not want the government to go too far in saying no to the US, but growing satisfaction with the state of Sino-Japanese relations also suggests that citizens do not want the government to antagonize China. In this year’s Cabinet survey of foreign policy attitudes, the proportion of respondents who view the Sino-Japanese relationship as “satisfactory” rose to 38.5% from 23.7%, while the proportion of respondents who view the relationship as unsatisfactory fell to 55.2% from 71.9%. I think there is value in looking at this improvement in light of a poll conducted by the Ministry of Foreign Affairs in the waning months of the Koizumi government, in which 77.9% of respondents desired improvement in the relationship. 47.7% of respondents said that cooperation should focus on forging a generally cordial relationship with an eye on the big picture, compared with 20% who thought it should focus on regional and global matters and only 10% who felt it should focus on Japanese sovereign rights. There is little desire to return to the ice age of the Koizumi years.

Despite the impression of US officials, the DPJ-led government, far from being radically out of line with the Japanese public, is virtually at the center of the Japanese political spectrum on foreign policy. That could be a problem for those who believe in a security-centered US-Japan relationship rooted in shared values and implicitly directed at a rising China, but it need not be a problem for US-Japan cooperation as a whole.

Incidentally, the reason we can have this discussion about the DPJ’s foreign policy changes is due to the nature of foreign policy, which is largely interpretive and rooted in symbols and language. Doctrines and declarations, the stuff of foreign policy, can signify change without actually changing anything in reality — which should serve as a note of caution that for all the doctrinal changes associated with the Hatoyama government, the US and Japan still enjoy a close partnership with a durable foundation and very much unlike the relationships between the US and China and Japan and China. Japan’s foreign policy may change perceptibly under the DPJ, but it would be wise for the US to not overreact to change that is in any event driven by forces larger than who governs in Tokyo — and it would behoove the Hatoyama government to be more insistent about reminding the Obama administration about the ways the relationship is not changing (even if the Obama administration is reluctant to listen).

Economic policy: Unlike foreign policy, however, in which a speech or a summit can serve as evidence of change, economic policy is more complicated. For starters, economic policy failures are more immediately felt by citizens — and have more immediate consequences for governments. The costs for getting economic policy wrong are (usually) much more noticeable for citizens than the costs of foreign policy blunders. Inheriting an economy in recession, the Hatoyama government has been particularly sensitive to the need to get economic policy right. After all, as of November Japan’s unemployment rate was 5.2%, only a slight improvement over July’s record 5.7% unemployment.

While it is far too soon to grade the Hatoyama government on its macroeconomic record, the government has provided the latest guide to its economic policy approach in a new economic strategy approved by the cabinet on Wednesday. Readers will recall that during the campaign that DPJ struggled with economic strategy: given the weakness of its proposals in its manifesto, the party was compelled to issue a clarification that attempted to outline the DPJ’s growth strategy.

The basis of the DPJ’s campaign rhetoric — repeated in the introduction to the latest strategy — is that Japan has to shift from a producer-centered economic growth model to a consumer-centered growth model. In other words, it is essential for the government to stimulate consumer spending on foreign and domestic goods and services, providing a better quality of life for Japanese citizens.

The new strategy states that the goal is to create a “problem-solving-style state” that will tackle climate change and the problem of Japan’s aging, shrinking society by promoting “green innovation” and “life innovation,” in the process making Japan into a “model country.” While there are a number of laudable proposals in this strategy — the focus on trade and investment within the Asia-Pacific is particularly noteworthy — the document reads like so many LDP economic strategies before it, flighty rhetoric and ambitious goals without clear proposals for how to achieve them (and like the Abe government, a clear penchant for katakana buzzwords). Similarly, the very idea of a growth strategy suggests that the government can plan the transition from producer-centered to consumer- and innovation-centered growth. I do not see how, with the return of deflation, the government will convince households to spend the cash they have been hoarding, or how the government will promote greater risk-taking and entrepreneurship among young Japanese, in the process remaking the labor market so that workers who fail to secure regular employment upon finishing school are not forever condemned to irregular employment. For that matter, there is little sense of the tradeoffs facing the Hatoyama government. How will it balance the goal of restoring fiscal normalcy with the goal of building a social safety net with the goal of promoting green innovation and other measures to promote economic growth?

