Kan tries again on trade

When the DPJ was campaigning to unseat the LDP in 2009, its manifesto included a pledge to "conclude" a free-trade agreement with the United States. The agricultural lobby flexed its muscles, and shortly after releasing its manifesto the DPJ issued several "clarifications," changing its pledge to reach an FTA with US to a pledge to "begin negotiations." Kan Naoto insisted that it would not conclude any agreement that harmed Japan's farmers. While the party claimed otherwise, the issue was effectively dropped for the duration of the campaign and the DPJ's first year in power.

After his victory over Ozawa, Kan, now prime minister, brought the issue of trade openness back onto the agenda in the form of Japanese participation in the Trans-Pacific Partnership. Simply put, Kan's initial attempt to clear the way for Japanese involvement in TPP was stymied by the agricultural sector — with help from members of the DPJ. The lobby argued that participation would devastate Japanese agriculture, and forced the government to make a weak commitment to "study" participation, a climb down considering the soaring rhetoric with which the PM announced that his government would study participation in his policy speech at the start of the autumn Diet session.

However, with the start of a new year and a new Diet session, Kan, far from being chastened by the earlier defeat at the hands of the agricultural lobby, is positioning his government to begin the campaign anew. As Corey Wallace notes, the "themes" of this reshuffle were tax and pensions reforms and TPP. Regarding TPP, the most significant change was the appointment of Kaieda Banri as minister of economy, trade, and industry. Moreover, Hachiro Yoshio, a former farmer, was replaced as Diet affairs chairman by Azumi Jun. Combined with Maehara Seiji's staying on at the foreign ministry — Maehara has repeatedly called attention to the importance of economic openness for Japanese foreign policy — Kan managed to put into place a team that will be committed to the fight for free trade. His cabinet quickly agreed to TPP participation as a basic policy of the latest Kan government.

The question is whether Kan will be able to translate this ambition into reality. At the very least, the Kan government (and the DPJ) appear to have found their purpose. After fumbling around in search of a major issue or two to devote its energies to, the DPJ-led government has decided to tackle two rather pressing issues, which, combined with the challenges in Japan's bilateral relationships, passing the budget and budget-related bills, and managing life as a de facto minority government will be more than enough to keep the Kan government occupied. 

But in pursuing an open Japan — Kan's New Year's message was devoted to his goal of a third opening, a "Heisei opening" that would mean not just a Japan open to more imports but open to cultural, intellectual, and social exchanges across borders  — the Kan government arguably faces an even steeper battle than Koizumi faced when he took on the postal system, meaning the postal workers and their allies in the LDP. Between the rural bias in parliamentary representation (which, given the size of the DPJ's parliamentary caucus, inevitably means that there will be battles within the DPJ), the opposition of local governments in rural areas throughout Japan, and the outsized power of Nokyo, the Kan government faces formidable and perhaps insurmountable obstacles to bringing Japan into TPP. 

A basic understanding of international political economy is that free trade falters because its costs are concentrated while its benefits are diffuse. Plenty of states have joined free-trade agreements, suggesting that this fundamental tenet may not be all that fundamental. But what can the Kan government do to overcome the determined resistance of the agricultural lobby and its allies? For starters, the government needs to build a coalition of its own to rival the anti-TPP coalition. Business peak organizations like Keidanren will be indispensable partners for the Kan government if it is as serious about TPP as it says it is. Given the frosty relations between the DPJ and big business, the "anti-business" planks of the DPJ's manifesto, and the party's ties with organized labor (and big business's traditional ties with LDP), building this coalition will take some work, although this meeting between Kaieda and Keidanren's Yonekura Hiromasa is an encouraging start.

But it will take more than the help of friendly interest groups for the government to succeed. Ultimately, TPP may be the first big test for the DPJ's parliamentary-cabinet system. On paper, the DPJ's new policymaking process ought to (1) enable the government to coordinate its strategy on TPP across the relevant ministries (METI, MAFF, MOFA, etc.), (2) keep all cabinet ministers on board with the policy, (3) silence opposition within the ruling party, and (4) make strong, direct appeals to the general public about the necessity of the government's program. It is not a perfect analogue, since the upper house, now controlled by the opposition parties, gives the opposition parties procedural weapons they lack in the UK. However, the Kan government still has considerable tools at its disposal. The question is whether it uses them. As Andy Sharp argues at The Diplomat, it may well take a Koizumi-style PR blitz for the Kan government to win on this issue. It needs to hammer home why TPP — and greater openness more generally — are good and necessary for Japan. The idea that trade policy is an arena where groups with "objective" interests derived from their position in the global economy is overstated. Even among urban residents, thought to be the natural constituency for free trade, support cannot be taken for granted. The policy will not sell itself; an pro-TPP interest coalition needs to be constructed. The government's plan to convene town halls across Japan in February and March to explain the benefits of the policy are a good first step. But more talk will be needed. And side payments in one form or another will be unavoidable.

There is considerable risk in taking on TPP at the same time that the government will be debating a consumption tax increase linked to pensions payments, which, if not handled properly, could produce public opposition that could overwhelm the patient work of building a consensus on TPP. Nevertheless, as the Kan government and the DPJ begin a new year in power, they seem to be finding their bearings on policy. This government may yet leave a positive legacy.

Selling free trade

Bogged down by an unfavorable political situation in Tokyo, the Kan government has few avenues for policy innovation. In recent weeks, however, it seems that the Kan government has decided to consider joining the Trans-Pacific Strategic Economic Partnership (TPP), a multilateral free trade agreement that currently includes only Chile, New Zealand, Singapore, and Brunei, but which the United States, Australia, Peru, Vietnam, and Malaysia are negotiating to enter.

