The LDP race begins

The race to succeed Aso Taro as LDP president begins today, with three candidates vying for the unenviable task of fixing a broken Liberal Democratic Party.

Surprisingly the race includes none of the candidates who Aso defeated to win the job last year: Ishiba Shigeru, despite being perhaps the most enthusiastic of the potential candidates, backed down earlier this week as Tanigaki Sadakazu gathered support from party elders.

Tanigaki, at sixty-four the oldest candidate in the race, faces two forty-six-year-old rivals, Kono Taro and Nishimura Yasutoshi. Kono is the articulate, intelligent, American-educated son of now-retired LDP elder statesman Kono Yohei; Nishimura is a three-term representative from Hyogo and former METI official. Neither of the younger candidates has ministerial experience, although Kono is renown for his policy expertise and has been parliamentary vice ministery of justice as well as chairman of the lower house foreign affairs committee (and has served five terms to Nishimura's three). Nishimura meanwhile is a former Machimura faction member, but half of his endorsements came from Machimura faction members.

As a result the race is not surprisingly being cast as a clash of generations: Tanigaki, not necessarily old but older and backed by the party's old guard, against Kono, scion of an old LDP family but brimming with policy ideas and reformist zeal, with Nishimura unlikely to cut into Kono's vote. For his part Tanigaki is trying to bridge generations by presenting himself as the most viable reform candidate, not the cat's paw of the factions.

The race is more unpredictable than it appeared after Tanigaki entered the race with the backing of senior party leaders, because the race will be decided not by the party's 199 Diet members but by the 300 votes wielded by prefectural chapters. A Yomiuri poll found Tanigaki and Kono running virtually even, with Tanigaki leading Kono 34% to 33%, with Nishmura receiving the support of a mere 2%. (Yamamoto Ichita, a Kono supporter, is heartened by these numbers.)

Were Kono to win, it would be a sign that LDP supporters are ready for the party to move in a new direction, even if the party's Diet members are more reluctant to do so. But electing Kono is also risky. While he would no doubt be more enthusiastic about reorganizing the party — for example along the lines proposed by the party revival council, which most notably called for the end of factions despite having said it would soften its position on the factions — he would probably have a harder time than Tanigaki getting party elders to commit to even modest reforms. He may be a more formidable challenger for the DPJ on policy terms, given Kono's policy expertise and seeing as how Tanigaki may be closest to the DPJ in terms of policy preferences. But it is difficult to see how Kono could succeed in remaking a party that after the election is top heavy in terms of the ratio of old to young. It would be all too easy party elders to resist Kono when it comes to fundamental reform. The election of Kono would bear at least superficial resemblance to the DPJ's election of Maehara Seiji following the disastrous 2005 election — resulting in Maehara's equally disastrous stint as party leader. Kono would not necessarily make the same political errors that doomed Maehara, but he would likely face even more daunting obstacles than Maehara faced.

A majority of the public expects that the LDP will be able to fix itself and remain the second pole in a two-party system. The problem in the party leadership election is that while Kono's election would have greater symbolism as a break with the past (despite his lineage), Tanigaki might be more capable of moving the LDP even modestly in a new direction. Nevertheless, LDP members have two good choices before them, and both represent a step forward for a party that in recent years has been characterized mostly by its distance from the concerns of the Japanese people.

Tax rebellion averted?

The LDP appears to have forged a truce in the incipient war over writing the timing of a consumption tax increase into law.

In the best LDP tradition, the LDP leadership has decided to muddle the message of the bill. The LDP has produced a draft with language that calls for implementing "essential legislative measures by 2011" for fundamental tax reform including the consumption tax, but also adds that the precise timing of said measures will depend on "the state of the process of economic recovery and an examination of trends in the global economy." The draft also calls for a two-stage increase of the consumption tax. Finally, it included language designed to appease the potential rebels by calling for appropriate measures to promote administrative reform and eliminate wasteful spending.

The LDP leadership hopes to secure a cabinet decision on the draft by Friday.

Amazingly, these minor edits appear to be sufficient to quell the discontent among the LDP's reformists. Said Nakagawa Hidenao in response to the additions: "The supplementary provisions cannot be said to be a tax increase bill; they are nothing more than instructional provisions." His fellow malcontent, Yamamoto Ichita, is less impressed with the compromise.

"Anywhere you look in the world," he writes, "there are no governments saying things like, 'Depending on the situation we will raise taxes after three years.'" He believes that far from being "merely instructional," the plan will appear to the public as a solid commitment to a tax increase, a tax increase that Mr. Yamamoto does not deny may one day be necessary but argues that for now is political and economic folly to discuss.

