Hatoyama stays above the fray, but his government resists Kamei

In his first two weeks as prime minister, Hatoyama Yukio ought to have learned an important lesson about governing: if you do not set the agenda, someone else will. With the LDP focused on electing a new leader, the policy agenda was clearly set by Kamei Shizuka, trying to make the best of the poor hand dealt to him by the new government. While the government's agenda is packed, the question of a moratorium on loan repayments for small- and medium-sized enterprises is clearly at the top of the list.

Speaking at a press conference following the first meeting of the government's Basic Policy Cabinet Committee — comprised of Kamei, Consumer Affairs minister Fukushima Mizuho, and Deputy Prime Minister Kan Naoto — Kamei insisted that he has Hatoyama's backing when it comes to implementing a moratorium plan. He also insisted that the plan is not simply his own, but rather that it is based on the governing parties' tripartite agreement concluded before the formation of the Hatoyama cabinet. Hatoyama denied that the DPJ, SDPJ, and PNP included this proposal in this agreement, but he did not deny that his government will grapple with the problem of financing for small- and medium-sized enterprises and may mandate a law that, unlike Kamei's plan, would impose a moratorium on repaying principal, instead of interest and principal. Ikeda Nobuo links to a video on Youtube of Hatoyama's voicing his support for a proposal along these lines made by Kawauchi Hiroshi, DPJ representative from Kagaoshima's first district. (Jiji reports on Hatoyama's campaign trail comments too.)

But at the same time Hatoyama said the matter ought to be debated "robustly." In other words, the problem isn't that Hatoyama is on Kamei's side and is pushing hard for a moratorium. The problem is that Hatoyama is not leading at all. The prime minister appears to be working hard to stay above the fray.

Perhaps this is what a government led by a prime minister who is first among equals looks like. Rather than issue marching orders to his ministers, Hatoyama is letting them hammer out a policy themselves. For now the moratorium is in the hands of Ootsuka Kohei, the vice minister of financial services, who is leading a council to investigate countermeasures to overcome reluctance to lend and the withdrawal of credit by financial institutions. Ootsuka, a former Bank of Japan official, wants to make it easier for SMEs to delay payments but does not want to obligate banks to accept a blanket moratorium. An outline of the council's bill will be ready by 9 October. Kamei was not pleased to hear Ootsuka's position — indeed, Kamei insisted that as a vice minister Ootsuka does not have the power to say what he said about a possible moratorium.

Kamei's remarks sound rather defensive, as if he just got completely outmaneuvered. He will undoubtedly continue to talk, but with Ootsuka's team working on a draft bill, Kamei will not get all the attention on the issue. The government appears to be fighting back against Kamei procedurally, as I suspected.

We may yet see why it is crucial that the government has empowered parliamentary vice ministers — and why it is crucial that Ootsuka and Furukawa Motohisa were placed at the center of the government as vice ministers for the cabinet office, where they will be in a position to coordinate the work of other ministries. Having economics and finance experts at the working level will strengthen the government immeasurably.

Kamei will continue to fight, and sooner or later Hatoyama will have to make his position known, but for now the Hatoyama government appears to have taken the first step to reclaiming its agenda from Kamei.

An important week for the Hatoyama government

Prime Minister Hatoyama Yukio has returned to Japan after what appears to have been a successful introduction to the world in New York and Pittsburgh last week. The visit to the US may not have accomplished much in practical terms, but it did have symbolic importance, showing that the Hatoyama government will not shy away from speaking out on pressing international issues but that the government can also be trusted to manage Japan's relationships, most notably the US-Japan relationship.

Now the new government's work will begin in earnest. The DPJ-led government is, after all, less than two weeks old and its policymaking system has yet to make the transition from a set of orders and outlines to a working policymaking process.

At the same time, the government also faces urgent policy questions, especially the matter of what to do about Japan Airlines.

For now, the most immediate task for the prime minister is dealing with Kamei Shizuka, the People's New Party leader and minister for postal reform and financial services. In Hatoyama's absence Kamei continued to press for a law that will provide a debt repayment moratorium for small- and medium-sized enterprises — and continued to assert that despite his nominally minor position within the cabinet, he alone is responsible for ensuring that this proposal becomes law, even after Chief Cabinet Secretary Hirano Hirofumi said that Kamei was speaking for himself and not for the cabinet as a whole. Kamei seems to think that each minister has clearly delineated turf over which he or she has undisputed power, a vision of policymaking that directly conflicts with the DPJ's plans for cabinet committees that will hammer out government policies.

Appearing on TV Asahi Sunday, Kamei issued a direct challenge to the prime minister, saying that if Hatoyama is opposed to his proposal, then the prime minister ought to dismiss him.