The DPJ-led government will have to surmount these challenges in large part because its predecessors failed to do so. It will clearly take time, which, again, is not the DPJ’s fault seeing as how the LDP did little to shift Japan’s economic model after the bubble burst.

Perhaps the one saving grace of the new growth strategy is its focus on Asia. In this sense the division between foreign and economic policy is artificial: like Japan’s governments at other critical turning points, the Hatoyama government recognizes the centrality of economic policy for achieving the country’s foreign policy goals. Without being more open to trade and investment within the region, there is no way that Japan will be able to expand its influence in the region as China continues to grow. That competition need not be zero-sum — but even to reap positive-sum gains Japan will actually have to enter the competition for influence. Bilateral EPAs concluded within the region in recent years are a start, but Japan has more work to do.

As we look ahead to 2010, we should see how this process of reorienting Japan to an Asia that is increasingly the center of the international system. In doing so, the DPJ will not necessarily be forging a new path but will instead be taking bigger steps along a path that the LDP had already started down, a path laid by the changing regional order. The US will remain an important player in Asia, but no longer will it be the region’s indispensable nation. Indeed, the Hatoyama government’s policies should put pressure on the Obama administration to follow through on President Obama’s claim that his is the first “Asia-Pacific” presidency. In 2010 the two allies will have to consider the meaning of their alliance even as they celebrate its fiftieth anniversary. They should not shrink from this task.

There are big changes afoot. While the DPJ and its leader are responsible for some of the content of Japan’s new policies, it is likely that similar debates would have occurred even had the LDP been able to retain power.

There is no guarantee that the DPJ will succeed in either smoothly transitioning to a more independent foreign policy without alienating the US, China, or both, or build a new economic growth model without bankrupting the country or simply failing to promote new industries. But by the end of 2010 we should have a better sense of whether the Hatoyama government will succeed in its bid to return Japan to Asia.

The LDP chooses inertia

In the past week, three LDP members of the House of Councillors have bolted from the party, calling to mind among some LDP members, according to Asahi, the last time the LDP was in opposition (1993-1994). None of the three — Tottori's Tamura Kentaro, Ibaraki's Hasegawa Tamon, and Kagawa's Yamauchi Toshio — have decided to join with the DPJ: Yamauchi has indicated his desire to join the Kaikaku Kurabu (literally the Reform Club, but apparently translated as the Japan Renaissance Party), a micro-party with four upper house members that caucuses with the LDP, and the others will be independents, for now.

For the moment the DPJ is no closer to gaining a majority in the upper house before the election that will likely be held in July.

But the exit of these LDP UH members provides a glimpse into the LDP's struggles to change following its defeat in August.

Political parties, like all complex organizations embedded in fluctuating, unpredictable environments, must achieve some balance between change and inertia. Successful — and long-lived — parties may well be characterized by higher degrees of inertia, changing policies, organizational structure, or party rules only when some external shock requires adaptation. It may be the case, however, that the more successful a party is, the less able it is able to adapt when its external environment changes.

The LDP has been in an almost continuous state of crisis since the late 1980s, starting with the Recruit and Sagawa Kyubin scandals and the Ozawa rebellion that led to the LDP's going into opposition for the first time. Returning to power in 1994 did not dull the sense of crisis in the LDP. We cannot understand the rise of Koizumi Junichiro without appreciating the backdrop of crisis. But returning to power, even in cooperation with a series of coalition partners, strengthened the influence of inertial forces within the LDP even as the external circumstances (stagnant economy, changing demographics, the decline of the countryside, etc.) continued to evolve, demanding that the party change too. The battle between reformists and the old guard, which came to a head in the debate over postal privatization, reflects the competing forces present in all large organizations — and is not dissimilar from the experiences of other political parties.