The DPJ sent mixed signals on trade during the 2009 campaign: the initial draft of the party's manifesto stated that the party would "conclude" an FTA with the United States, but, criticized by farmers' groups, the party softened its proposal to "begin negotiations with the United States" and added a clause that it would only conclude an FTA with the US if domestic agricultural production could be safeguarded. Since the DPJ took power, trade has more or less vanished from the agenda — until now.

Following Kan's declaration in his policy speech that his government is considering TPP, Maehara Seiji, the foreign minister, has emerged as the government's leading advocate for greater trade openness, arguing in his speech earlier this month at the Foreign Correspondents' Club of Japan that since Japan's foreign policy is only as effective as its economic strength, diplomacy that enhances Japan's economy should be the government's top priority. (To make the point he pointed to South Korea's superior competitiveness as something that Japan should emulate.) To that end, he outlined a three-pillared approach that included (1) building a free trade system, (2) diversifying sources of food and natural resources as a hedge against risk, and (3) ensuring that Japan has the technology and infrastructure necessary to export.

When it came to concrete proposals to expand free trade, however, Maehara balked. He said that taking steps to join the TPP would be a test for Japan, but did not promise anything. He talked about trade negotiations with the US either bilaterally or within a multilateral framework, but offered little in the way of specifics. Given the thorny politics of free trade in Japan, Maehara's circumspection comes as little surprise, and the debate that has occurred within the government since his speech has been similarly tentative. To this point the government is still collecting opinions on the matter and has not decided whether it will pursue negotiations to join the TPP. Genba Koichiro, head of the national strategy office, said that the government will make its decision late next week. It has the support of Maehara and Kaieda Banri, the minister for economic and fiscal policy, as well as Sengoku Yoshito, the chief cabinet secretary, who said that TPP could be coupled with measures to support farmers harmed by imports (the logic behind Sengoku arch-rival Ozawa's income support plans). But these advocates are of course opposed by the ministry of agriculture, forestry, and fisheries — and by Nokyo, the peak association for agricultural cooperations, whose chairman has declared the TPP will mean the destruction of Japanese agriculture. The PNP, the DPJ's partner in government, and the Social Democrats, its erstwhile partner, have also come out against TPP, and Hata Yuichiro, chair of the DPJ's upper house parliamentary strategy committee, has said that he opposes joining the trade agreement "at this time."

Given the opposition arrayed against TPP, it is perhaps wise that the Kan government has not committed to the policy and is instead floating trial balloons. However, I wonder if there will ever be a good time for a Japanese prime minister to pursue an ambitious trade agenda. By proceeding cautiously now, did the government simply give its opponents time to mobilize and thus ensure that once again the issue will be postponed? It strikes me that if Japan is ever to participate in an ambitious free trade agreement like TPP (or the hypothetical US-Japan FTA), the only way it will ever get done is if the prime minister owns the issue, building a coalition in favor of free trade and selling the policy to the public in the same way that Koizumi sold postal reform. As the political economist Helen Milner once wrote (I'm paraphrasing), for economists, the puzzle is why states would ever done anything other than free trade — for political scientists the puzzle is why states would ever practice anything but protectionism.

If the government decides next week to make joining TPP a priority, it better be prepared for a three-pronged fight: among political parties in the Diet (remember that the government needs to cobble together upper-house majorities to pass legislation), among interest groups, and in the court of public opinion. The trade agreement will not sell itself. The government will have to commit to it fully. Anything less and the government is likely to suffer yet another defeat.

After the showdown

Japanese Prime Minister Kan Naoto and Wen Jiabao, his Chinese counterpart, have met briefly in Brussels on the sideline of the ASEM summit, marking an end to the bilateral standoff following the collision between a Chinese trawler and Japanese Coast Guard vessels in the vicinity of the disputed Senkakus.

As expected, Japan and China reiterated the importance of the strategic, reciprocal partnership initiative. High-level talks and cultural exchanges will resume. All in all, it is difficult to say what has changed strategically as a result of the dispute. That China will fiercely resist any perceived change to the status quo in its maritime disputes? That China has greater leverage at its disposal? That countries — not just China — don't like having their nationals held by other countries, particularly when, Sourabh Gupta argues, there may have been little basis for Japan's holding the Chinese fishermen in the first place? 

Meanwhile, the conventional wisdom that the US is the biggest winner from the dispute is probably overstated. The allies will not find it any easier to resolve the Okinawa dispute, which continues to loom over the alliance. More importantly, however, the dispute appears to have merely reinforced the DPJ government's basic approach to China: having little choice but to forge a working political relationship with its neighbor, Japan will redouble its commitment to building constructive relations with China. In short, the dispute, rather than signaling that Japan must change course entirely, may simply lead the Kan government to try harder. 

The basic idea that has animated foreign policy under the DPJ from the day it took office — that Japan, living in a region dominated by a rising China and a declining but still powerful US, needs to find a way to navigate between and live with both power — remains intact.

That being said, the dispute with China has obviously had consequences within Japan, not least for the Kan government's public approval ratings. Despite having received a remarkable bump in his support after defeating Ozawa — nearly twenty percent in some polls — Kan's numbers are back to around fifty percent thanks to his government's perceived mishandling of the dispute. Peter Ennis makes a strong case that the Kan government actually handled the issue well, getting the assurances it needed out of the US while resisting Chinese pressure long enough for the government to claim that the captain's release was the result of a decision by the prosecutor's office in Naha and not the central government. But the Japanese people apparently do not see it the same way. In Yomiuri's poll, for example, eighty-three percent of respondents were not convinced by the prime minister's claim that there was not political intervention. The same poll found a ten-percent increase in the number of respondents who said foreign and security policy should be a top priority for the Kan government; in early August only four percent said it should be a top priority. Whether this change in the public mood is more than temporary remains to be seen, but the drop in the government's approval ratings give Kan that much less room to maneuver as the prime minister tries to coax the opposition parties to cooperate with the government.

