Open government

Amidst all the changes introduced by the Hatoyama government since it took office in September, it is easy to forget what may be the most revolutionary change of all: transparent government.

The most visible example thus far is the Government Revitalization Unit's comprehensive review of government spending programs, ably chronicled by Michael Cucek here and here. As Cucek notes, for the first time bureaucrats are being forced to account for programs for which they are responsible — and in Cucek's opinion, the bureaucrats' responses have been notable mostly for their lack of enthusiasm. He concludes that "the GRU proceedings have reinforced the DPJ's image as the party that cares about how tax revenues get spent."

He may be understating the significance of what the Hatoyama government is doing.

One of the major themes of the DPJ's 2009 election manifesto and earlier party documents was the importance of transparency and accountability for democracy. Simply put, Japanese democracy was rotten precisely because the authorities in Tokyo did not see fit to trust the public with information about how tax revenue was being spent and who was making national policy. Protected by a press that did not venture beyond press clubs in search of stories, stories that might reveal how policy emerged from opaque negotiations among bureaucrats and LDP fixers, LDP rule was shrouded in a cloud. As a result, public confidence eroded not just in the LDP but in Japan's government more generally. It is little surprise that public opinion polls during the months leading up to the general election showed that voters were skeptical about the DPJ even if they were willing to vote for the party: after years of LDP rule, during which the only thing that was clear was that the government was failing the public, what reason did voters have to be confident that any group of politicians could follow through on its promises? After the devastation wrought by the LDP, skepticism (to the say the least) towards the political system was and is a healthy response.

But little by little the DPJ is chipping away at the years of much-merited cynicism and disgust that have emerged among the Japanese people. Publicizing the GRU's hearings was an important first step. Opening up the press clubs could be another important step. The finance ministry's decision to publicize the budget compilation process piece by piece should help too.

The savings secured by the GRU have thus far been small, totaling just over 1 trillion yen. But the GRU hearings could prove much more consequential for the government if they restore the public's trust in the government, especially when it comes to spending taxpayer money. A Sankei/FNN poll found that the public is nearly unanimous in its support for the hearings. 88.7% of respondents said that the hearings have been useful for eliminating administrative waste. 85.2% said that the hearings should be held annually. Nearly 80% said that they were interested in the contents of the hearings. Most extraordinarily, 77.5% of self-declared LDP supporters said that they saw the hearings as useful.

I do not think that it is mere coincidence that a recent Yomiuri poll found that 61% of respondents said that they view a consumption tax increase to raise revenue for social security as unavoidable. This is just a theory, but I wonder whether the Japanese public had a problem not with consumption tax increases but rather with consumption tax increases carried out by a ruling party with such a dismal record when it came to using the public's money wisely. Why should the public have supported paying for money into coffers controlled by the spendthrift LDP? By taking its duties as the duly elected government of the people seriously in reviewing how public money is spent, it is conceivable that voters will be more understanding if and when a DPJ government seeks public approval for a tax increase, especially if it is explicit about how it will use the additional revenue.

Transparency is inextricably linked with accountability. By being open about how public money is spent, the DPJ will enable voters to assess how the government has performed come election time. This is central to the new policymaking system the DPJ is building today. The 1955 system was effectively premised on the idea that the LDP and therefore the government could take the time to craft a consensus, often working in secret and making various side payments to make it stick. Getting the distribution of benefits right was more important to the LDP than provide a full accounting of its activities to voters. The DPJ's nascent system, on the other hand, is based on Westminster and implicitly recognizes that since the ruling party could lose in competitive elections, transparency is on average is preferable as it enables the government to promote its achievements (while trying to spin away the failings). Without transparency, the ruling party cannot be held accountable by the public for its achievements. I recognize that the LDP did not build the 1955 system with these principles in mind — although I think that the DPJ's leaders are thinking along these lines — but I think this stylized story is useful for thinking about how LDP rule functioned.

So while the DPJ may be conducting a sort of fiscal truth and reconciliation commission through the GRU — a useful political maneuver as the DPJ consolidates its power — the hearings as much about the future as they are about the past.

And openness has as much to do with foreign policy as with fiscal policy. With Foreign Minister Okada Katsuya announcing that the government will proceed with unveiling the "secret" agreement between the US and Japan that permitted the "introduction" of US nuclear weapons into Japan despite the three non-nuclear principles prohibiting such actions, the push for open government also includes an indictment of how the LDP conducted the US-Japan alliance for decades. It could not be otherwise. For too long the US was happy to manage the alliance in the shadows and work with a host of unsavory characters if doing so served the interests of the alliance. While the end of the cold war likely meant the end of the more sordid dimensions of US-Japan cooperation, the US government nevertheless continued to enjoy deep ties with an LDP that essentially governed behind a veil of secrecy. Just as the DPJ is seeking to air the truth of LDP rule at home, so too will it air the secrets of LDP rule in foreign policy, starting with the nuclear pact that has been an open secret for decades. The DPJ's approach to the Indian Ocean refueling mission and the 2006 Okinawa agreement on realignment similarly cannot be understood without reference to the DPJ's emphasis on transparency.