Having failed to reform in power, the LDP has been given another opportunity to reform out of power. Judging by the departure of the three upper house members, who expressed their dissatisfaction with the party leadership's reform efforts when they notified the party of their decisions, the LDP is still struggling to change in significant ways. Masuzoe Yoichi, the former minister of health, labor, and welfare, has also criticized the party's leadership: in a speech last Tuesday Masuzoe said that the LDP needed a "dictatorial leader exceeding [the DPJ's] Mr. Ozawa." He said that if he were party leader, he would strengthen the party's hands in nominating candidates, bringing new candidates in and preventing them from running in their home districts (like the DPJ, Masuzoe is borrowing from British politics). He stressed that the party does not need to be resuscitated — it needs to be reborn.

New rules for selecting candidates, new leadership institutions, new procedures for choosing leaders, new policies, even a new name: these are the kinds of changes that we should expect political parties to consider in the aftermath of a considerable defeat. And these are precisely the kinds of changes that the LDP under Tanigaki Sadakazu has failed to undertake. Earlier this month, a party committee debated and ultimately rejected a proposal to change the LDP's name. More comprehensive reforms have not been forthcoming. Talk of killing the LDP's factions, which continue to linger on despite having lost much of their power, seems to have ceased. The party has introduced some changes into how it picks its leader: in the party election in September the party's prefectural chapters wielded more votes than in the past, but this change was more a matter of necessity due to the party's vastly reduced Diet caucus than a matter of conviction. Post-election talk of introducing a DPJ-style shadow cabinet that would centralize the party's policymaking functions went nowhere. In its most important functions the party president is no stronger now than before the LDP's defeat. And there are few signs that party has a plan for introducing the changes discussed by Masuzoe or other innovations derived from the DPJ's experience in opposition.

Why has the LDP thus far been so reluctant to change, or even to discuss change?

The LDP's reluctance to introduce institutional and policy changes may not be all that atypical. In fact, in keeping with the importance of inertia for parties and organizations, it may take a series of shocks rather than a single shock for a party to overcome its natural resistance to change. After all, embracing inertia — retrenchment, in a word — can be a rational strategy for a party recovering from a major shock, a means of limiting the extent of post-defeat chaos. Tanigaki's election as LDP president is an effect of this tendency, and has also served to deepen its roots within the party. While Tanigaki had a reputation as a liberal prior to his election, it seems that his devotion to the LDP establishment outweighs even his liberal tendencies. His actions since his election suggest that Tanigaki is a proponent of the old guard's thinking: he has silenced talk of radical reforms, spoken on behalf of the factions, and adopted a political strategy that prioritizes political expediency (calling for Hatoyama to resign immediately and a snap election) over the long-term survival of the LDP. Unlike Masuzoe's position, which stresses the importance of significant reforms as critical for the medium- and long-term survival of the LDP, Tanigaki's position seems to be that returning to power as soon as possible trumps party reform. In other words, had the LDP selected a different leader — Kono Taro, for example — it is likely that the LDP would be debating and embracing different policies than under Tanigaki.

Tanigaki's tendency to retrench rather than reform also reflects the balance of power within the LDP after the general election, which, as I noted the day after the election, is skewed towards older party members who have held numerous cabinet and party leadership posts. The composition of the LDP's members reinforces the power of inertia present in all large organizations.

As Masuzoe's speech last week suggests, leadership is critical — but as the aftermath of the Koizumi government suggests, it is not enough. Without control of the party leadership, the LDP's reformists waned once Koizumi left office. Reformists like Masuzoe will have to remake the party both in Tokyo and at the grassroots. They will have to fight to open the nominating process to new candidates, while at the same time working at party headquarters to centralize party governance much as Ozawa made the DPJ a far more centralized and disciplined party than it had been previously. But it may take more defeats in national and local elections before the reformists are able to build a durable coalition in favor of significant party change. Fortunately for the reformists, given that the LDP's support has remained abysmal even as the Hatoyama government's approval rating has fallen, more defeats (and defections) may be in the offing.

