Talking Ozawa and the economy on CNBC Asia

I was on CNBC Asia's Asia Squawkbox today to talk about the Ozawa situation and the state of economic policy.



Oddly enough, I was on CNBC Asia one year ago exactly talking about the DPJ's victory the previous day. What a difference a year makes.

Ozawa's last stand?

"All political lives, unless they are cut off in midstream at a happy juncture, end in failure, because that is the nature of politics and of human affairs." — Enoch Powell

Returning to his familiar role as Ozawa Ichirō's trusty factotum, former Prime Minister Hatoyama Yukio announced Thursday that he will be supporting Ozawa in a bid to unseat Prime Minister Kan Naoto in next month's DPJ party leadership election. Ozawa himself has yet to make an official announcement, but much like when Hatoyama was DPJ secretary-general under Ozawa, Ozawa conveyed his intentions to Hatoyama, and Hatoyama revealed them to the public. Naturally Hatoyama's backing Ozawa after earlier indicating his support for Kan is an insult to the prime minister.

I have held off from commenting on the possibility of an Ozawa run at the party leadership and premiership because the idea struck me as patently absurd (for reasons that Michael Cucek captured well here and here).

And yet here we are, with Ozawa on the brink of entering the ring once more. I suppose on the plus side, at least he's competing for a public post, one that would force Ozawa to assume public responsibility instead of hiding out of sight.

There is no shortage of speculation about Ozawa's motives for running, having to do with his tenuous legal position, his desire to reinsert himself into the policymaking process by running, losing, and then bargaining for an important post, or his genuine desire to, in Hatoyama's words, "to risk his life on behalf of the country." I have long since given up trying to read Ozawa's mind and am willing to believe that any, or all, or none of these reasons is the real reason for Ozawa's decision.

Whatever his reasoning, the consequences could be dramatic. The best-case scenario would be that Ozawa is simply unable to muster enough support and goes down to an embarrassing defeat that is a prelude to his departure from politics. It is unclear just how much support from the party's parliamentary caucus Ozawa can count on — for my part, I have always thought that the media has exaggerated the extent to which Ozawa can rely on an "army" of young MPs indebted to him for his assistance. Even more unknowable is the extent of Ozawa's support among the party's rank-and-file members, who will also be voting in the party election. Given the near-universal public disapproval (including DPJ supporters) of Ozawa, it is worth asking whether there are still enough pockets of support for the former party leader to make his candidacy viable.

And if he were, somehow, to defeat Kan and take the premiership? Many seem to think that Ozawa's becoming DPJ leader would be the catalyst for the long-awaited political realignment (although Your Party's Watanabe Yoshimi insists that the DPJ will break regardless of what Ozawa does). It is easy enough to see how Ozawa could trigger the realignment. Remember the "purge" of Ozawa loyalists that marked the transition from Hatoyama to Kan? Presumably the "magistrates" who opposed Ozawa and have occupied important positions under Kan would have little to look forward to under Ozawa, and would have two options outside of the cabinet: build anti-mainstream "factions" within the DPJ to challenge Ozawa, thereby completing the LDP-ization of the DPJ, or leave the party altogether to join with Watanabe or form yet another new political party. 

The reality is that while at another point in his career Ozawa might have been able to deliver a miracle, untwisting the Diet by encouraging members of other parties to defect or hammering out a new governing coalition, there is good reason to believe that Ozawa is out of miracles. As Kan has found as he has tried to coax the opposition parties to cooperate, with the DPJ reeling the opposition parties have the upper hand. The DPJ will pay a steeper price than the opposition parties for inaction, particularly as the economy worsens. Add Ozawa's unpopularity and his notoriety as a living symbol of the bad, old politics and the opposition's advantage grows. And if a Prime Minister Ozawa were the head of a nominally united but fractured DPJ his bargaining power would be undermined even further. Whoever wins the party election will still face a miserable political situation. Having Ozawa as prime minister would only make the DPJ's situation even more difficult.

It is ultimately for that reason that I suspect that Ozawa will provide another demonstration of Enoch Powell's maxim, adding a final defeat to a lengthy political career that has seen its share of defeats along with extraordinary victories, arguably none more extraordinary the DPJ's victory a year ago next Monday. Ozawa simply does not have a compelling case for why he should take charge of the government at this juncture — and I think that the party's voters know it.