Indeed, the LDP has rushed this issue to the top of the agenda as the autumn extraordinary session of the Diet begins. The party has declared that the "abrupt" release of the captain was the worst foreign policy failure in postwar history. The LDP is sure to build its response to the Kan government around this issue, together with the latest Ozawa indictment, meaning that the largest opposition party has two tangential issues with which to attack the government — with the sanction of the public, thanks to the public opinion polls showing that these issues matter — and put off talk of cooperation on an economic agenda. The LDP will of course get an assist from the Japanese media, particularly its more conservative precincts, which appear to have found their voice again after a dismal couple of years during which their issues vanished from the agenda as the global financial crisis unfolded and then the LDP was unseated by the DPJ.

The dispute with China not only has given ammunition to an LDP desperate to obstruct the Kan government and force an early election — it has also provided an opening for dissent within the DPJ, stirrings of which could be found in the petition signed by forty-three DPJ members, including Nagashima Akihisa, and submitted to Sengoku. The petition goes out of its way to soften its criticism of the government, but it does suggest that China policy could create some space between the government and the ruling party. However, since Kan's cabinet has been united on the issue, grumbling within the DPJ can be safely ignored for now.

So did Kan lose? I cannot agree with Ennis entirely that the government handled the dispute well. The government's biggest mistake was stressing that it was a matter for the Japanese legal system to handle. This stance may well have contributed to China's raising the stakes on the issue (because it could not accept this stance without tacitly acknowledging Japanese sovereignty) but it also ensured that the rule of law would be tarnished in the event of a Japanese climb down. If the Japanese government was indeed prepared to allow the legal process to run its course I suppose this position would have been acceptable, but I doubt that Tokyo really was prepared to wait that long (unless the Kan government was actually caught off guard by Beijing's response). The Kan government should have treated the issue like the diplomatic dispute it was from the very beginning instead of staking the credibility of Japanese institutions on the outcome. That it did so at least partially explains the public's opposition to the government's handling of the issue.

By holding out for as long as it did Japan may well have forced China to think twice about how hard it will push Japan in the future, perhaps won Japan more support from other countries locked in disputes with China, and provided an opportunity for Japan and other countries to take steps to mitigate China's economic leverage (as in the case of rare earth elements), but these gains may have come at the expense of Kan's credibility at home. Without public support, the prime minister, already the head of a de facto minority government, will find it that much more difficult to move an agenda centered on fixing Japan's economy, which in turn is critical to maintaining Japan's influence in the region (as argued by Maehara Seiji, Kan's foreign minister, at the Foreign Correspondents' Club of Japan Tuesday). Whatever the medium-term benefits to Japan from the dispute, it may not have been worth the short-term costs for Kan.

The end of the "strategic, reciprocal" relationship?

Since Abe Shinzō succeeded Koizumi Junichirō in 2006, the focus of Japan's China policy has been the promotion of what has been called in official documents as a "strategic, reciprocal relationship" between Japan and China. Acknowledging the importance of the bilateral relationship for peace and stability in East Asia, the two countries agreed to build a political relationship based on mutual trust, increase cultural and educational exchange, bolster economic cooperation, and collaborate to build an East Asian order founded on openness, transparency, and inclusiveness.

As the showdown between Japan and China over the fate of the Chinese fisherman now in Japanese custody intensifies, it is worth asking what the process of "unfreezing" the Sino-Japanese relationship since 2006 has accomplished, and whether that process will survive this dispute — or whether this standoff marks the beginning of a new, uncertain period in the relationship.

With each passing day it becomes clearer that the answer to the first question is "not much." The two countries' leaders have talked more frequently and exchanged state visits. Japanese leaders have avoided the deliberately provocative actions regarding wartime history that led to the deep freeze in the first place. Chinese leaders have at various times acknowledged and praised Japan for its peaceful development during the postwar period. But arguably no progress has been made to defuse the truly potent issues in the relationship, starting with the Senkakus.

This dispute was a hard test for the "new" Sino-Japanese relationship, as it concerns important symbolic issues — sovereignty over the Senkakus and the incarceration by Japan of a Chinese national, an "abduction" of sorts in Chinese eyes — and is therefore precisely the kind of issue that appeals to Chinese insecurity about its regional and international status, making unlikely to be resolved by Tokyo's appeals to handle the issue calmly and without resorting to nationalistic posturing. Of course the strategic, reciprocal relationship failed the test. China has steadily applied pressure on Japan, canceling cultural and political exchanges and possibly banning the export of rare earth elements (although for the record, the Japanese government has not confirmed whether there is in fact an export ban and the Chinese government has denied that there is any such ban).

As important as the resumption of normal relations between Tokyo and Beijing has been, it is worth asking whether the "strategic, reciprocal" relationship agenda will ever result in the kind of bilateral relationship rooted in trust that would limit the ability of this kind of issue from escalating into a more serious crisis. As long as anti-Japanese sentiment remains widespread, making a hard line towards Japan in disputes politically expedient, as China's policymaking process remains opaque, making it difficult to know how or why decisions are made, and as China remains acutely sensitive to insults to its national pride, it seems unlikely that the underlying dynamics of the political relationship will change. The economic relationship will undoubtedly remain important, but it is unlikely that economic interdependence will spill over into the political relationship — in either country. While Bruce Einhorn argues at Business Week that Japan "can't afford" a fight with China, Daniel Drezner suggests that attempts by China to use economic links to exert pressure on Japan could very well backfire and lead Tokyo to dig in its heels. Contrary to Einhorn's presumption, the impact of economic interdependence on Sino-Japanese political ties is arguably negligible. If anything the impact has been negative, leading China to believe that it has more leverage over Japan than it might otherwise have.