Make no mistake: the DPJ is conducting a revolution in Japanese politics. It may not look like a revolution, because there are few guarantees that the DPJ will deliver sweeping policy changes, but it is important to recognize that a procedural revolution is still a revolution. And for the first time in decades the Japanese people may be able to trust their government to work on behalf of the public interest in full view of the public, so that they may be able to judge the government's progress.

The DPJ begins work on regime change

In a remarkable coincidence, the day after the DPJ's victory in the general election — and the day the DPJ began its transition in earnest — was the same day that ministries and agencies submitted their spending requests to the ministry of finance for the Fiscal 2010 general account budget.

The requests totaled roughly 92.13 trillion yen, a 3.58 trillion yen increase over the 2009 general account budget, making it the first over 90 trillion yen. Of the total, 52.67 trillion yen are general expenditures, with most of the remainder going to servicing Japan's national debt and regional subsidies.

Tango Yasutake, the finance ministry's administrative vice minister, stressed the ministry's desire to complete the budget within the calendar year, as is customary. The reason for Tango's emphasizing the ministry's desire is of course because the DPJ, still a few weeks from taking power, wants to halt the process immediately due to its desire to rearrange the budget completely, for the sake of introducing political leadership into the budgeting process and ensuring that programs from the DPJ's manifesto are included in a DPJ government's first budget as per the timeline included in the manifesto.

DPJ leader Hatoyama Yukio has stressed that the DPJ wants to change the budget completely, as the budget does not reflect its desires whatsoever. Apparently Kawamura Takeo, the outgoing chief cabinet secretary, did not get the message sent by the Japanese people on Sunday: Kawamura said Tuesday that because the requests include measures related to economic stimulus, the DPJ should give serious consideration to the requests as they stand. His colleagues also seemed to miss the point of Sunday's election. Ishiba Shigeru, the outgoing agriculture minister, and Kaneko Kazuyoshi, the outgoing transport minister, used the occasion of the post-election cabinet meeting Tuesday to criticize DPJ programs and demand that the DPJ leave programs untouched.

This is the first battle in the DPJ's fight to change how Japan is governed, and it should win: Asahi reports that the finance ministry is trying to exclude obligatory organizational expenses from the DPJ's desire to reshape the budget in its image. Presumably that leaves plenty of room for the DPJ to fix the budget as it desires. In this fight, the timing of the election may have been fortuitous. The bureaucracy is now facing the DPJ fresh from the high of its historic victory, with possibilities for the new ruling party that presumably won't exist once the DPJ moves into government and gets bogged down in governing.

But at the same time, the process would go smoother if the DPJ were to assemble its cabinet lineup sooner rather than later. Despite earlier indications that a victorious DPJ would name the appointees for senior cabinet posts within the first week after a general election — as indicated in the transition plan which according to Asahi is more associated with Okada Katsuya than Hatoyama — Hatoyama said Monday that he would not name a handful of senior appointees before naming the entire cabinet. The whole cabinet will be named after Hatoyama is elected prime minister. It also seems that Hatoyama may be wavering on his desire to appoint only elected officials to leading cabinet posts as he realizes how inexperienced his own party's members are. I strongly disagree with the decision to delay filling the most senior positions early. The transition would presumably go more smoothly with the government's core in place immediately, with the ministers-in-waiting getting their own teams in place and beginning to meet with senior bureaucrats in the ministries. The transition period is critical for the Hatoyama government's proposed national strategy office, which will have a major role to play despite not existing yet. After all, the NSO will be responsible for remaking the budget along lines desired by the DPJ — a point reinforced by Hatoyama's comment that the posts of NSO chief and the finance minister will be stressed jointly. To smooth the transition, the NSO in particular ought to be staffed as soon as possible.

Meanwhile, the press continues to report that Fujii Hirohisa will have a central role in the new government and that he will likely be joined by Kan, Okada, and Naoshima Masayuki, currently the DPJ's policy chief. Again, why wait if it is increasingly clear who will be occupying the leading posts? Filling these positions now would also take a bit of pressure off of Hatoyama — and would help move from abstract, campaign-style pronouncements as in Hatoyama's press conference Monday.

The bureaucracy itself is making its preparations for its new political masters. Bureaucrats have already delivered copies of budget requests to the offices of DPJ incumbents. For the first time, Yomiuri reports, DPJ members' offices are being visited by bureaucrats, in droves, whether or not the Diet members are present. Meishi are being left in mailboxes by bureau chiefs and other officials at levels never encountered by many DPJ members.