The compromise may be a way for the tax hikers to create a foothold; if the LDP somehow survives this year's general election and if the reformists are diminished by the returns, they now have a basis for going forward with a firmer commitment. Instructions now, substance later.

For the same reason, I wonder whether the Japanese press is declaring a truce in the tax rebellion prematurely. Mr. Yamamoto's response does not sound like someone who is content with the party's compromise — and I'm sure he's not alone. It may be that the rest of the reformists do not share Mr. Nakagawa's desire to accommodate the party.

Meanwhile, I think I am with Kono Taro on this debate. At his blog, Mr. Kono muses on the growing severity of the downturn and wonders why the LDP is wasting its time on whether to hike the consumption tax in 2011 — a time at which, he notes, the LDP may not even be the ruling party — when sales are falling, company debt is growing, credit is freezing, and manufacturing is shrieking to a halt. He assumes that another stimulus package will be unavoidable, and that the LDP should be doing all it can to stop the bleeding instead of debating whether to raise taxes once the economy recovers.

Fukuda, a glutton for punishment

On Tuesday, at the same press conference where he complained about the stress of the job, Prime Minister Fukuda made a statement guaranteed to ensure that his stress will increase inexorably.

"Since [the consumption tax rate] is only 5%, we are burdened with a budget deficit. We must decide — this is an extremely important period. If we think about the aging society, the road is narrowing." He compared Japan's consumption tax rate unfavorably with European consumption tax rates, but admitted that he didn't know how the public would respond to a consumption tax hike. [This story was front page news in Asahi.] The idea is that the LDP and the Diet will debate comprehensive tax reform in the fall.

Yamamoto Ichita seems to have a better idea of how the public will respond — and finds it intolerable that some LDP members are willing to proceed with the tax hike even if it means an LDP defeat.

"In my thirteen years in politics, I have never met a politician 'resolved to discard his Diet member's badge at any time."

The prime minister has now opened the flood gates on a debate between tax-hikers (many of whom happen to be zoku giin) and budget-cutters, the latter of which want to government to trim as much waste as possible from the budget before raising taxes. (Nakagawa Hidenao is probably the leading advocate of this school of thought, as in this post in response to the prime minister's remarks.) Naturally the zoku giin don't want to see "wasteful spending" trimmed — because it's not wasteful to them.

In short, the prime minister will be attempting a tricky maneuver in the autumn, dealing a blow to the road tribesmen by getting his road construction plan written into law and then wheeling about to use a victory on the road construction (read: budget trimming) front to get a consumption tax hike. He will do all of this while dealing with a party full of backbenchers terrified that they will lose their seats in the next election. In order to execute this pirouette successfully, Mr. Fukuda has quickly assembled a project team on eliminating waste, headed by Sonoda Hiroyuki, to " review [spending] thoroughly with an eye to reducing waste to zero." According to Shukan Bunjun, the project team is staffed with abrasive reformist Diet members like Kono Taro who are bound to use the project team to antagonize bureaucrats and zoku giin alike as they review spending in four areas (public works, social security, energy and agriculture, and culture and technology) in search of savings. (An additional working group will focus on spending in another twelve ministries and agencies, including the ministries of foreign affairs and defense.) I wish Mr. Kono and company success in their endeavor, but I cannot help but wonder whether this project team is too little, too late.

It sounds like a recipe for catastrophic defeat, especially when discontent over North Korea is thrown into the mix. It is becoming less and less likely that Mr. Fukuda will survive the year. Moreover, by introducing the consumption tax question, Mr. Fukuda is poisoning the well for the post-Fukuda era, making it difficult for tax-hiker Yosano Kaoru to win election as his replacement.

Mr. Fukuda has not only triggered a fierce debate within the LDP; he has also given encouragement to the DPJ, which is desperately in need of LDP mistakes (just as the LDP is in desperate need of DPJ mistakes — I leave it to you to determine which needs the other's mistakes more). Ozawa Ichiro jumped on the prime minister's remarks, arguing along lines similar to Mr. Nakagawa's that wasteful spending must be eliminated first before having a debate about tax reform.

Bait and switch

The HR passed the road construction bill a second time on Tuesday afternoon, as scheduled. Despite rumors to the contrary, there was no rebellion. Kono Taro and his comrades voted with the government, in the process illustrating why the much-anticipated political realignment has yet to occur: for all the discontent voiced by backbenchers about the leadership of both the LDP and the DPJ, they remain reluctant to bear the risks associated with bucking the party leadership and possibly leaving the party.