The politics of Kan's apology

"I would like to face history with sincerity," said Japanese Prime Minister Kan Naoto in a statement issued on 10 August, the 100th anniversary of Japan's annexation of Korea. "I would like to have courage to squarely confront the facts of history and humility to accept them, as well as to be honest to reflect upon the errors of our own."

In what is now being referred to as the Kan Statement, the prime minister acknowledged the suffering caused by Japan's "colonial rule" and apologized to the Republic of Korea, and also pledged to return the remains of Koreans as well as cultural artifacts removed to Japan during the annexation.

Cynics will undoubtedly be quick to note that this is only the latest in a lengthy list of apologies issued by Japanese leaders for Imperial Japan's behavior — and one need not be a cynic to ask what value one more apology will have for Japan's relationship with South Korea or its standing in the region more generally. Japan's conservative ideologues, never shy in their opposition to what they see as "masochistic" behavior on the part of Japan's leaders, have vociferously opposed the statement. In a lengthy editorial published the day after the statement, the Sankei Shimbun, a revisionist right-wing daily, criticized the government for "imposing" a "one-sided view of history," denigrating the achievements of Meiji Japan in the process. The paper stressed that it is necessary to balance the "shadow" of Japanese rule with the "light," which came in the form of education and railroads.

In its coverage, Sankei also raised questions about the procedure by which Kan secured cabinet approval for his statement, claiming that Kan foisted the statement on his cabinet and the ruling DPJ, over the objections of party members.

Two days after the statement an "emergency citizens' meeting" met in central Tokyo to demand the withdrawal of the apology. Headed by Odamura Shirō, a leading conservative figure who was involved in opposition to the infamous "comfort women" resolution passed by the US House of Representatives in 2007, the meeting passed a resolution calling for a bilateral relationship based not on feelings of moral superiority for one party and guilt for the other and questioning the legitimacy of prime ministerial apologies. (Of course, the resolution also called attention to the role played by Japan in triggering Korea's economic development.)

The revisionist right's reaction to Kan's statement has less to do with South Korea, however, and more to do with the right's program for Japan. Its reaction is, above all, narcissistic: what does Japan lose by apologizing to those harmed by Japanese imperialism? As Kan himself noted, there is nothing cowardly about frankly acknowledging one's transgressions without hedging or equivocating. And while the list of apologies to Japan's neighbors is lengthy, it is precisely because conservatives question the legitimacy of those apologies — most notably the Murayama statement — that prime ministers are compelled to keep issuing new ones. The revisionist right believes that a "proper" and "truthful" historical perspective are critical for national pride, which it believes to have been corroded by the left-wing academics and media personalities and pusillanimous politicians. While they claim to be interested only in historical fact, their selective reading of history belies a blatantly opportunistic approach to Japan's imperial past that belittles the claims of Japan's victims and presents a blatantly self-serving (and at least in this telling contradictory) narrative in which Japan was not a colonizer, and even if it was, it was a benevolent one that hastened the demise of those wicked European empires.

Japan's revisionist right, of course, is not the only political group that propagates a self-serving account of its past that explains away inconvenient enormities (cf. the United States and Hiroshima, among other examples). But the revisionist right's attitude has persistently placed a stumbling block in the path of better relations with South Korea and China. As Kan makes clear in his statement, a good relationship with South Korea is critical in the years to come. While I do not doubt that Kan's apology is sincere, it also comes with strategic benefits, as President Lee Myung-bak appears no less interested in building a close relationship with Japan. Since taking power last year, the DPJ has steadfastly worked to build closer bilateral relationships throughout the region. This latest apology is but another step in that program.

And so the battle over Kan's apology pits two very different world views against each other. For Kan and members of his cabinet, Japan's future is in Asia, which means maintaining partnerships with important countries in the region. If apologizing to South Korea again strengthens Japan's position and clears the way to closer and deeper exchanges not just with Koreans but other Asian peoples, it is an exceedingly small price to pay. For Japan's revisionists, any unambiguous admission of Japan's guilt is evidence of "masochism" and an indication that Japan's leaders are simply not up to the challenge of competing with China for predominance in Asia. If Kan's view is strategic (although, again, not only strategic), the revisionist right is absolutist, and were it embraced by those in power it would result in an ignoble and ultimately self-defeating isolation for Japan in the region.