But the battle lines are also being drawn. As I argued in my earlier post on the importance of budgeting for the DPJ (previously linked to in this post), the DPJ's battle for budgetary authority will be waged more with spending ministries than with the finance ministry. Chief among them will be the ministry of land, infrastructure, transport and tourism (MLITT — haven't since this acronym, but why not?) and the ministry of agriculture, forestry, and fisheries (MAFF), the ministries with the most to lose from the DPJ's economy drive. Naturally MLITT's budget request was just about at the budgetary ceiling set by the CEFP. It appears that while MLITT has suggested that it might be open to revising its request, the ministry and the DPJ could clash over the construction of Yanba dam in Gunma prefecture and Kawabegawa Dam in Kumamoto — the DPJ called for the cancellation of both projects in its manifesto, meaning that the DPJ will fight that much harder to ensure that they are expunged from the budget. The DPJ's goal is cut 1.3 trillion yen in public works over four years (which, incidentally, shows how much Japan has already cut public works).

MAFF's request, meanwhile, was a 15% increase over last year's budget, an increase that includes a 19% increase in the ministry's public works spending.

MLITT, having shown conciliatory signs to the DPJ and having become accustomed to shrinking budgets, may find a way to accommodate itself to the new regime. Taniguchi Hiroaki, its administrative vice minister, requested a meeting with Hatoyama, a bit later than his colleagues in the leading ministries but still encouraging. Indeed, the ministry has announced that from 11 September it will freeze bidding on the Yanba dam, at least temporarily. The ministry still intends to argue for the dam, for which funds have already been dispersed to neighboring prefectures, but the DPJ probably has the upper hand.

The big fight will be with MAFF, which is truly threatened by the DPJ's income support plan and whose adminstrative vice minister has already traded words with the DPJ.

The DPJ could not have asked for a better start to its rule than to have bureaucrats dispirited and conscious of the fact that for now opposing the DPJ means opposing a public already ill-disposed to the bureaucracy, a public that whatever its doubts about the DPJ's manifesto is perhaps most sympathetic to the idea of political rule. It may be the case that neither side wants a fight for now, the DPJ because to wage open war on the bureaucracy would hinder its ability to get anything done, bureaucrats because for the moment a fight with the DPJ is a fight that they are sure to lose in the court of public opinion.

For more on the possibilities of genuine administrative reform, I recommend this essay by Karel van Wolferen, who is aware of the obstacles facing the DPJ without dismissing the possibility that the DPJ will succeed. I particularly like this sentence: "But my impression is that the individuals of the inner core of the party are deadly serious about what must be done to turn their country into what one of them, the most senior and most experienced Ozawa Ichiro, has in his writing called a 'normal country'."

Exactly so. The DPJ means what it said during the campaign, and is taking the first steps towards a new system of governance.

The budget is the key to regime change

In their final appeals to Japanese voters, Kan Naoto and other DPJ leaders laid particular stress on the budget.

Speaking in Tokyo on Saturday, Kan said, "True regime change is politicians who have received the trust of the people restoring the right to formulate budgets to the people." Okada Katsuya, the DPJ's secretary-general, delivered the same message in Gifu Saturday. "We will completely review and remake the budget," he said. "We will review from a zero base that severs existing obligations."

Perhaps it seems strange that on the eve of the general election that may deliver the DPJ into power for the first time, its leaders are speaking of the "right of formulating budgets" and "zero-based budgeting."

It shouldn't. After all, the power to determine how a nation's wealth is spent and distributed — inherent in the national budget — has been at the center of political conflicts for centuries since the rise of the modern state. Appropriately considering that Kan and other DPJ politicians are looking to create a proper Westminster system on Japan's shores, the battle over the budget was particularly central to Britain's political development, from the struggles of the seventeenth century, Britain's "century of revolution," to the battle over the "People's Budget" roughly a century ago, when the Asquith government fought over the House of Lords over a budget that included redistributory measures, especially pensions, and would be financed by tax increases on the wealthy.

When Kan speaks of the right to formulate budgets, he is speaking of something fundamental to democracy: that the people's representatives should have the power to decide how the public's money is spent and that their decisions should be transparent so that the people can decide whether they approve of how their representatives are using the public's wealth. The problem is not that politicians have been uninvolved in budgeting under LDP rule, but that their involvement was the product of collusion between elected representatives and bureaucrats who saw cooperation with certain politicians — the LDP's zoku giin (policy tribesmen) — making deals behind closed doors to benefit particular groups and constituents at the expense of the whole. The opacity of the budgeting process was compounded by the existence of special accounts in addition to the general budget, funds that were used with little or no public oversight. It was for this reason that when I spoke with one of the DPJ's rising stars, a retired finance ministry official, in January he stressed that the DPJ cannot be sure of how it will pay for all of its promises because it cannot be sure of how much money is sitting in special accounts the contents of which have not been made available to the DPJ, let alone the public at large.