For the moment, however, there may be little the reformists can do other than float proposals for party change and work with party rank-and-file in the hope of building support for reform from the bottom up. Sooner or later, the DPJ will overreach and need another spell in opposition. I hope for Japan's sake that when it does overreach the LDP — or an LDP successor — is ready to govern. As of now, the LDP is still a long way from becoming that party.

Why the DPJ should defend Hatoyama

As Japan heads into the final week of the political annus mirabilis that has been 2010 2009, Hatoyama Yukio, the face of political change as the first leader of a party other than the LDP to win a majority in more than a half century, finds himself under siege.

The immediate cause — beyond falling public approval — is Hatoyama's lingering political funds problem. Sankei, the "opposition" newspaper that sometimes appears to be little more than a mouthpiece for the LDP, wonders whether the Hatoyama government is, in the words of an LDP official, in "dangerous waters" as prosecutors assemble the case against two former Hatoyama aides indicted for violations of the political funds control law. On Thursday evening, the prime minister held a press conference on the indictments, taking responsibility for the violations but dismissing calls to resign.

In response to Hatoyama's press conference, Tanigaki Sadakazu, the LDP's president, offered the absurd idea that the prime minister should immediately resign, dissolve the House of Representatives, and call a general election.

What Tanigaki's response tells us is that Hatoyama's problems have little or nothing to do with the LDP. The LDP is no more ready to receive the confidence of the Japanese people today than it was on 30 August — indeed, it may be even less capable of earning the trust of the Japanese public. Hatoyama's problems instead lie with the media, which is capable of offering much more potent resistance to the sitting government than the LDP at this moment in time. "Public opinion" as packaged by Japan's media outlets has long played an outsized role in determining the fate of Japan's prime ministers, the monthly opinion polls conducted by newspapers and TV stations effectively providing an EKG for their governments. The last years of the LDP provided example after example of the power of "public opinion." LDP barons worried more about the sitting cabinet's approval ratings than whether the sitting government was fixing Japan's numerous and multiplying problems. Somehow in their pursuit of "public opinion" the public interest got left behind.

The DPJ was effectively elected on a platform that rejected this approach to politics. Taking its manifesto seriously, the party viewed its electoral victory as a mandate for implementing — or at least trying to implement — its policy proposals. Its manifesto included a four-year timetable for its proposals. In other words, the only register of public opinion that would matter to the DPJ would be the next general election, when the Japanese people would judge the DPJ on its record in office. It would not be obsessed with the month-to-month fluctuations of newspaper opinion polls.

Faced with open speculation about who will replace Hatoyama should he step down in January before the 2010 ordinary Diet session, including speculation that his replacement might be Ozawa Ichiro, whether the DPJ will be able to stay true to this new style of politics will be sorely tested in the coming weeks.

Defending Hatoyama — even to establish a new principle — is less than ideal. His political organization's accounting "irregularities" were known even before the election, and his hold on his own government appears at times to be tenuous, even if I wouldn't go so far as to declare that Ozawa is using Hatoyama as a puppet. (The LDP, drawing upon its own history, has taken to calling the government the "Ohato" government, alluding to the description of Nakasone Yasuhiro's first government as the "Tanakasone" government for the role supposedly played by Tanaka Kakuei in its formation.) And there is a certain political sense in not lashing the party's fortunes to its leader.