Of course, there is actually little risk of the revisionist agenda being implemented. Even Abe Shinzō, the most unabashedly revisionist conservative prime minister Japan has had in recent years, recognized the value of strong relationships with both South Korea and China and was willing to make concessions on the history issue, whatever his personal beliefs. Since Abe's downfall in 2007 the revisionists have been increasingly marginalized in Japanese politics, their influence virtually non-existent under the DPJ despite having sympathizers within the party. Indeed, their influence may be inversely proportional to the amount of noise they are capable of generating through various media outlets.

As Jun Okumura suggests, it is now up to South Korea to accept Kan's apology in good faith. That, of course, points to the central problem with apologies between nations: no matter how sincere the apology (and the acceptance of the apology), it is difficult for one leader to bind the hands of his successors. Nevertheless, by building a closer bilateral relationship, Kan and Lee can do their part to minimize the harm that can be done by political actors in both countries who wish to exploit history for political gain.

What can the Yakuza explain anyway?

Having read and enjoyed Jacob Adelstein's Tokyo Vice, it was with considerable interest that I read his article "The Last Yakuza" in the World Policy Journal (h/t to Corey Wallace).

Like Wallace, I have no particular expertise with which to assess the role played by the Yakuza in Japanese society. But also like him, I am skeptical about what political outcomes we can actually attribute to organized crime.

In brief, Adelstein argues that after decades of deep ties to the LDP — which organizations didn't have deep ties to the LDP when it was Japan's hegemonic ruling party? — leading Yakuza organizations have shifted their allegiances to the DPJ as it took control of the upper house in 2007 and then the lower house and with it the cabinet in 2009.

The main consequence of this shift, Adelstein suggests, is that the Hatoyama cabinet included Kamei Shizuka, head of the People's New Party, who is known to have links to organized crime. Without questioning those links, I think there is a far simpler explanation for Kamei's presence in the Hatoyama government, an explanation that does not require any reference to the Yakuza. Wanting to streamline decision making in the new coalition government, the DPJ included both Kamei and his SDPJ counterpart Fukushima Mizuho in the cabinet and created a special cabinet committee to coordinate policy among the ruling parties. Kamei, I think, was there so as to concentrate coalition negotiations within the government. The ease with which Kan Naoto cut Kamei loose once he challenged the new prime minister suggests that repaying the Yakuza was low on the DPJ's list of priorities when it came to Kamei.

But this case raises the larger question asked in the title of this post: what does the Yakuza explain anyway? What political outcome over the past half-century or so of Japanese politics is different because of the influence of the Yakuza in Japanese politics?

The most obvious answer is that the pervasive influence of the Yakuza explains the impunity with which gangsters have been able to act since the end of the war (which makes the 1992 anti-organized crime law mentioned by Adelstein a puzzle worth explaining).

But what about bigger questions? The durability of LDP rule? The rise and fall of prime ministers? Foreign policy and relations with the U.S.? What is different because of the Yakuza's power? What can the Yakuza explain that other theories cannot? I suspect not much. It's possible that gangsters may have influenced the outcome of LDP leadership elections during the former ruling party's heyday, given the shady pasts of some leading LDP politicians and the wholly opaque manner in which the LDP selected its leaders for much of its history. If it were possible to identify prime ministers who came to power only because of Yakuza support, it would perhaps be possible to identify indirect consequences of Yakuza influence, but as Adelstein's own career shows, becoming a Yakuza expert requires time, energy, and no small risk to one's person — all for exploring what may be nothing more than an auxiliary explanation.

That's not to say that the Yakuza are of no interest to political scientists who study Japan. One question worth addressing is why the Yakuza are so pervasive in the first place, at which point attention naturally turns to Italy, that other Axis power occupied by and then allied with the United States (which failed to purge and in fact developed links with far-right elements) and governed by a hegemonic conservative party for the duration of the cold war. Additionally, it may be fruitful to study the Yakuza in comparison with other interest groups that had long supported the LDP only to watch their fortunes wane during the lost decade(s). After all, Yakuza groups are interest groups, of a sort: interested in the regulation of organized crime. Like other interest groups, they had to adjust their political strategies in response to uncertain political and economic environments.

As such, while the Yakuza are an unlikely explanation for major political outcomes in Japan, they are a part of the landscape and observers should be cognizant of their role. For that we are lucky that Adelstein is working so hard to expose the inner workings of Japanese organized crime.