Hatoyama cannot delay any further in resolving the Kamei problem. I am still convinced that Kamei's antics stem from a desire to enhance his position in the cabinet given the ambiguities of his post, and that Kamei can be managed. The way to manage him is, of course, through the cabinet committees. The prime minister should ignore Kamei's demand that the prime minister dismiss him (he didn't say he would resign, after all), and convene a financial sector cabinet committee with Kamei, Fujii, and METI minister Naoshima Masayuki. The prime minister needs to stress that policy will be made through this system, not through an individual minister using the media as an outlet to announce his personal policy preferences. The same must go for the Basic Policy cabinet committee, comprised of Kamei, Deputy Prime Minister Kan Naoto, and Fukushima Mizuho, SDPJ leader, which is scheduled to meet for the first time Monday afternoon. It is unclear what role this committee will play in the government, but arguably Kan's task should be to marginalize it as a policymaking outfit, limiting its pronouncements to broad principles rather than specific guidelines for other cabinet ministers. Hopefully Kan and the DPJ can rely on Fukushima to isolate Kamei in the committee.

The fact that cabinet committees are only forming now shows that it is too early to panic about the workings of the Hatoyama government. The government still has not set to work in earnest. Indeed, also meeting for the first time Monday will be a committee headed by Kan to review the compilation of next year's budget, the most important task facing the new budget.

The task then for this week is to establish how the government will make its policies. As much of a nuisance as Kamei has been since the government took power, the damage has been limited and he can be bested simply by quickly getting cabinet committees in place to begin work on the government's legislative agenda for the forthcoming extraordinary Diet session — and reiterating that Kamei does not speak for the government.

At the same time, Ozawa Ichiro, fresh from a trip to Britain, where he studied parliamentary administration, will have to pressure Kamei from another direction. The PNP caucuses with the DPJ in the House of Councillors, presumably giving Ozawa power over the PNP's five upper house members. If the DPJ can rely on the PNP's support in the upper house even if the government does not do as Kamei wants, Kamei will have a much harder time defying Hatoyama.

One way or another, we should know more about how the DPJ-led government will work after this week.

Containing Kamei

While Okada Katsuya was securing his position as the undisputed leader in foreign policy making, Kamei Shizuka has made immediately clear that he was going to be a source of trouble for the Hatoyama government as minister of postal reform and financial services.

I already noted Friday that Kamei had used a press conference following a cabinet meeting to warn Haraguchi Kazuhiro, the minister for internal affairs and communciations, to stay off his turf, namely halting the privatization of the postal system. At the same time, Kamei, using his perch as director-general of the Financial Services Agency, has called for a three-year moratorium on the repayment of loans by small-and-medium-sized enterprises, which would naturally be devastating for banks, which, after all, not too long ago were laboring under the burden of bad debt to the point that they eventually required the infusion of public funds. Naturally markets have not taken kindly to Kamei's remarks. (Sasayama Tatsuo has more on radical financial regulations proposed by the People's New Party.)

Kamei also attacked Kan Naoto and the national strategy bureau as being intended to undermine the basic policy cabinet committee composed of Kamei, the SDPJ's Fukushima Mizuho, and Kan as the DPJ representative.

Finance Minister Fujii Hirohisa tried to calm worries, noting that while there is a precedence for this action — in 1927, in the midst of Japan's depression — the situation is not nearly so bad as that. But Kamei reiterated on NHK Sunday that implementing this program is his responsibility (although he said he would be "borrowing" the wisdom of the finance minister).

While Kamei's remarks are irresponsible, I do not think that they are indicative of anything more than Kamei's insecure position within the cabinet. Having no real authority of his own, of course he is going to throw elbows and try to find an area in which he can take the lead. It is unlikely that he will lead on either postal reform or this moratorium scheme — and it is unlikely that the cabinet will simply sign off on the moratorium scheme as floated by Kamei. Little wonder that he also attacked the NSB as undermining the one area in which he is sure to have some influence, the cabinet committee to coordinate among the government parties.

Fujii needs to speak that much more decisively on Kamei's irrelevancy on this matter. Perhaps he can sit on a cabinet committee, in which his views would be reliably drowned out by Fujii and whoever else they found to round out the group. All of which goes to suggest that investors and commentators should not overreact to Kamei's freelancing — he still has to convince his colleagues in the cabinet that his ideas are sensible.

However, refereeing turf battles is one role that Hatoyama Yukio should be playing. He should not be leaving his team of rivals to resolve their own disputes. Hatoyama as prime minister should be issuing orders to ministers and establishing boundaries. How many more days is he going to let Kamei make extravagant claims to the media about the powers of his portfolio?

Of course, there is also a media relations story here too. If Hatoyama were to appoint a press secretary to coordinate media affairs, he might not be able to keep Kamei from putting himself in front of cameras, but the media could then go to the press secretary who would stress that Kamei has no authority to speak on behalf of the cabinet as a whole and that policy X has not yet been submitted to a cabinet meeting for a decision. The government needs to control its image and it needs to control its message. For the moment, it seems to be having a hard time when it comes to dealing with Kamei.

But it is still early in the government's tenure, which is the final point. The policymaking process is still nothing more than a framework. It is still unclear which ministers will emerge as the leaders who make the cabinet work. It is far too early to say that Kamei, a minor minister on the basis of his portfolio if not on the basis of his party position, will wreck the government. But some cabinet ministers and the prime minister are going to have to find a way to manage the obstreperous leader of one of the DPJ's tiny coalition partners.