What about the Kan government's response to this dispute? Peter Ennis notes that there has been no sign of disagreement between Kan, Chief Cabinet Secretary Sengoku Yoshito, and the new Foreign Minister Maehara Seiji, all of whom have not responded to Chinese pressure by upping the rhetorical ante or responding in kind. This stance suggests that far from hearing the "wake-up call" that Dan Twining believes China is sending to Japan, the Kan government remains committed to the "strategic, reciprocal" program, persisting in the belief that forbearance by Japan will bear fruit over the long term if it leads China to learn to trust its neighbors.

In other words, in the aftermath of this dispute the Kan government will likely recommit to the pursuit of constructive cooperation with China, however unlikely it is that this approach will produce tangible results in the short run. The DPJ will be criticized by people like Abe for being "not understanding international politics," but it is unlikely that it will change course in foreign policy, and certainly not in the direction favored by hawks in Washington. When considering Japan's approach to China it is necessary to note that while the Japanese public wants their government to stand up for Japan in disputes with China, Japanese citizens are not clamoring for defense spending increases to match China's military modernization program or more assertive diplomacy to contain China's growing influence. As such, the Kan government's response to China's posturing may not be herald a "new realism" in the DPJ's foreign policy thinking but is instead perfectly consistent with its approach since taking power last year. (I've argued repeatedly that, Hatoyama's woolly-headed rhetoric notwithstanding, the DPJ has been remarkably realist in its diplomatic maneuverings since the beginning of its tenure.)

In doing so, the Kan government will be gambling that over the long term engagement will work. Given how little has been accomplished since 2006, it is an unappealing gamble — but the alternatives are worse. Economic interdependence may not make political cooperation inevitable, but it means that the Japanese government has an interest in talking with China regularly. The approach pursued by Japanese governments since 2006 essentially means keeping the Sino-Japanese relationship in a holding pattern, finding areas to cooperate while maintaining the status quo over issues like the East China Sea, perhaps in the hope that over time China will become more satisfied and less predisposed to forcing changes in the status quo. It may be a foolish gamble, but the alternative, the creation of a de facto Asian NATO, would be far worse, providing hardliners in Beijing with signs of encirclement and virtually guaranteeing that China will not limit itself to small maritime "provocations." It would be a fine example of what Bismarck said of preventive war, "committing suicide for fear of death."

Despite being an unsatisfactory option, the "strategic, reciprocal" relationship may well here to stay.

Kan presses the reset button

Having successfully fended off Ozawa Ichirō's challenge to his leadership of the ruling Democratic Party of Japan — indeed, having defeated Ozawa by an unexpectedly large margin, not only winning the vote among Diet members but also receiving the support of 249 of 300 district-level party chapters and sixty percent of the vote among local representatives — Prime Minister Kan Naoto finally has an opportunity to govern. After all, since succeeding Hatoyama Yukio in June Kan has spent much of his time focused on elections, first with the House of Councillors election in July and then the showdown with Ozawa.

Perhaps it should come as no surprise that within days of his victory Kan reshuffled his cabinet and the DPJ leadership. I am generally skeptical of the efficacy of cabinet reshuffles. Doling out cabinet and sub-cabinet posts is, of course, one of the more important tools in a party leader's toolbox as he tries to induce good behavior on the part of backbenchers. But too much turnover at the head of ministries can stymie policy change. Every change of minister comes with a period of inactivity as the minister learns the job; reshuffle too frequently and by the time the minister is ready to lead, he will be on the way out. This problem was characteristic of LDP rule in particular.

During its first year in power, the DPJ avoided a wholesale reshuffle, despite its declining popularity (the usual time for a reshuffle) — even Kan held off when he took over from Hatoyama. However, having secured his control of the DPJ, giving him a two-year term as party leader during which the government will not have to face the electorate if it doesn't want to, I suppose it is only natural that Kan would want to appoint a cabinet of his own making. And the DPJ certainly benefits from more party members getting experience in government, giving that virtually none had any experience of power before the DPJ won last year.

The new cabinet is being billed as a "non-Ozawa" cabinet. No member of Ozawa's group received a cabinet post, although Kaieda Banri, who, while not being a longtime Ozawa associate, supported Ozawa's challenge, was appointed as economy minister. There will be little turnover in the cabinet's most important positions. Sengoku Yoshito stays on as chief cabinet secretary and Noda Yoshihiko will continue to serve as finance minister. With Okada Katsuya's becoming DPJ secretary-general, Maehara Seiji, formerly responsible for transport and Okinawan affairs, will move over to the foreign ministry. Kitazawa Toshimi stays on as defense minister, ensuring a degree of continuity as far as Futenma is concerned. Renhō and Genba Koichirō will stay on the cabinet's administrative reform posts. The cabinet also includes former Shimane governor (and non-MP) Katayama Yoshiro as minister of internal affairs and communications, with an additional portfolio for regional revitalization and Kano Michihiko as agriculture minister (a post he held in 1989 in the Kaifu government).

Kan has presented his new cabinet as a cabinet that will "make good on its promises." That remains to be seen, as the prime minister has a difficult road ahead.