But despite these negatives, the DPJ is better off rallying behind the prime minister. To abandon Hatoyama now is to continue to afford the media an extraordinarily powerful role in picking who leads Japan. The DPJ's political reforms do not necessarily call for a presidential-style premier, but to retain the LDP's revolving door at the Kantei would undermine the image of the DPJ's election as signifying genuine political change — and it would invite even more attacks from the media on the government. If the mass media can dog the DPJ into an abandoning a prime minister once, why not a second time? And why stop at changing prime ministers? Why not pressure the government into calling a snap election too? Finally, a change of prime ministers mere months into Hatoyama's term would reinforce the image abroad that Japan is ungovernable, an image which Hatoyama, through his travels during his first months in office, has tried to change.

The Hatoyama government has an opportunity to fight back in the weeks before the ordinary session. With its budget in hand — the cabinet agreed to the 92.3 trillion yen budget for 2010 on Friday — the government can push back against its critics by showing that it is taking the first steps in following through on its campaign promises. It has weeks during which it can defend its choices regarding which promises to maintain (universalistic child allowances, free secondary education) and which promises to scale back (retaining the gasoline surcharge). The LDP is already attacking the budget as a "violation of the manifesto," and criticizing the government for not referring to a consumption tax increase as a way to address mounting social security outlays. The Hatoyama government should take this opportunity to steer public discussion away from the prime minister and back to the policy agenda upon which it was elected.

As Nakasone himself said recently, the government is still in its early stages; it is too soon to expect results. The agenda is bigger than any single politician — Ozawa included — but for the moment the DPJ's success depends on surviving this initial period with the public still behind it. Hatoyama may not last four years in office, but if the DPJ is to show him the door, it should do so on its own terms, and not because the media has dictated that Hatoyama's head should roll sooner rather than later. And if the DPJ can successfully defend Hatoyama from the media in the short term, it may improve Japanese politics over the long term by weakening the ability of media organizations to shape political outcomes.

Winter of discontent?

December has brought little but bad news for the Hatoyama government, which has now been in office for just over three months.

The economy continues to struggle (and deflationary pressure continues to grow), US officials are displeased over the government's decision to delay on Futenma, and polls show the public souring on the new government.

Two recent polls show that the Hatoyama government's approval rating has fallen below 50%. Asahi's poll recorded a fourteen-point drop in the government's approval rating, from 62% to 48%, with its disapproval rating rising from 21% to 34%. The biggest blow to the government's approval came from independents. The poll found disenchantment with Hatoyama Yukio's leadership — and 60% disapproved of the government's handling of the Futenma dispute. The Asahi poll is not all bad news: the DPJ continues to enjoy considerable support, 42% of respondents to the LDP's 18% (the DPJ's support fell four, the LDP's rose four).

Jiji's poll found the government's approval rating fell more than seven points to 47%, with respondents similarly voicing their disenchantment at the prime minister's leadership. In Mainichi's poll, the government is still above fifty percent approval, but its support fell nine points to 55% — and nearly 70% of respondents said that they were "worried" about the government's approach to the US. The DPJ continued to hold a wide advantage over the LDP in the Mainichi poll.

One more poll number is worth mentioning: the Jiji poll asked respondents who they think is the most influential actor in the government. 71% said Ozawa Ichiro. Hatoyama was second, with 10%.

Back in September, the day before the Hatoyama government took power, I listed what I thought were the strengths and vulnerabilities of the Hatoyama government. In the latter category, I listed Hatoyama, Ozawa, and the media. I anticipated that the combination of these vulnerabilities could produce a vicious cycle that could unravel the government. In these figures I wonder whether that is exactly what we are seeing. I do not think that Ozawa is actually the most important figure in the government. What the 71% figure tells us is that the media has succeeded in constructing a narrative that shows Ozawa as the most influential figure in the government. After all, a poll question on who respondents think is the most influential figure in the government is asking respondents not what they think of some policy question that has some bearing on their lives but what they've heard on TV or read in newspapers. Naturally with articles like this one from Sankei — "Mr. Ozawa's leadership gaining strength — 'Government Unification' becoming a dead letter" (referring to unifying cabinet and ruling party) — the Japanese public might get the idea that Ozawa is considerably more significant than the prime minister.