Accordingly, while some doubt that anything will change with a DPJ victory, if the DPJ succeeds at making the budgeting process even more top-down and subject to political control than it became as a result of the Hashimoto reforms of the late 1990s (the extent to which these reforms transformed the budgeting process are open for debate), it will have truly changed Japan. Restoring the cabinet's constitutional prerogative to formulate the budget is, after all, the goal of the party's plans for a national strategy office. Administrative reform has arguably been one of the DPJ's core principles since the first DPJ was created in 1996 — the above statements and others reveal that for the DPJ administrative reform that does not include reform of the budgeting process is incomplete.

Changing the budgeting process, often construed as entailing a fight with the ministry of finance, may in fact entail more significant battles with the ministries responsible for spending the money rather than the ministry allocating it. Under LDP rule, spending ministries like the agriculture ministry, the former construction ministry, and the health, labor, and welfare ministry have been the primary administrative beneficiaries of opaque budgeting — it was not accidental that the most powerful policy tribes were connected to these policy areas. All of these ministries have suffered from budget cuts over the past decade, which will presumably make them even more resistant to changes proposed by the DPJ: it is their budgets that the DPJ would like to redirect in order to pay for programs directed at the public's main concerns.

Cutting these budgets will take a certain ruthlessness on the part of a DPJ government. Naturally the LDP will find ways to put a human face on budget cuts. Presumably manga artist Satonaka Machiko's appeal on behalf of the 11.7 billion yen "national media arts center" lampooned as Aso Taro's "Manga cafe" by the DPJ will not be the last such appeal if the DPJ wins Sunday. Masuzoe Yoichi, Aso's minister of health, labor, and welfare and potentially Aso's successor as LDP leader, warned that the DPJ's policy of rearranging the budget could jeopardize important programs in his ministry to combat swine flu and unemployment, which strikes me as fearmongering on Masuzoe's part, but it does suggest that after an electoral defeat the LDP will still find ways to challenge the DPJ on this question of remaking the budget.

But ultimately giving politicians in the cabinet more power over the budget is but a first step to moving Japan in a new direction. Having claimed budgetary authority, the government will then have to find a way to balance among the DPJ's three goals of fixing Japan's finances, building a proper social safety net, and finding a way to get Japanese households and companies channeling their cash holdings into profitable investment and consumption.

In most areas the DPJ may not signal a radical departure from the LDP — most areas except for the question of who should make Japan's budgets. And it is that difference which makes all the difference. If the DPJ implements its plans for a strengthened cabinet, it will make a radical departure from LDP rule, and clear the way for further policy changes.

The DPJ and the bureaucracy continue their dance

Sankei has a long and must-read article on the obstacles facing a DPJ government in implementing its plans for reforming the policymaking process.

The article highlights divisions within the DPJ over how to proceed in reforming Japan's administration, especially budget-making authority. The pragmatism visible in other aspects of the DPJ's program is also visible in the party's approach to administrative reform of late.

The pragmatic view is that of party senior counselor Fujii Hirohisa, a former LDP member who left the party in 1993, followed Ozawa Ichiro through from the Japan Renewal Party to the New Frontier Party to the Liberal Party to the DPJ. He served as finance minister in the short-lived Hata cabinet. And before running for the upper house in 1977 as an LDP candidate he served in ministry of finance for twenty-years, rising to the position of budget examiner in the budget bureau. Accordingly, perhaps we shouldn't be surprised that Fujii is opposed to suggestions that the DPJ might completely detach the budget bureau from the finance ministry and attach it to the cabinet (the party's 300-day transition plan refers to this idea).

Going as far as a 'national strategy office' is sufficient. We had better not fumble around by detaching the budget bureau from the finance ministry and creating a kind of budget office under the direct control of the prime minister. (Revising the laws) would take half a year, and in the meantime the government would break down.

There is a certain wisdom to Fujii's advice, at least as a DPJ government's first year in office goes. And it is worth listening to, for, as Sankei hints, Fujii could end up as finance minister despite not standing for reelection this year. Indeed, as a MOF OB (and Ozawa confidante) Fujii probably has the inside track on the finance portfolio.

Should the DPJ win this month, winning an absolute majority in the 2010 upper house election has to become its top priority. Any steps that interfere with the government's ability to move legislation that will enable the DPJ to stand before the voters in 2010 having made some progress in implementing its manifesto is detrimental to the goal of ensuring that a DPJ government survives. Whether or not a battle over the budget bureau would actually paralyze the government, it is a risk that the DPJ will not be willing to run.