Kan spent his time on the campaign trail talking about "jobs, jobs, jobs." But talking about employment is one thing — doing something about it is a different matter entirely. The rising yen has triggered more hollowing out in the manufacturing sector, as businesses relocate to cheaper countries within the region. A recent METI survey found, for example, that forty percent of manufacturing sector respondents would move factories overseas were the yen to continue to rise. In the immediate aftermath of the DPJ election the Bank of Japan did intervene in foreign exchange markets, which has at least temporarily halted the yen's rise (although Felix Salmon suggests that since the BoJ did not sterilize its intervention this time, it could have anti-deflationary effects).

But as Richard Katz argues in the Financial Times, intervention to weaken the yen is little more than a temporary fix. He notes that a weak yen does nothing to help wean Japan off export-dependent growth, and cannot reverse the long-term trend towards a stronger yen. (And if Japan's is but the first in a series of competitive devaluations with its trading rivals in the Eurozone, it is hard to see what Japan will gain from intervention.)

The problem for Kan is that the path from short term to long term is perilous. In the short term, economic success will depend on the traditional export-led model, meaning that when a survey reveals that Japan's manufacturers will accelerate offshoring if the yen continues to strengthen, a government focused on economic recovery has little choice but to pressure the BoJ to intervene. But over the longer term, Japan needs to revitalize the service sector to produce a more balanced growth model (while trying to put the government's finances on a healthier trajectory).

This objective, easily the overriding purpose of the Kan government and its successors, would be difficult enough in the best of political circumstances. These are not the best of political circumstances.

First, although Kan has a new mandate as DPJ president, he still has work to do consolidating his control of the party. Whether Okada will be able to help him in the post as secretary-general remains to be seen — as Michael Cucek notes, Okada may not be the ideal man for the job, seeing as how his appointment to the post was not uncontested. The main problem within the party may still be Ozawa. While Kan's margin of victory may silence Ozawa for the moment, it remains to be seen how Ozawa will react to Kan's decision to exclude Ozawa's lieutenants from the cabinet and party leadership. I do not expect Ozawa to leave the party, not least because it is far from certain that he would get many to follow him out, especially now that the Kan government has a bit more buoyancy in the polls. Having failed to unseat Kan, Ozawa may recede into the kind of role I thought he might take earlier, that of an elder statesman, periodically declaiming on or critiquing the government's decisions but not actively organizing an intra-party opposition.

But while Ozawa may be less of a problem, Kan will still have to contend with backbenchers unhappy with the direction taken by the government, as Kan implicitly acknowledged by suggesting that he will have a "cabinet of 412" (referring to the number of DPJ legislators). The inclusion of DPJ MPs in policy deliberations is unavoidable as the Kan government tries to revise or scale back the party's promises in the 2009 manifesto, but it need not be cumbersome if the prime minister is able to take control of the policy agenda.

Whether he is able to will depend on the opposition. Kan still has to find a way to coax the opposition parties to support his proposals, without which they will die in parliamentary proceedings. That the Kan's approval ratings have shot up to the same level as when he took over should help him — if he does not squander public support through indecision or inaction. Arguably the only way Kan can succeed is by doing what Koizumi did: appealing to the public directly in order to break the resistance of opposition parties and opponents within his own party. But to bring the public along Kan has to offer something in the first place. The challenge for Kan, then, is to develop an economic program that includes macro- and microeconomic policies, that attacks wasteful spending, includes deregulation and tax reform, and promises something better for the public. If the government is incapable of developing this program internally, Kan should take a page from the playbook of prime ministers past and convene a blue-ribbon advisory council headed by Kan and composed of prominent figures from business, labor, academia, the bureaucracy, and the political opposition. The commission would have to be as much a public relations exercise as a policymaking exercise, regularly issuing statements and drafts that reveal the emerging program and allowing the process to dominate public discussion.

The turn to advisory-group policymaking would be at odds with the DPJ's professed desire for cabinet-led policymaking, but at this point I'm not sure that the Kan government has much choice. I've lost count of the number of "growth strategies" the DPJ-led government has issued over the past year, but whatever the number, it's too many. The public is willing to give Kan and the DPJ another chance, but it is clear that what they have been doing isn't working. 

If Kan is unable to bring the public along with him, the outcome will be easy enough to predict: low public support, opposition obstructionism, and unrest within the DPJ, the same cycle that has brought low every prime minister since Koizumi.

Facing constraints in the alliance

Prime Minister Kan Naoto had his debut on the world stage at the G20 meeting in Toronto this week. While in Toronto he had his first meeting with US President Barack Obama.

As Reuters notes, Kan met with Obama for a half-hour, considerably more time than Hatoyama got when he visited Washington in April (when Hatoyama was infamously described as "loopy"). The two leaders apparently discussed their shared love of matcha ice cream, and the Japanese media looked for signs that the two were becoming pals, looking for evidence that the relationship between the US and Japan was back on track after the Hatoyama government "strained" the bilateral relationship.

Meanwhile at gatherings in Washington to commemorate the "fiftieth anniversary" of the alliance (depending on when one chooses the date the birth of the alliance), the mood, according to Peter Ennis, was relatively upbeat following Hatoyama's decision to embrace a version of the status quo regarding Futenma and his subsequent resignation. Ennis says that the theme was "emphasize the positive."

All well and good, but as far as I can tell the alliance is right back to where it was 2007-2009, with the only difference being that the Japanese government is openly confronting the problems surrounding the implementation of the 2006 roadmap.

As I've argued before, the collapse of the Abe government in 2007 was more than just a spectacular reversal for the LDP — it marked the end of the bilateral "project" that grew out of the Nye Initiative in the mid-1990s to build a stronger, closer US-Japan alliance. After rewriting the guidelines on defense cooperation, securing (token) Japanese contributions to the Afghanistan and Iraq conflicts, and develop a new "shared values" rationale for the alliance, the project ran squarely into the wall of political realities in Japan and in the region.