The latest concerns about Ozawa are the result of a dispute between Ozawa and the prime minister over the 2010 budget. Aware of the need to control spending, especially with this year's tax revenues falling below 40 trillion yen for the first time since 1985 even as debt issuances increased to 53.5 trillion yen, the government and the DPJ are debating how to modify the party's election promises. The government will try to limit new debt issuances to 44 trillion yen next year, which, barring a massive and unlikely increase of tax revenue, means that the party will have to scale back its spending plans. Naturally Ozawa and the government have different opinions on what should be scaled back.

The DPJ — i.e. Ozawa — has submitted a proposal to the government for what the budget should look like. On the spending side, the plan calls for, among other things, introducing a 13,000 yen/month child allowance in the first fiscal year of the program, ending fees for public high schools, introducing income support for farmers, and paying out new subsidies for local governments. On the revenue side, it includes proposals to increase fees for medical services, retain the temporary gasoline surcharge but cut the automobile weight tax, change the highway toll system gradually, and begin investigating an environment tax. Combined with Ozawa's intervention with the Imperial Household Agency to secure a meeting between the Emperor and Xi Jinping, the Chinese vice president reputed to be Hu Jintao's likely successor, Ozawa appears to be inordinately powerful as a policymaker.

But his influence has, I think, been overstated, in part because the media has wanted to treat Ozawa as the government's "shadow shogun" from the moment Ozawa passed the reins to Hatoyama, in part because the media's expectations concerning the unification of cabinet and ruling party are unrealistic.

Regarding the former, Ozawa simply overshadows every other DPJ politician, Hatoyama included — although when I say overshadow, I do not mean overshadow in terms of influence. Rather everything Ozawa says or does is dissected by the media. He is charismatic in his way, has interesting things to say when asked, and is always good for headlines, very different from Hatoyama in these respects. Hatoyama is a bit professorial, and, well, boring. And now that he is prime minister, he has to be careful with his words in a way that Ozawa, not holding a cabinet post, does not have to be.

As a result, Ozawa looks and sounds influential. But that does not make it so. There was never going to be a way to completely silence Ozawa or to entirely subordinate the ruling party to the cabinet. Ozawa, guardian of the party's majority and therefore its electoral prospects, was never going to be completely silent on policy, at least insofar as the government's policy decisions affect the party's political outlook. The question is whether political considerations are considered as one concern among several in cabinet deliberations or whether they are the dominant concern. It is at this point that I part ways with the press. I do not think that Ozawa is issuing marching orders to the government. In fact, I think the reports of mutual displeasure may be signs of the limits of Ozawa's influence. Ozawa has suggested some ways of trimming the party's manifesto that he thinks maximizes the party's chances in the next year's upper house election. Others will disagree. Ozawa himself has said that the final decision belongs to the government. Will he accept that decision without complaint?

In fact, this debate over Ozawa's influence obscures the fact that we are talking about one man. Under the LDP we could not have this debate because it was not just one man in the LDP who wielded a veto but a vast network of committees and subcommittees in PARC, faction leaders, the election strategists, and the party elders in the general council. As troublesome as Ozawa can be, is he more meddlesome than the LDP's policymaking system, when a debate of this nature would mean input from every committee chair or subcommittee chair with the slightest interest in the forthcoming budget (i.e., everyone)? A single veto player can be overruled or coaxed into cooperation. The same could not be said for the LDP's policymaking system. Any discussion of Ozawa's role must keep sight of the alternatives.

Ultimately these developments reinforce the idea that there was no way to completely neutralize Ozawa's negative influence on the Hatoyama government. And the bigger problem — as the opinion polls suggest — may be Hatoyama and not Ozawa. As in the case of Kamei Shizuka in the early days of the Hatoyama cabinet, Hatoyama has allowed a political vacuum to form and allowed someone else to fill it, in this case Ozawa. Hatoyama has won a small victory, with the Tokyo prosecutor's office announcing that it will not seek to indict the prime minister, but he has bigger problems. Can he show enough backbone to dispel the impression that he cannot lead his own government?