Accordingly, it is entirely possible that the DPJ will soft pedal administrative reform during its first year. The DPJ would, of course, pass legislation creating a national strategy office (henceforth NSO) during this year's extraordinary Diet session, but the NSO, intended to replace the Council on Economic and Fiscal Policy (CEFP) is not the radical change that relocating the budget bureau would be. At the same time, the DPJ appears to be looking for ways to build relationships with senior bureaucrats, a change in tune from calls for "loyalty tests" for senior ministry officials. The Sankei article notes that in addition to the meeting with Tango Yasutake, the administrative vice-minister of finance, mentioned in this post, senior officials from the MOF, MOFA, METI, and an unnamed fourth ministry met with senior DPJ Diet members in late July to discuss this year's supplemental budget and next year's budget. The finance ministry has also been meeting surreptitiously with Party President Hatoyama Yukio and Secretary-General Okada Katsuya. The impression I get is that both the DPJ and senior bureaucrats are eager to ensure a minimal level of continuity should the DPJ take power later this month.

I see no problem with this, at least as a short-term strategic decision. The bureaucracy's position of strength was not built in a year, and it will not be dismantled in a year. In the meantime, the DPJ will need allies in the bureaucracy, especially in order to limit the bureaucracy's ability to undermine the party's other policy programs. I do hope that budget authority is eventually wrested from the bureaucracy's hands, but I recognize that successful revolutions take time and usually involve the slow process of changing customs, norms, and ideas in addition to changing institutional structures. I do think Nakagawa Hidenao — who has been writing of the DPJ's "abandoning the 'abandoning Kasumigaseki' line" — is deeply unrealistic when he writes of the DPJ's shift to an "appeasement line" on administrative reform. Appeasement, when stripped of its negative connotations, often amounts to recognizing one's limitations in implementing a certain policy approach. Appeasement can go too far, of course, but for a DPJ possibly on the verge of taking power to look for ways to ameliorate the bureaucracy's concerns and possibly co-opt certain senior officials is prudent politics.

Interestingly, Machimura Nobutaka, Nakagawa's fellow Machimura faction member, criticized the DPJ's administrative reform plans in a way diametrically opposed to Nakagawa Wednesday: he argued that "political leadership" in the form desired by the DPJ would be "iron fisted."

At this point in time Japan could probably use some "iron-fisted" government, after years of the LDP's weak hand. In looking for ways to cooperate with the bureaucracy to achieve its goals, the DPJ may be coating its iron fist in velvet, at least during the first phase of its government.

Anticipated reactions

The ministry of finance, its ears filled with the ringing of revolution (or at least administrative reform), appears to be engaging in a classic case of anticipated reaction to the prospect of a DPJ government or an LDP government that could take its promise of "cutting waste" seriously. Accordingly, it has instructed requesting ministries to identify wasteful funding in their budget requests due at month's end. The finance ministry is particularly focused on inefficient public works projects.

The finance ministry is clearly trying to concede some ground to a possible DPJ government in the hopes that doing so will forestall a more forceful attempt by the DPJ to seize budgetary authority, at least in the short term. The anticipated reaction may well fail. On NHK Sunday Naoshima Masayuki, the DPJ's policy chief, said that if the DPJ takes power it will completely review the budget requests for fiscal year 2010, although he also said that the party wants to complete the budget within the calendar year, which might be difficult given that the party does not know whether it would have its preferred organization for drafting the budget — the national strategy office attached to the prime minister's office — ready in time to oversee a review of budgetary requests. But the DPJ has made no secret of its desire to restore the cabinet's constitutionally granted power to draft the budget to the elected representatives serving in the cabinet. Hatoyama Yukio made the DPJ's intentions clear to Tango Yasutake, the newly appointed administrative vice minister of finance, in a discussion in July. Tango had some praise for the party's plan for a national strategy office, but overall his reaction was perhaps a bit muted. Tango may well prove amenable to the party's plans: his service as a secretary to former Prime Minister Koizumi Junichiro may make him more amenable to the idea of "political control."

But this is just the first phase in what could ultimately be the defining battle of a DPJ government should the party win this month. The DPJ will presumably not be satisfied with waste cut voluntarily by the ministries, but the finance ministry loses little by trying to anticipate the DPJ's goals now, and by doing may ensure that this year's budget process goes smoothly despite a possible change of government. But if the DPJ is serious about overhauling the budget-making process so that politicians are responsible not just for determining the overall shape of the budget, but in micro-budgeting, determining which programs belong in the budget and how much public money they deserve, there will be a major struggle between the DPJ and the finance ministry, provided a potential DPJ government survives more than one budget cycle.

Two crises

In the comments section of this recent post, I have been accused of overstating Japanese decline and understating the US decline.

I have actually said very little about the economic crisis in the US — and what I have said about Japan is not particularly new. For the most part I have simply updated an argument that I have made since the early days of this blog to take new circumstances into account: Japan is in the midst of systemic, secular decline, akin to the bakumatsu, the end of the Tokugawa shogunate in the mid-nineteenth century. I am far from alone in making this argument; Ozawa Ichiro himself is fond of making it, with the implication that he and the DPJ will be the instrument of Japan's restoration. (Among foreign observers, Michael Zielenziger has made a similar argument.) Japan's decline long predates the current financial crisis. It arguably goes back to the bursting of the bubble and the onset of the "lost decade." The decline has institutional causes, demographic causes, and leadership causes, but these factors all add up to an unmistakable and precipitous drop in the state of the Japanese economy, the post-2001 "boom" notwithstanding.