Mr. Kono and other reformists are still threatening to fight for the party to adopt the prime minister's plan to phase out the road construction fund from 2009, but after caving on the road construction plan Tuesday, will their concerns be taken seriously in the coming months? As Mainichi reports, despite remaining silent in the face of the cabinet decision supporting Mr. Fukuda's plan, the road tribe remains ready to fight to preserve its privileges. The road tribesmen will instead focus their efforts on the year-end budget proposal, a sound strategy considering that Mr. Fukuda will likely be gone by then, leaving the reformists to fight on alone.

Even with Mr. Fukuda as premier the tribesmen have important allies within the party for their campaign to derail the reform: local and prefectural politicians, who will undoubtedly remind their patrons in Tokyo that their communities need the road fund and suggest that if Mr. Fukuda's plan goes forward, they cannot guarantee that the LDP will get favorable returns in the next general election. Whether such a threat is credible is not the issue — if the LDP leadership becomes convinced that ending the special fund truly alienates the party from its supposed base, that will be enough to ensure that the reform plan gets watered down to the point of irrelevance. The head of the national mayors association has already criticized the plan, no doubt the first of many such comments to come from local politicians.

In short, the LDP, already concerned that its rural base could desert the party in a general election, will not follow through on Mr. Fukuda's proposal, a classic bait and switch.

And so the LDP's death throes will continue, as the LDP can no longer rely on the two methods that had extended its life in the past: opportunistic policy shifts (like this, for example) and "divide-and-rule." (These arguments are made by Ito Atsuo in a Chuo Koron article to which I linked above.) Regarding the former, not only has the LDP calcified ideologically, but its reformist members, who want to change the party's policies, find it nearly impossible to overcome the opposition of older members who desperately cling to their remaining privileges. What do the latter have to lose in resisting reform tooth-and-nail? The party is in no position to punish them, Mr. Koizumi's 2005 purge notwithstanding. Mr. Koizumi's purge of postal rebels — so objectionable to many LDP members, judging by the return of most of the rebels to the LDP — was clearly an aberration.

As for the latter, the LDP's bid to divide and co-opt the opposition by offering a grand coalition to the DPJ clearly failed and if anything united the DPJ in its opposition to the government. This scheme may have temporarily created turmoil within the DPJ by intensifying dissatisfaction with Ozawa Ichiro's leadership, but Mr. Ozawa appears to have quelled most of the resistance to his leadership. The LDP continues to hope that Mr. Ozawa will face a serious challenge in the September party leadership election but the threat to Mr. Ozawa may be overstated. A reformist like Maehara Seiji or Okada Katsuya, both former party leaders, may ultimately stand against Mr. Ozawa, but it is unlikely that the bulk of the party will abandon Mr. Ozawa for either man.

Meanwhile, the depth of the LDP's desperation is revealed in its hope for an incapacitated DPJ.

The imperial guard coalesces

It's been less than a week since Prime Minister Fukuda made his eleventh hour appeal to the DPJ to cooperate in the gasoline tax/road construction dispute, discarding much of the road tribe's program in the process and leading Kono Taro to remark (noted here) that the young reformers had gone "from opposition forces to imperial guards."

Now Mr. Kono, along with Tanahashi Yasufumi and Mizuno Kenichi from the LDP and Komeito's Ueda Isamu, has created a study group with the horribly clumsy name "Club to Support the Fukuda Plan and Move the Road Construction Fund into the General Fund." Thirty-seven Diet members reportedly participated in the preparatory meeting. At a press conference Wednesday Mr. Kono warned, "If it [the road maintenance fund special law revised bill] passes the House of Representatives again, there will be rebellion!"

According to Yamamoto Ichita, not all participants are as brazen as Mr. Kono. He notes that he was surprised to hear that some protested including mention of the end of the special fund into the club's name, so as to not exacerbate internal conflict within the LDP.

With that in mind, it's hard to take Mr. Kono entirely seriously when he speaks of rebellion. That said, it does look like the LDP's young reformers may finally be stepping out from the shadow of Koizumi Junichiro and speaking up for themselves. The fight pits them against the party's elders, some of whom think that the government must pass the tax and road construction bills again as soon as possible. The reformers may be flying Mr. Fukuda's standard, but they will also be pressuring him not to revert from the proposal made last week. The mood within the LDP's leadership suggests that Mr. Fukuda will be under pressure to forgo efforts to seek agreement with the DPJ, meaning that the LDP may very well batten down the hatches, ride out the April confusion, and push ahead to pass first the tax, and then, a couple weeks later, the road construction plan again, whatever the consequences for the party's incumbents. Could it? Will it?

I remain convinced that Mr. Fukuda is on the brink of a fight for the survival of his government.