The public has not abandoned the DPJ yet. But it needs some sign that the prime minister is actually in control of his own government. Disagreements and discussion among cabinet ministers — and between Ozawa and the government — are acceptable, as long as Hatoyama is able to make clear that the final word truly is his. He needs to inject his voice into the debate more. We need to hear more of what he thinks. Otherwise Ozawa's outsized personality will continue to dominate the public image of the government, the media will continue to feast on the disorder, and the Hatoyama government's approval rating will continue to fall. The Hatoyama government is perilously close to the vicious cycle that I feared would endanger the government from the start.

New finance blog

My father, Yra Harris, has just launched a new blog, Notes From Underground. A longtime commodities trader at the Chicago Mercantile Exchange and regular commentator on CNBC and Bloomberg, he will be providing his (somewhat) stream-of-consciousness analysis of the day's market activities, with a focus on currencies, here.

Preparing to retreat?

As the Hatoyama government approaches the end of its first 100 days in office, the air is thick with condemnation of the DPJ-led government's handling of the relationship with the United States, particularly the ongoing dispute over the future of Futenma air station and the US presence in Okinawa.

Smelling blood in the water, the LDP and its allies in the conservative commentariat have gone on the offensive against the government. On Thursday Tanigaki Sadakazu, the leader of the LDP, said that the government was acting irresponsibly when it came to the hopes of the Okinawan people and harming relations with the US. Compared to what others were saying, Tanigaki was being charitable. Conservative journalist Sakurai Yoshiko, speaking in Kyushu at a forum sponsored by the Sankei-affiliated journal Seiron, said the Hatoyama government was effectively giving comfort to China by taking on the US on Futenma. (Sakurai also criticized the Hatoyama government for neglecting the military to spend money on child allowances, and insisted that Japan is on the path to becoming a dependency of China.) Sankei's prose is no less purple than Sakurai's. In an editorial published Thursday, Sankei accused the Hatoyama government of creating a crisis in the US-Japan alliance, and says that Hatoyama has committed an act of betrayal towards President Obama by prioritizing the stability of his government over his country's security.

Richard Armitage, visiting Tokyo earlier this week along with Michael Green, added his criticism of the Hatoyama government in a meeting with Tanigaki, questioning the government's ability to lead.

It is hard not to conclude that the Hatoyama government has miscalculated, in part I think because Hatoyama assumed that he could resolve the problem by speaking frankly with Obama (which would explain the prime minister's desire to summit with Obama on the sidelines in Copenhagen). In effect, Hatoyama seems to have desired the mirror image of Koizumi Junichiro's relationship with George W. Bush: where the Bush-Koizumi relationship deepened Japan's dependence on the US and led Japan to support US wars abroad, his relationship with Obama would based on mutual trust and would result in the creation of an "equal" US-Japan relationship that would focus on cooperation in non-security fields.

To build this relationship Hatoyama seems to have decided to take a calculated risk. If the two countries could tackle Futenma quickly — an issue which has been a millstone around the alliance for years — the way would be open to the kind of relationship Hatoyama purports to desire. By addressing this issue in the first months of its tenure, his government could signal a break with past practices in the alliance and demonstrate its ability to follow through on its promises and its deftness in foreign policy.

Instead the Hatoyama government faces its worst-case scenario: it has painted itself into a corner, having systematically eliminated alternatives to the current agreement, while appearing incompetent in its handling of foreign policy, deepening the mistrust of US officials (many of whom were already skeptical about the DPJ) in the process. Also, by dangling the possibility of a new agreement that could remove Marines from Okinawa entirely, the Hatoyama government raised the hopes of the Okinawan people, perhaps to unreasonable heights.