The current crisis has served merely to illustrate just how fragile the post-2001 "recovery" was and just how little the Japanese economy has changed. As an article in this week's Economist notes, "In the long run, what Japan needs is as clear as it has always been: less dependence on export-led manufacturers, more productive and internationally minded service companies, and a more flexible workforce that welcomes women, older workers and immigrants...For the time being, where the world economy goes, so goes Japan." The Koizumi revolution was still-born. Structural reform was left incomplete before Mr. Koizumi departed. Even worse, Mr. Koizumi failed to destroy the old LDP. He dealt it what may ultimately prove to be a mortal blow, but in the short term he gave the party enough of a boost to ensure that a largely unchanged LDP would continue to hold power during this critical period. But not only did Mr. Koizumi serve to prolong the life of the LDP, he also dealt the DPJ a serious blow. Not only did he steal the opposition party's better ideas, but he also served to draw reformist candidates to the LDP. With Mr. Koizumi as party leader running as an LDP candidate was palpable for young, idealistic reformers. By doing so, Mr. Koizumi deprived the DPJ of candidates who would naturally belong to the DPJ's reform wing. The DPJ's leadership crisis can at least partially be laid at the feet of Mr. Koizumi. The young reformers — now orphaned in the LDP by Mr. Koizumi — may yet leave, but I think that when we assess the impact of Mr. Koizumi's tenure, we must consider this line of reasoning as one of the negative consequences. As a result, Japan now has a ruling party which in the three years since the last general election has turned its back on structural reform (and paying down the debt) and an opposition party that is not nearly as reformist as it could be.

Is it really necessary to spell out again the crisis facing Japan today? The dying regions? The bleak demographic outlook? The national debt? It is hard to overstate the impact of Japan's national debt problem. According to this list, Japan ranks third in the world in debt/GDP ratio at 170%, behind Zimbabwe and Lebanon. The next highest G8 country is Italy, in seventh place at 104%. The numbers will change somewhat in light of various stimulus packages in response to the crisis, but in Japan's case it will only get worse. Granted, the US has a major debt problem of its own, which barring drastic action in the coming years will only worsen. But the US has one important advantage that Japan doesn't have: the dollar remains the world's reserve currency. Despite the crisis, governments and investors are still willing to hold US dollars. This doesn't mean that the US can avoid adjustment (more on this momentarily), but it does give the US government more room for maneuver. Japan's situation is not hopeless — as an anonymous commentator to my earlier post notes (scroll to the bottom), Japan's debt/GDP ratio includes prefectural debt and most of it is held domestically, which gives the government a cushion that the US government may not necessary have.

The consequences of Japan's debt are clear. The government is trapped. How will it revive economic growth, foot the bill for a greater portion of welfare provisions (effectively building a welfare state), and cut its debt to more sustainable levels so that it will be able to do more for its retiring baby boomers? Japan is not alone in this dilemma, but it is feeling the pain particularly acutely.

What about the US?

First, let me say that US elites have been no less incompetent (ideological, short-sighted, arrogant, etc.) than their Japanese counterparts. The biggest difference is that Japanese elites have had years to correct their mistakes. Say what you will about President-elect Obama, but at least American voters had the good sense not to reward the Republican Party with another presidential term. I've seen few signs that the Democratic Party is any better equipped to deal with the crisis, but at least the Republican Party has been sentenced to some time in the wilderness, which one hopes it will use productively.

I have no doubt that this crisis is dire, and that the US has yet to hit bottom. There is still the risk that the recession will become a depression. It is still unclear whether the banking crisis has passed. The Paulson Treasury appears to have mishandled the bailout package.

And then there are the structural problems. To say that America has been living beyond its means is a gross understatement — America has been living as if the very idea of limits didn't exist. No limits to energy consumption. No limits to the US government's ability — by means of its unrivaled military — to reshape the world and provide extended security for the American people. At the same time, the US has neglected its infrastructure, its health care and pensions systems, and, most important for future growth, its education system. Above and beyond these serious problems, Americans and their government have acted as if there were no limit in the rest of the world's demand for US debt.

Americans are now learning the meaning of limits. The question, as Paul Krugman notes, is what the post-crisis economy will look like. He looks at the balance of consumer spending, nonresidential investment, residential investment, government purchases, and net exports and concludes that a smaller trade deficit should step in for lower consumper spending, which means that the US may become more dependent on exports than it has been in the past. Meanwhile, as Niall Ferguson argued in Monday's Washington Post, central to this transformation will be the US relationship with China, a relationship Ferguson describes with the unfortunate word "Chimerica."