Regarding the former, when faced with a government that was dead set on constitution revision, it turned out that the Japanese public was not all that interested in it, no matter what years of Yomiuri Shimbun polls said (although revisionist politicians apparently missed the polls that showed that very few felt that constitution revision was an issue deserving of the attention of national leaders). More than that, there are few signs that the Japanese public is interested in anything but the status quo as far as security policy is concerned. In other words, the status quo in which Japan spends less and less each year on defense while playing host to forward-deployed US forces. While public opinion polls are at best ambiguous regarding Japan's former refueling mission in the Indian Ocean or its ongoing anti-piracy mission off the Horn of Africa, the public isn't exactly clamoring for a more expansive role abroad for the SDF. Nor does there seem to be much support for collective self-defense, another remaining piece of the project.

Now, of course, it's the job of the government to lead — indeed, dating back at least to the early 1990s the idea behind the administrative reforms at the heart of the DPJ's program was that it would produce more decisive leadership, especially in foreign and security affairs. But realistically speaking, it is unlikely that a government committed to a controversial fiscal retrenchment agenda will simultaneously pursue a foreign policy agenda that would if anything be more controversial, especially in light of the domestic agenda.

The result is an unusual parallel to the Yoshida Doctrine, which, incidentally, Ambassador Katō Ryozō, who before serving as ambassador to the US for the whole of the Bush administration was deeply involved in the project to strengthen the alliance, recently declared had "completed its mission." Today Japan finds itself in a position where it needs an alliance with the US based on the forward deployment of troops not to free up resources for re-industrialization but so that it can weather its demographic plight and economic decline. The resulting arrangement looks the same, but the underlying logic is strikingly different — and remarkably fragile, resting as it does on the strength of the US commitment to Asia, the willingness of the Japanese taxpayer to provide host-nation support (and Okinawan and other communities to host US forces), and the restraint of the People's Republic of China.

In fairness, policymakers in both countries seem to recognize that this arrangement is less than ideal. For example, two years before he became known within US-Japan circles for issuing a warning to the Hatoyama government not to challenge the 2006 agreement, US Secretary of Defense Robert Gates delivered a speech in Tokyo calling for a review of the alliance that would seek to answer basic questions about its raison d'etre. 

But no one has taken up Gates's call, perhaps in large part because there are no easy answers to the challenges that face the alliance. Japan's domestic political environment shows no signs of changing (at least as far as the alliance is concerned), and the political environment could even worsen if the ruling parties fall short of a majority in the upper house. While China occasionally acts in ways that could trigger a shift in Japanese public opinion, on the whole China has been restrained, meaning that Japan will continue to seek a constructive partnership with China. There are no signs that the US commitment to regional security is wavering, but given the state of the US economy it is impossible to rule out an isolationist turn (fears of which naturally lead Japan and other countries in the region to consider their options).

In other words, the new project for the alliance is learning to accept and make the best of these constraints. As leaders of both countries say, the alliance continues to play an important role in providing peace and security in the region, but the idea that the alliance could be something more than a "passive" or negative force for peace (what, after all, could be more passive than oxygen, Joseph Nye's commonly used metaphor for the US presence in Asia), that it could play a creative role in promoting US values or reshaping the regional security environment appears to be increasingly fanciful. The alliance may well survive for decades to come, but its survival — and the form it takes — may depend less on decisions made in Washington and Tokyo than on decisions made in Beijing.

The meaning of the Upper House election

On Thursday campaigning for the House of Councillors election scheduled for 11 July begins, as 440 candidates vie for 121 seats. (Michael Cucek has the breakdown here.)

The significance of this election has been thrown into clear relief since Kan Naoto took over from Hatoyama Yukio as prime minister and head of the DPJ. What once looked to be a referendum on the leadership of Hatoyama and DPJ secretary-general Ozawa Ichirō — a referendum that polls suggested that the DPJ would not win — is now an election on the future of Japan, perhaps to an even greater extent than last summer's historic House of Representatives election. If the DPJ can retain control of the upper chamber, it will have three years before it will have to face the voters again in an election, provided that no snap election is called in the meantime. Those are three years that the government can use to make tough political decisions that a government with a shorter time horizon might be less inclined to make, like, say, a consumption tax increase.

And so this election is critical for Japan's future. For the Japanese people, there's not much of a choice. Under the DPJ Japan now has a prime minister who is everything that his predecessor was not: Kan is clearly willing to take a position, stick to it, and make his government follow along. He is devoted to clean politics and dynamic political leadership, and under his watch the DPJ once again looks like a party capable of bringing substantial change to how Japan is governed.

Much of the discussion during the campaign will focus on the government's plans related to the consumption tax and deficit reduction more broadly. But once again this election is less about the competing policies offered by the DPJ, the LDP, and the smaller parties than about how Japan is governed. The choice is between unified DPJ government that will face few institutional checks as it attempts to introduce sustainable growth, sustainable government finances, and sustainable social security and a divided system in which the government will have to cobble together working coalitions in order to pass legislation in the upper house (or use its lower house majority to pass legislation over the upper house's objections).

In other words, voters have to decide whether they're willing to tolerate an "elective dictatorship" for the next three years as the Kan government sets to work implementing the DPJ's modified but still ambitious political program or whether they would prefer that the LDP, Your Party, Komeitō, and the other parties retain a perch from which to challenge the government and retard its progress.

Mr. Kan's Third Way

The Third Way has, belatedly, arrived in Japan.