I am hesitant to declare this situation a crisis for the alliance because the Hatoyama government may already be moving in the direction of accommodation: Hatoyama has said that all options are on the table (including the agreement on hand), and has indicated that his government's plan will be forthcoming as early as next week. Foreign Minister Okada Katsuya has concluded that relocating Futenma's operations to Kadena is not an option. After visiting Guam, Defense Minister Kitazawa Toshimi — perhaps the leading defender of the status quo in the cabinet — concluded that relocating Futenma to Guam is not doable. The Hatoyama government is running out of alternatives to the 2006 agreement. Even the Social Democrats may be coming around: a senior member of her own party criticized SDPJ leader Fukushima Mizuho for suggesting that she could pull her party out of the government over the Futenma issue.

If it ends up embracing the 2006 agreement, it will be hard to conclude that the Hatoyama government did not injure itself by dragging out the process only to maintain the status quo. I do not think that it will be a mortal blow to the government because ultimately Futenma is a low-stakes issue domestically. It does reinforce the image that the DPJ is inexperienced on foreign policy, but then the Japanese public already believed that last summer before the general election and still voted the DPJ into power. More significantly, it calls into question Hatoyama's ability to lead his cabinet.

I am more sanguine than most when it comes to the significance of disagreements among cabinet ministers — I do think that the DPJ's model is a prime minister who is first among equals. That being said, on the Futenma issue Hatoyama has not been first at all, despite his periodic interjections to remind the public and the US that the final decision will be his and his alone. Given the sensitivities of this issue, Hatoyama needed to use a heavier hand to guide the deliberations of his ministers. Someone needed to take control of the process of reviewing the agreement. Okada tried, but apparently failed. It needed to be the prime minister. Hatoyama may be trying to correct that now, but the damage has been done.

What have we learned from this dispute?

First, my earlier misgivings about Hatoyama's ability to lead are justified. Hatoyama seems to have some idea of where he wants to take Japan, but he seems to have little idea how to go about it. Hatoyama strikes me as too much of a dreamer and not enough of a strategist. This tendency would be less of a problem if Hatoyama had a Machiavelli in his cabinet, but it is not yet clear to me who in the government will fill this role, if anyone. (For all we know it may be Ozawa Ichiro after all, although I am not convinced of this just yet.)

Second, as noted above, I think the lasting damage from this dispute will be limited, especially if it works out in Washington's favor. Having been burned on this issue and facing an general election upper house election (I hope writing general election where I meant upper house election doesn't prove prescient) and a fight over the budget in the new year, we will be hearing less from the Hatoyama government on foreign policy in the months to come, perhaps clearing the air for a proper discussion of the future of the alliance and the future of US forces in Japan (what Hatoyama, Ozawa, and others are most interested in anyway). This discussion needs to happen, the sooner the better, and Futenma and Okinawa are sideshows to the bigger question of where the DPJ sees the alliance in its Asia-centered foreign policy and what is the minimum level of commitment the US will expect from Japan if the alliance indeed narrows its focus to the defense of Japan. Someone, if not Hatoyama, needs to start signaling how the Japanese government plans to translate its foreign policy ideals into concrete policy.

Third, the DPJ may hold the upper hand in its relationship with the SDPJ. The SDPJ does have the nuclear option of pulling out of the government and reducing it to a minority in the upper house, but it is a one-shot weapon. Once the SDPJ uses it, it's done and who is to say how the SDPJ would fare in a snap election triggered by its pulling out of the government. What would the SDPJ have to gain from pulling out of the government? With Fukushima in the cabinet it has a seat at the table, giving it more influence over policy now than it could expect to have in opposition (just ask the LDP) or as a silent partner in the Diet. While the SDPJ's hand — and, for that matter, the PNP's hand — looks impressive given that it holds the balance in the upper house, its position is weaker than meets the eye.

The Hatoyama government misplayed the Futenma dispute. But it is possible that the prime minister and his ministers will learn from the experience and be a bit savvier the next time around.