The 2006 roadmap's impasses

In the wake of its defeat the Kan government has made it patently clear that the Hatoyama government's "ratification" of the 2006 realignment plan was nothing of the sort — it is now saying that it will be impossible to complete negotiations before Okinawan gubernatorial election in November. The government once again is considering alternatives to the V-shaped runways to be built at Henoko bay, and is reluctant to impose a solution on the Okinawan people.

But, as the Wall Street Journal reports, American domestic politics is emerging as a new constraint on implementing the 2006 agreement. Both houses of Congress have voted to cut funding for the construction on Guam that is necessary to prepare the island to receive the 8,000 Marines and their dependents that according to the plan will move from Okinawa to Guam in 2014.

Congressional staff members said the problems in building new facilities for the Marines in Guam loomed even larger than the politics in Japan in their decision to cut funding.

The Senate appropriations committee said they remained concerned about Guam’s inadequate water, electrical, road and sewer infrastructure — and said inadequate planning had gone in to preparing for the nonmilitary aspects of the move.

The House Appropriation Committee report echoed the Senate findings about Guam, and said it had made the cuts because of the Defense Department’s “inability to address numerous concerns about the sustainability of the buildup as currently planned.”

These budget cuts come more than two years after the US government's Government Accountability Office (GAO) criticized the Defense Department the the US military for dragging its feet on the Guam end of the realignment plan and suggested that it was unlikely that the 2014 target would be met — and not because of Japanese politics. In late 2008 Admiral Timothy Keating, then the commander of US Pacific Command, acknowledged that the plan would most likely not be executed on schedule, citing budgetary concerns.

Corey Wallace is right to point to Washington's hypocrisy — for all of Washington's hand-wringing about political instability in Japan, the reality of the 2006 agreement was that the domestic political conditions concerning the agreement in both countries were at best complicated, and at worse impassable. For the realignment to go forward on schedule, the US government would have to secure the support of the people of Guam and Congress would have to budget a tremendous amount of money to improve the island's infrastructure, while Tokyo secured the support of communities in Okinawa and budget for the Futenma replacement facility and the construction underway on Guam.

In the rush to get something committed to paper, the Bush administration and the LDP have left the alliance with a festering sore, an agreement that looks all but unimplementable, has eroded trust between Washington and Tokyo, and mortally wounded the DPJ in its ten months in office. Considering these costs, it is remarkable that the Obama administration has clung so tenaciously to this Bush administration legacy. Is there anything in American foreign policy making to rival the much-vaunted bipartisan consensus on Japan?

What next for the LDP?

With the exit polls suggesting that the LDP will edge out the DPJ in this election and recover some of its strength in the upper house, it is worth asking what will be the consequences of victory for the LDP.

Most obviously, LDP leader Tanigaki Sadakazu will have a new lease on his position, delaying generational change within the LDP for a bit longer. 

Generally speaking, the LDP's old guardsmen will be able to use this vote as vindication for their resistance for anything more than superficial reform to the party. If the Diet does indeed remain twisted — if the DPJ is not able to cobble together a coalition that would swing control back to the government — the LDP will be sorely tempted to use the upper house's powers to harass the government instead of focusing on internal reform and revitalizing the party's policies.

Of course, an electoral victory against a hobbled DPJ is by no means a vindication of the LDP's approach. The party's reformers may have been better off had the LDP lost.

Twisted again

The various newspapers are reporting that according to exit polls, the DPJ won somewhere between forty-three and fifty-one seats, falling short of the total needed to preserve control of the upper house.

Once again the Diet is "twisted," barring the formation of a new coalition that enables the DPJ to retake control of the upper house.

Adamu is living blogging the returns at Mutantfrog here. I won't necessarily be live blogging, but I will be updating intermittently.

Is Ozawa back?

If there is one lesson that this upper house campaign has taught us, it is a lesson that we all should have already learned: there is no stopping Ozawa Ichirō. Despite what looked like a marvelous coup by Hatoyama Yukio in getting Ozawa to step down as DPJ secretary-general, Ozawa has been a public critic of the Kan government throughout the campaign.

However, is Ozawa's criticism of the government — he's been particularly harsh about the Kan government's comments about raising the consumption tax to 10%, which he argues with plenty of justification that the government has made life more difficult for DPJ candidates — the prelude to Ozawa's being a thorn in Kan's side after the election (as Yuka Hayashi suggests in this post at the Wall Street Journal's Japan Realtime)?