"In essence," Ferguson argues, "we need the Chinese to be supportive of U.S. monetary easing and fiscal stimulus by doing more of the same themselves. There needs to be agreement on a gradual reduction of the Chimerican imbalance via increased U.S. exports and increased Chinese imports. The alternative — a sudden reduction of the imbalance via lower U.S. imports and lower Chinese exports — would be horrible.

"There also needs to be an agreement to avoid a rout in the dollar market and the bond market, which is what will happen if the Chinese stop buying U.S. government bonds, the amount of which is now set to increase massively."

The very word Chimerica undoubtedly keeps Japanese officials awake at night, as it captures what has long been the worst nightmare of many Japanese elites: ever closer cooperation between Washington and Beijing. The thought of the economic crisis bringing the US and China closer together, perhaps under the watch of Secretary of State Hillary Clinton, is surely causing a spike in the blood pressure of certain Japanese. (That said, Ferguson does not mention that Japan holds more US treasuries than China, meaning that surely US-Japan bilateral negotiations are no less necessary thank US-China negotiations.) (Correction: As of September, China became the largest holder of US treasuries.)

The adjustment will undoubtedly be painful, particularly for my generation — the so-called millennial generation — which has known only good times (indeed, perhaps the most prosperous period in human history). But America still has, to use Aso Taro's favorite phrase, "latent power," starting with comparably favorable demographics. Interdependence also works in America's favor, as it may have plenty of help from other governments in shifting to a more sustainable footing. The rest of the world still catches America's flu.

Ultimately it is foolish to argue that one country's problems are worse than another's. The developed countries have their collective back to the wall, and not for the first time does the world run the risk of watching an age of unprecedented prosperity collapse into an "era of fear." (It is worth revisiting a Tony Judt essay to which I linked nearly a year ago.) Japan's and America's problems are both severe, but different. For the past two decades, Japan has fallen from a great height, and barring adjustments, it may have further to fall. The US may yet experience a similar decline.

Finally, I must repeat what I said in the comments to the earlier post: I do not celebrate Japan's decline. I lament it, and wish its leaders had done more sooner — and failing that, I wish that they be held responsible for their failures. I don't believe that Mr. Aso is wrong to believe in Japan's latent power, and hope that the government finds a way to release the energy of the Japanese people.

The shape of the Ozawa revolution

"Now is the time to change Japan. It is not exaggeration to say that this is the last chance to change."

So said Ozawa Ichiro Sunday as he marked his uncontested election to a third term as president of the DPJ.

Mr. Ozawa gave an extended policy address to mark the occasion and to steel his party and its opposition partners for the forthcoming general election campaign. Mr. Ozawa's address will steal some thunder from Aso Taro's imminent coronation as LDP president, but its value is bigger than a ploy to draw media attention to the LDP. Mr. Ozawa tried to give some substance to the revolution that could result from "regime change," echoing the belligerent rhetoric of Koizumi Junichiro — Mr. Ozawa spoke of the coming election as the "last battle" — to advance his position in the fight to reimagine the Japanese state and its relationship with society.

Renewing his party's pledge to put the people's livelihood first, he offered a nine-point program for an Ozawa government, largely a recapitulation of the party's 2007 manifesto: (1) restoring health and pensions systems; (2) instituting policies to encourage childrearing, starting with child allowances; (3) reducing the number of "working poor" and ensuring work for those who want to work; (4) revitalizing regions by revitalizing agriculture and small- and medium-sized businesses; (5) lifting the burden of high prices; (6) eliminating "special account budgets" to return money from the bureaucrats to the people; (7) implementing "true" regional decentralization; (8) opening politics to the people; and (9) working to preserve the environment and international peace.

These proposals are not new — and certainly not unique to the DPJ — and will undoubtedly attract questions about how the DPJ will implement these policies (and how it will pay for them).

To answer that question, Mr. Ozawa offered what may amount to a wholesale reinvention of how the government formulates its budgets. To reorient government to serve the interests of an insecure public and to implement the nine-point program, he called for a "general rearrangement" of the budget, most notably by dissolving the special account budgets that finance semi-public corporations and considerable infrastructure work, among other projects that tend to receive less scrutiny than the general budget. The goal seems to be a reconstruction of the Japanese budget from scratch, a far more revolutionary idea than Nakagawa Hidenao's crusade against government waste. Whether the DPJ will be able to accomplish such an ambitious goal is an open question, but this discussion is only possible under a DPJ government, less attached to the existing arrangement between the LDP and the bureaucracy. Connected with this is a promise by Mr. Ozawa regarding the timing of the DPJ's program, declaring that proposals will be passed into law either next year, within the next two years, or within the next four years.