The style of politics popular in advanced industrial democracies during the 1990s among center-left leaders keen to reconcile their left-wing parties to the rise of neo-liberalism and the onset of austerity after the 1970s had heretofore failed to surface in Tokyo. But with the ascendancy of Kan Naoto, Third Way politics may get another lease on life in Japan.

In his maiden policy speech as prime minister on 11 June, Kan explicitly spoke of a "third way" to the reconstruction of the Japanese economy. Rejecting the first way, what he identifies as the ideology of the construction state (shared prosperity through public works), and the second way, "extreme market fundamentalism" focused on supply side reform at the expense of public welfare, Kan proposed a third way that would target the budget deficits that he says have produced ongoing stagnation and eroded confidence in the social security system. In short, he is trying to break what I've described elsewhere as an impossible trinity of deficit reduction, renewed, balanced, and low-carbon-emitting growth, and robust welfare provision.

What follows is a set of policies intended to create a "Strong Economy," "Strong Government Finances," and "Strong Social Security." 

His proposals on the first point are a reiteration of the DPJ's prevailing position on the economy: the need to balance external and domestic demand, to be realized through a combination of intra-Asian trade, tourism, Green technology, and support for families and the elderly.

On the second point, Kan alluded to the specter of Greece — an allusion that will be repeated in other times and places in the coming years — to make the case for aggressively attacking Japan's bloated national debt with efforts to cut wasteful spending and fundamental tax reform, which would undoubtedly include a consumption tax increase. Naturally he appealed to the LDP to cooperate with the government on this issue.

Finally he turned to social security, identifying a secure social security system as critical for economic growth. Effectively he argued that a shaky social security system in an aging society triggers hoarding on the part of middle-aged and senior citizens concerned about their well-being in retirement.

The similarities with the Third Way politics of Blair and Clinton are not accidental. Kan, a veteran of Japan's reformist, pragmatic left, is at once trying to unleash and humanize Japanese capitalism. He praises Koizumi's supply-side reforms for promoting the restructuring of Japanese businesses, but despairs of their impact upon Japanese society in the form of unemployment and persistent deflation.

While Kan arguably speaks more fluently about economic policy than any prime minister since Koizumi — his speech was largely free of the airy fairy rhetoric that characterized Hatoyama's pronouncements — it is difficult to see Kan's Third Way having any more success than the Anglo-American Third Way, which in retrospect seemed to do little more than promote the Casino Capitalism that produced the financial crisis that has arguably wiped out whatever gains were made to the state's role in welfare provision and plunged both countries ever deeper into debt. The point is not that Kan is foolish for trying to reconcile what appear to me at least as irreconcilable political goals: the political environment demands that the government addresses all three, not least the problems in the social security system. Instead, it seems likely that over time Kan will be forced to focus on one goal at the expense of the others — and that the privileged goal will be deficit reduction.

Even without Kan's embrace, it is likely that deficit reduction would become the government's primary goal with Greece serving as "focusing event," with Kan's government full of deficit hawks, and with the finance ministry still a potent force in policymaking. But with Kan himself having embraced the issue in strong terms, there appears to be little doubt that his government will prioritize deficit reduction above all else, to the point of the DPJ's including a pledge to increase the consumption tax in its manifesto for next month's upper house election (perhaps not a bad move politically with a Yomiuri poll showing sixty-six percent support for a consumption tax increase). Kan has also stated that within the month his government will establish 2020 as a goal for restoring the government's primary balance to surplus.

The question, however, is whether deficit reduction will lead to sustainable growth and secure social security spending. For example, I find it difficult to believe that the government will able to promote greater domestic demand, let alone sustain existing domestic demand while taxing consumption at higher levels. Deficit reduction is undoubtedly valuable in its own right, it's just difficult to see how the Kan government will be able to make good on the totality of its economic program. Can the government really cut enough waste and raise enough tax revenue to shrink its deficits while expanding programs to promote economic growth?

I think that the pursuit of deficit reduction will have implications for Japan's foreign and security policies. The first challenge, however, is figuring out exactly what has changed: Yomuiri sees a new realism in the DPJ's latest manifesto (discussed here at Twisting Flowers), but the reality is that apart from the new government's emphasis on rebuilding relations with the US and the call for defense transparency in China, the DPJ is putting in words what it has already been doing since taking power, especially in its focus on stronger bilateral ties with South Korea, Australia, and India. And really, the Hatoyama government was not nearly as soft on China — or as opposed to the US-Japan alliance — as the contemporary wisdom in Washington held.

Moreover, the Kan government's overtures to the US can be overstated: even the formulation of support for the alliance voiced in Kan's address last week was more like former LDP Prime Minister Fukuda Yasuo's, in which the alliance is viewed largely in terms of its role in providing stability in Asia, than the vision of the alliance as resting on a foundation of shared values and dedicated to the promotion of democracy in the region. Like Fukuda, Kan recognizes that stable, constructive relations with Japan's neighbors, China most of all, are essential, and that the US-Japan alliance is valuable insofar as it contributes to Japan's Asia policy aims.

But in the Kan government's unflinching support for last month's agreement on Futenma, the new government is clearly interested in bolstering the US pillar of Japan's foreign policy. What I wonder is whether the DPJ's renewed interest in the security relationship is a function of its focus on deficit reduction. As the government looks to reduce spending, DPJ officials may increasingly be coming to the realization that austerity combined with regional uncertainty means that for the foreseeable future Japan will be dependent on US deterrent power. While the new government is quietly hedging against the possibility that the US commitment to Asia might weaken through its focus on bilateral cooperation with regional powers and its growing acceptance of the need to loosen restrictions on arms exports (which would lower the cost of bolstering Japanese's own conventional capabilities), the DPJ clearly accepts that for the foreseeable future it will be necessary to maintain a constructive security partnership with the US, even if the party continues to hope for an "equal" partnership.