It is tempting to see Ozawa's remarks as the beginning of an Ozawa-led anti-mainstream within the DPJ that will force the Kan government to make further concessions to party backbenchers when it comes to policymaking, particular if the DPJ falls short of a majority on Sunday.

Working in Kan's favor, however, is that he has government and party leadership united behind him. United in their opposition to Ozawa's influence, Kan's leadership team already looks more effective than the Hatoyama-Ozawa team, missteps regarding the consumption tax notwithstanding. More importantly, Kan has already made concessions to the party's backbenchers, giving them a vehicle for having their voices heard by the cabinet. Ozawa's concerns about the government's abandoning last year's manifesto would carry more weight if the Kan government had not already begun working on a mechanism for incorporating the concerns of backbenchers into government decision making. Furthermore, there are few signs that Ozawa is any less unpopular now than he was before resigning as secretary-general — or that MPs are keen on preserving every piece of the 2009 manifesto. While there are still concerns that Ozawa stands at the head of a proto-faction that could number more than 100 members, I wonder how many members Ozawa can actually count on to back him. How many backbenchers would be willing to buck the new party regime to stand with Ozawa? It is worth noting that few senior party members have echoed Ozawa's critique of the Kan government.

That's not to say that party members are happy with how the government has handled the consumption tax issue over the past month. The understandable desire to give the voters a chance to render judgment on the Kan government's new approach to the consumption tax likely forced the government to roll out the proposal before properly vetting it with party members, which in turn led the government to back away from its initial position, ironically damaging the position of the government and the DPJ even further.

But backbencher dissatisfaction does not automatically translate into support for Ozawa. Far from signaling the beginning of an Ozawa-led anti-mainstream, Ozawa's behavior during the campaign could signal a new role for Ozawa as an internal critic, concerned less with vying for control of the party than with keeping the party on what he sees as the right path. It seems to me that the Kan government could live with Ozawa's moving into this role.

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)

Meet the new cabinet, (mostly the) same as the old cabinet?

As Japan waits for the DPJ's Diet members to choose a new party leader and then for the Diet to confirm the new prime minister, the media is speculating about the new lineup for the cabinet and the party leadership.

Among other items of speculation, Sengoku Yoshito is supposedly the front runner to succeed Ozawa as secretary-general, and Noda Yoshihiko, now the vice finance minister, is said to be the front runner to replace Kan as finance minister.

I would expect, however, that if elected, Kan Naoto will make very few changes to the Hatoyama cabinet, not least because the DPJ has stressed the importance of continuity in office for political appointees (and the prime minister, although it has obviously failed at that). Beyond this principle, one wonders whether the new prime minister will actually need a new cabinet, given that the one task Hatoyama actually succeeded at was selecting a cabinet composed of heavyweights representative of the DPJ's various groups and perspectives. There might be more changes to subcabinet positions, but even there, the DPJ has stressed the importance of cooperation among the political appointees within the ministries.

Hatoyama did not fail because of his cabinet, although Kamei Shizuka and some other cabinet ministers undoubtedly made his life more difficult. It was difficult to see how a reshuffle could have helped Hatoyama, and it is difficult to see how a dramatic overhaul of the cabinet will help Kan.

Obviously Hirano Hirofumi, appointed largely as a Hatoyama confidante, will be out as chief cabinet secretary — he might be the one cabinet member truly deserving of the ax. Otherwise it is far from obvious who should be replaced. And I for one hope that Okada stays on as foreign minister.

UPDATE: After initial indications that the new cabinet would form today, it appears that Kan — with Sengoku Yoshito emerging as the likely chief cabinet secretary — will not form a cabinet before Tuesday. That may be for the best, but I will still be surprised if it looks drastically different from the Hatoyama cabinet.

Talking about Kan on CNBC

The virtues of Kan

Kan Naoto, Hatoyama Yukio's second finance minister, was the first DPJ member to declare his intention to run in the party election scheduled for Friday — and it seems unlikely, for reasons outlined by Michael Cucek here, that he will be denied the job.

What would be the significance of Kan's replacing Hatoyama?