Not surprisingly, Yomiuri is skeptical of Mr. Ozawa's agenda and asks what of Japan's participation in "the war on terror," but Yomiuri seems to have little idea of the coalition Mr. Ozawa is assembling under the DPJ's banner. Sounding not unlike candidates from the US Democratic Party, Mr. Ozawa spoke of his travels from north to south, his conversations with those who have suffered under LDP-Komeito rule, especially its market fundamentalism and survival-of-the-fittest politics, and grounded his appeal in the sufferings of the Japanese people. He questioned the LDP's attentiveness to the public's insecurities, drawing a contrast between the LDP's casual replacement of prime ministers and enduring economic hardships.

"Although one can reset in video games, one cannot reset in real-life politics and in the lives of the people. Although the LDP president can abandon an administration, the people cannot abandon their lives. People who cannot understand even this self-evident matter do not have the qualities to wield power."

The idea is less that the LDP is the deliberate enemy of the Japanese people than that the LDP is unserious about the people's woes, more concerned with sloganeering and posturing than with fixing Japan's problems.

Contrary to the arguments of the Japanese establishment, a DPJ victory will not depend on the strength and specificity of its policy program, just as an LDP victory will not depend on its policy specifics. Much like in the United States, electoral victory will depend on who can best embody a break with the (recent) past. To win, Mr. Aso will have to run against his predecessors, inconvenient for him considering his service in the Koizumi and Abe governments. Seeing as how the Japanese economy has only worsened since the LDP lost the 2007 upper house election, it is all too easy for Mr. Ozawa to make the case once again that the LDP is indifferent to the people's concerns, to ask the public to set aside their doubts about Mr. Ozawa and to turn their attention to the government in Tokyo that has neglected them.

Will it work again? Will enough voters see the LDP as bankrupt — even with Mr. Aso at its helm — and turn to the DPJ as the best hope for change in Japanese politics? It just might. The combination of a worsening economy, a broken LDP, faltering social services, and Mr. Ozawa's ramblings across Japan may be enough to break the LDP's hold on power. (Here's an intriguing idea: if the general election is held after the US presidential election, will a victory by Barack Obama raise the probability of a DPJ victory by reminding Japanese voters of the possibility of change through the ballot box?)

A DPJ victory will undoubtedly be cathartic, a dramatic break with five decades of LDP rule. But catharsis alone does not make a revolution. It may be that the DPJ comes to find beating the LDP easier than governing in its stead. Japan's problems will not be fixed in one, two, or four years. The broken budget remains the first priority for any Japanese government. But as Mr. Ozawa argues, this is an important turning point, Japan's best chance to chart a new course. The DPJ, for all its flaws, is Japan's best chance to right itself.

The LDP is shocked — shocked! — to find waste in the budget

I previously wrote that the LDP, in the midst of a debate over whether and when to raise the consumption tax to cover growing pensions liabilities, also organized a project team — headed by Sonoda Hiroyuki and staffed with fervent young reformists like Kono Taro and Yamamoto Ichita — with the purpose of identifying "waste" to remove from the budget.

The LDP hopes that "exterminating" waste will provide 200bn yen for the budget. To that end, the project team submitted a proposal to the prime minister on Tuesday. The proposal is something of a wish list, the items that the project team would most like to eliminate from the budget. There are the typical items one would find on such a list: "recreation," late-night taxi rides for bureaucrats (the latest outrage), PR documents, no-bid contracts for public corporations (note how they slip that in among more trivial items), and subsidies to public corporations (ditto). The proposal also calls for reducing duplicated work and more oversight by auditors.

All of this sounds fine. These measures would undoubtedly help Japan tackle its budget difficulties and free up money to finance growing liabilities.

But then remember that the LDP has been in power for more than fifty years. It presided over the ballooning of Japan's national debt, it dithered as Japan's population aged, and it failed to refit Japan's welfare institutions for the age of globalization. And now it wants to eliminate government waste to deal with these problems?

If the DPJ is smart, this should be a losing issue for the LDP, reminding voters how now, after years of mismanaging Japan's finances and coddling the bureaucracy, the LDP is ready to crack down on wasteful spending. The LDP would prefer that the public didn't think too much about wasteful spending in the first place, how it got there, how long it's been there. It didn't appear magically, and it didn't appear overnight. It's not a disease or a natural disaster. It is the product of decisions made by the Japanese government — by the LDP — over the course of decades. The DPJ would be wise to remind the Japanese people of this at every opportunity.

And people wonder whether the DPJ can be trusted with power. The DPJ will undoubtedly make mistakes of its own if and when it forms a government, but for now it is the LDP that should be judged in an election, not the DPJ.

Seems simple enough, right? And yet both the Japanese and the foreign press are obsessed with the idea that the DPJ might somehow be worse than the LDP at governing Japan.

Meanwhile, the DPJ might get an assist from the LDP's zoku giin, who will undoubtedly fight tooth-and-nail to ensure that their pet projects aren't classified as waste and eliminated, thereby exposing the LDP's sordid underbelly to the public yet again.