It is open to debate whether austerity is leading the Kan government into a more enthusiastic embrace of the US (or even whether the embrace is more or less enthusiastic than the Hatoyama government's or any LDP government's for that matter). The DPJ may simply be free or cheap riding irrespective of concerns about austerity in the future. Or it may sincerely believe that the status quo is more or less the best option for Japan when it comes to coping with the rise of China.

However, I think the proposal to relax the three arms-exporting principles is a sign that the DPJ is sensitive to the costs of defending Japan and, therefore, that while the alliance may provide the most cost-effective means of national defense (provided measures are introduced to lessen the domestic political costs of US bases on Japanese soil), the government should look for ways to reduce the costs of Japan's providing its own defense in due time.

In short, at home and abroad the DPJ is performing balancing acts, pursuing multiple and at times conflicting goals that require flexibility on the part of the government — precisely the reason why Ozawa and other politicians have called for a stronger Westminster-style executive over the past two decades. Whether the government will be up to these challenges even with reform remains to be seen.

The Kan system

The Kan government has formed, having retained eleven ministers from the Hatoyama government (as expected). Among the new faces in Kan's cabinet of "irregular forces" are Noda Yoshihko (finance), Yamada Masahiko (agriculture), Arai Satoshi (national strategy), Genba Kōichirō (administrative reform), and, perhaps most prominently, Renhō (government revitalization).

Looking at the transition from the Hatoyama-Ozawa regime to the new DPJ cabinet, Michael Cucek reviews the history of the DPJ's coming to power and the nature of the Ozawa's strategy and concludes that under Kan, "the DPJ, the classical DPJ, is back."

It is hard to disagree. Indeed, the haste with which Kan Naoto and his "Seven Magistrate" deputies have tried to break with Ozawa — Kan's telling the former secretary-general to keep quiet, new DPJ election chief Azumi Jun's decision to review Ozawa's strategy of running two candidates in three-seat districts — are surely just the beginning of what will be weeks and months of distancing the party from Ozawa. More than that, Kan's emphasis on grassroots politics, the basis for Kan's calling his cabinet a "cabinet of irregulars" (or commandos), stands in marked contrast to Ozawa's courtship of the same interest groups that had long sustained the LDP in power.

What does this "classic" approach mean for the DPJ's plans to build a top-down policymaking process?

Perhaps the biggest change is that under Kan and DPJ secretary-general Edano Yukio the party will undo the concentration of power in the office of the secretary-general that occurred under Ozawa. Most notably the party has accepted the restoration of the policy research council, the primary demand of the reform movement that emerged earlier this year.

The new PRC, however, will look nothing like the LDP's PRC, not least because there is no indication that Kan will roll back the restrictions on contact between backbenchers and bureaucrats that the Hatoyama government promulgated upon taking power. Genba, the minister for public service reform, will serve simultaneously in the cabinet and as the PRC chair. Genba himself said in his first press conference that the "former PRC" is not being restored, that the new PRC will not pose a threat to the government's plans to unify policymaking in the cabinet. Instead it appears, at least based on Genba's remarks, that the PRC will serve as a forum for two-way communication between cabinet and party. As a member of the cabinet, Genba's responsibilities will include explaining the government's policies to backbenchers in addition to facilitating debates about new policies among MPs. The principle of collective responsibility ought to restrain Genba from using his post to challenge the government: as a cabinet minister he is obligated to defend the government's decisions once they have been made.

The new PRC will enable backbenchers, especially first-term backbenchers, to participate in policy debates and perhaps generate new policy ideas — but there is no sense that it marks a return to bottom-up policymaking in which party members wield a veto over every government decision.

In addition to creating a new PRC that is directly linked to the cabinet, the Kan government will keep the new secretary-general closer to the government — literally. Edano may occupy an office within the Kantei. The result would be that the secretary-general would act more like a political adviser to the prime minister than the autonomous strategist that Ozawa had become, and, as Edano said in his initial remarks, would be responsible for defending the government's decision before the voting public. (The Kan-Edano relationship will invariably differ than the Hatoyama-Ozawa relationship not least because Kan will not be overshadowed by his secretary-general in the public's eye.)

The result is that under Kan the DPJ will try to replace a government in which the ruling party had fewer veto players but in which the party's one veto player was at least as powerful as the prime minister with a government in which the party may have more veto player but in which the prime minister is more powerful, more visible to the public, and more capable of controlling party officials. There will be more players involved in policy debates, but my sense is that Kan, with the help of Sengoku Yoshito, the new chief cabinet secretary, will not be reluctant to remind his subordinates of who is in charge of the government.

Of course, the question hanging over this new "un-Ozawa" system is whether Ozawa himself will accept it. Freed of formal responsibilities, Ozawa will now have the time to forge his political loyalists into an Ozawa faction should he want to, which would of course make life difficult for the Kan government. Inevitably the new regime will have to make its peace with Ozawa — or Ozawa will have to restrain himself from intervening in policymaking and political strategy.

Nevertheless, under Kan the DPJ has a prime minister who may be even more devoted to building a Westminster-style system than his predecessor. The DPJ may  have made some necessary concessions to the party's MPs, but the goal remains strengthening the role of the prime minister and the cabinet at the expense of bureaucrats and backbenchers.

It's Kan!

Kan Naoto has been elected head of the DPJ and is line to become Japan's ninety-fourth prime minister this afternoon. He received 291 votes to Tarutoko Shinji's 129.

(Image by Kenji-Baptiste OIKAWA and used under a Creative Commons license)