I think that what I wrote when Kan became finance minister is even more apropos for Kan's becoming prime minister: "While it is common to point to DPJ politicians like Hatoyama and Ozawa and conclude that the DPJ is a pale imitation of the LDP, Kan's career shows that the DPJ's victory has brought new politicians with different backgrounds and different concerns from LDP politicians to the fore." Should Kan become prime minister, he will be the first prime minister since Koizumi not directly related (son or grandson) to another prime minister, and the first non-hereditary politician since Mori. He began his career toiling on the margins of Japan's reformist left, a follower of Eda Saburō, who tried and failed to modernize the JSP, and lost three elections before finally winning a seat as a representative of the Social Democratic Federation (SDF) in 1980.

Indeed, the political origins of Hatoyama and Kan could not be more different. Not only is Hatoyama the scion of a political dynasty, he seemingly entered politics on a whim — the family thought his brother Kunio would be the politician while Yukio would pursue his academic career. Kan, however, became involved in politics purely out of his convictions, starting as a student activist. Had Kan been interested in pursuing personal ambitions, he could have found better ways to do it than by following a marginal center-left politician.

Accordingly, unlike Hatoyama, he has a core set of beliefs that may in fact be best called social democratic or liberal in the American sense. He is egalitarian, a believer in transparent, clean, and accountable government. He became famous as minister of health during the mid-1990s for taking on his ministry's bureaucrats over an AIDS-tainted blood scandal, which may be an easy position for a politician to take (especially during the "bureaucrat-bashing" 1990s), but nevertheless conformed with the focus of Kan's career in politics. During the months leading up to the election, he became the DPJ's point man on administrative reform, a role he continued to play when the Hatoyama government formed. 

Perhaps it would not be inappropriate to say that his beliefs are something like Eda's, who in 1962 stressed that he wanted Japan to have "the American standard of living, Soviet levels of social protection, British parliamentary democracy, and Japanese pacifism." While these days one would not think to look to the Soviet Union as a model for social protection — Scandinavia would probably be the model today — this mix of policies might best capture Kan's politics, perhaps with the exception of Japanese-style pacifism (more on this momentarily). He certainly made clear last summer that he believes strongly in the necessity of Westminster-style parliamentary democracy in Japan, and as finance minister

Kan has said fairly little over the years about foreign policy and Japan's relations with the US and its neighbors. To the extent that he has talked about foreign policy, for instance on previous occasions that he led the DPJ, his views have been virtually at the center in terms of the spectrum of opinion within the DPJ. He as acknowledged the importance of the alliance and the US forward presence on multiple occasions, but when Koizumi was prime minister, he criticized the government for its slavish subservience to the US and for not balancing the US-Japan relationship with the other "pillars" of Japanese foreign policy, multilateral cooperation at the UN and bilateral and multilateral relations within Asia. He isn't exactly dovish, but he's no hawk either. Accordingly, I would not be surprised if Okada Katsuya either stays on as foreign minister or continues to play an important foreign policy role in another capacity.

However, the details of Kan's policy beliefs may be less important at this juncture than his biography. Given that he is a conviction politician, given his ministerial experience (something that Hatoyama lacked), and given his emphasis on open politics, Kan may be the right man to restore public trust in the DPJ-led government and lead his party to a respectable showing in next month's upper house election. The central task for the Hatoyama government was the restore public faith in government after years of LDP misrule. The central task for a Kan government would be to restore public faith in government after years of LDP misrule — and nine months of Hatoyama misrule. If the public does not trust the government, it is difficult to see how Japan will escape its economic stagnation. As I've said before, if the public cannot trust the government to be honest about its intentions and forthright about how public money is spent, no government will be in a position to ask for something like a consumption tax increase.

Kan certainly has the right biography for this purpose — and having been a cabinet minister before, he should be more capable of managing the cabinet than Hatoyama was, avoiding the self-inflicted wounds that ultimately destroyed the Hatoyama government.

What about that other task facing the new government, the Futenma problem? Kan has said little about it, refusing, it seems, to stray beyond his brief as finance minister. However, it seems unlikely that Kan — or any other DPJ politician — will rush to embrace a plan that is now being written off as unimplementable. Perhaps he will have the backbone to scrap the thing entirely. One way or another, the demise of Hatoyama following his shift on Futenma and the collapse of the coalition with the SDPJ has undoubtedly poisoned the issue. If the Obama administration were smart, it might learn from the mistakes it made last year when the Hatoyama government took office and give the new government time to find its bearings and plan a course of action, whether that course of action is trying to soften up public opinion on some relocation option within Okinawa or searching again for an option outside of Okinawa. If the US is actually serious about resolving the problem, it is not enough to say that Japanese public opinion is simply a problem for the Japanese government to deal with: to insist once again on a plan that cannot win the support of the Japanese public and expect another prime minister to fall on his sword for it would be sheer folly.

