Japan walking into a trap at Essen?

The G7 is due to meet in Essen, Germany this weekend, and there are dark rumblings that Japan may be called to account for failing to allow its currency to rise as the dollar falls, which has forced the euro to appreciate to a greater extent than the yen, which has remained the weakest of the major currencies.

At a recent ECOFIN (that's the Economic and Financial Council of the Council of the European Union -- the finance ministers' group in the European presidency) meeting, German Finance Minister Peer Steinbrück and French Minister of Economy, Finance and Industry Thierry Breton suggested that the weakness of the yen would be on the table at Essen. In Breton's words, "We agreed that the yen ought to reflect the reality of the Japanese economy" (From Jiji, in Japanese).

That was from 31 January.

Just before that, however, US Undersecretary of the Treasury for International Affairs Tim Adams said at Davos that the US viewed Japan's economic policy as "appropriate," suggesting that any attempt by the European members of the G7 to cajole Japan into allowing the yen to bear more of the burden of the dollar's fall would be nixed by the US.

Recent changes in the US, however, suggest that Japan may in fact be confronted in Germany.

First, Adams tendered his resignation on Friday. His letter gives the usual "more time with my family" excuse, but I can't help but wonder if there isn't a dispute going on in the upper reaches of the Treasury Department over how the US should deal with currency manipulation. As Ken Worsley notes in this post at his Japan Economy News blog, Congressman John Dingell (D-MI), chairman of the House Energy and Commerce Committee, apparently wrote a letter to Bush calling for the administration to press Japan on the currency issue. (Apparently if China won't budge, Congress can always turn to Japan as a scapegoat.) Maybe Secretary Paulson is caving on this front.

Second, I wonder how the Kyuma dispute plays into all this. The Bush administration, after all, isn't known for being especially charitable to critics, and Kyuma trod upon the administration's toes -- well, toe, probably the pinky toe -- just as it struggled to sell the new course in Iraq to the American public. While alliance managers have traditionally tried and mostly succeeded at keeping the economic and security realms separate, I can't help but wonder if the Bush administration, embattled at home and abroad and short on prominent Japan hands, isn't particularly concerned about breaking with tradition in the US-Japan relationship.

As such, should Japan face a united front of criticism from the rest of the G7 in Essen, it could be a crippling blow for the already tottering Abe Cabinet. Combined with the boycott of budget hearings by the opposition as a result of l'affaire Yanigasawa, pressure from the G7 to change course at home could further paint Abe into a corner.

Is it too early to start placing bets on how many more months (weeks?) Abe has before being ousted?

Political Tourette's Syndrome?

The new Diet session is more or less on hold, as the DPJ and other opposition parties have decided to boycott the Lower House's Budget Committee meetings on supplemental expenditures until Health, Labor, and Welfare Minister Yanigasawa resigns.

Although Abe has apologized for his subordinate's remarks, the opposition has continued to push for resignation.

And not without reason. It's hard to imagine a cabinet member in any other G7 country calling women machines for giving birth and surviving in office.

As such, contrary to this Yomiuri editorial, which criticizes the DPJ for reviving an old Japanese Socialist Party tactic and putting politics -- specifically the desire to solidify the opposition bloc in advance of the July elections -- ahead of policy, I see no reason why the opposition should give the Abe Cabinet a pass. Like a person suffering from Tourette's Syndrome, the Abe Cabinet cannot help but periodically blurt out inappropriate remarks, dating back to the first weeks of Abe's tenure, when Foreign Minister Aso and LDP policy chief Nakagawa repeatedly mentioned the need for Japan to consider developing nuclear weapons.

Abe is apparently unable to keep his team on message. Why shouldn't he pay politically for his failings as a party leader and head of government? If it hasn't happened already, I expect that it is only a matter of time before a serious fight begins within LDP over who will succeed Abe should his numbers continue to dip -- and should his missteps result in a catastrophic defeat in July.

Maybe Foreign Minister Aso wasn't being too hasty in announcing the creation of his own LDP faction, in order to position himself for another run for the party presidency...

New year, old news

Just when I thought that it was the DPJ that was off to a bad start in the new Diet session, the Abe Cabinet once again finds itself in hot water over the inability of a cabinet minister to control his mouth.

As I noted earlier, Yanagisawa Hakuo, health minister, recently referred to women as "birth-giving machines." Although Abe has criticized him, opposition parties are once again calling for the resignation of an Abe cabinet member. (Last term they sought the resignation of Foreign Minister Aso after remarks that seemed to undermine the government's commitment to the three non-nuclear principles.) The opposition probably has more reason to push for a resignation in this case, but either way Yanagisawa has managed to change the leading topic of conversation away from the fallout following the resignation of Tsunoda and the contents of Abe's policy address last week. Once again Abe appears less than capable at keeping his cabinet under control, and, accordingly, Abe Cabinet appears less than capable at running the country.

Alongside l'affaire Yanagisawa has been the feud over Defense Minister Kyuma's comments about US foreign policy. While I discussed his remarks on Iraq here, I did not discuss the more egregious portion of his criticism of the US, which blamed the US for failing to understand Tokyo's need to coax agreement from the government of Okinawa before the reconfiguration of the US military presence there can proceed.

This is considerably more outrageous than his comments on Iraq. The US is trying to expedite the process of reducing its footprint in Okinawa, which has been a source of tension for decades -- and now the defense minister is criticizing the US for failing to understand that Japan needs to go slow? (Kyuma more or less reiterated his comments on Okinawa in a press conference yesterday). Considering that the initial agreement on Futenma, the Marine air station that has been at the center of the dispute for some time, was reached in 1995, the US has been plenty patient with Japan, waiting for Tokyo to reach some kind of lasting accord with the government of one of its own prefectures. Kyuma claims that since the players have changed, the government has to pause to hear their opinions, which sounds reasonable except that the players have continually changed. At what point does the government just lay down the law and actually implement the agreements it has made with the US?

So it seems that things are back to normal in Nagatacho. The Abe Cabinet is embroiled in disputes with the opposition, and now, with the US, over the ill-considered words of its members.