Ultimately if Kan is the next prime minister and if the Ozawa regime is truly uprooted, the DPJ will have an opportunity to reclaim some of the goodwill that has been squandered since September.

(Image courtesy of Curzon from Mutantfrog/The Coming Anarchy, based on a whimsical Facebook status update of mine from earlier today)

Ennis on the resignation

Peter Ennis, formerly of The Oriental Economist, has picked the perfect time to start blogging.

His take on the resignation can be found here.

Discussing the resignation

I will be on Asia Squawkbox on CNBC Asia at 8:30am Japan time Thursday to discuss the implications of the resignation.

Regime change?

It seems that in addition to Hatoyama's resigning from the premiership, Ozawa Ichirō will resign as secretary-general of the DPJ.

If Ozawa does resign — together with his lieutenants in various leadership positions within the DPJ with him — and actually manages to retire from politics and not try to run the party from the shadows, the twin resignations of Hatoyama and Ozawa may actually provide the DPJ with an opportunity to reclaim the hope that accompanied the party's victory last year.

That Hatoyama and Ozawa were at the head of the new regime when the DPJ took power was a bit strange. Of course they were among the party's most senior and experienced politicians. There really was no alternative, and no other candidate — aside from Okada — was capable of challenging last year's passing of the torch from Ozawa and Hatoyama (thanks to Maehara Seiji's disastrous tenure as party leader). But these two hereditary politicians whose careers began in the LDP wound up at the head of a parliamentary majority composed largely of newcomers to politics, very few of whom had relatives in politics. The DPJ's promise was less in its policy program, aside from its institutional reforms, than in the new blood it injected into the Japanese political system. But between their corruption scandals and the fact that no one could tell just what Ozawa's role was in policymaking, the DPJ diarchy managed to squander its new majority.

More than Hatoyama's, Ozawa's departure provides the DPJ with a chance to reclaim some of the energy. It will enable a party leadership to abandon Ozawa's courtship of fading interest groups and focus once again on speaking to floating voters. Inevitably the next secretary-general will not overshadow the prime minister, meaning that the secretary-general might actually help the prime minister sell his policies to the public while corralling the party's backbenchers.

At the same time, however, the new secretary-general will not inspire the same fear in the party's backbenchers. The result could be more give and take between the leadership and the rank-and-file — or it could be complete chaos.

Ultimately it will depend on the prime minister, whether Kan, Okada, or someone else entirely. With decisive leadership at the top the policymaking system the DPJ tried to put in place when it took power might work better than it did under Hatoyama.

Hatoyama departs

It appears that the inevitable has happened: NHK reports that Prime Minister Hatoyama Yukio has informed the DPJ leadership that he intends to step down.

Hatoyama, of course, has no one to blame but himself. In the nine months since he took office, he has failed as a manager of his cabinet, as the head of the DPJ, and as the leader of his country. Unable to make up his mind, he groped from blunder to blunder, before finally making a controversial decision on Futenma without doing any of the work to convince a skeptical public of its merits.

The good news is that his successor should, to a certain extent, have an opportunity to press the reset button, seeing just how much dissatisfaction with the prime minister was behind growing dissatisfaction with the DPJ. The bad news is that Hatoyama will leave his successor the poison pill of the latest agreement over Futenma, which the public overwhelmingly opposes and which appears to be more or less unimplementable, and with an uphill battle for the House of Councillors next month. And that's without mentioning lingering problems concerning the long-term future of the Japanese economy.

And so the US gets its wish: the "loopy" Hatoyama is gone, having overstayed his welcome and squandered whatever goodwill last year's election earned him. His successor — whoever he is (given that in all likelihood the DPJ will plan for a smooth transition to Kan or Okada) — will have to set to work immediately fixing the DPJ's standing with the public, starting with yet another attempt to fix Futenma in a way that satisfies Okinawans and the general public.  He'll also have to do what Hatoyama failed to do: make Ozawa serve the prime minister, another failure that ultimately doomed Hatoyama. The US, meanwhile, would be wise to give the new prime minister plenty of space this time around.