"It's the institutions" (Noah Smith)

Hi! First, of course, to introduce myself. My name is Noah Smith, and I'm an economics PhD student at the University of Michigan in Ann Arbor (specialty: urban economics and macroeconomics). Between college and graduate school I lived in Osaka, Japan for 2.5 years, from 2003-2006, where I worked as an editor and also a research assistant at Osaka University in Suita. I've been interested in Japanese politics, economics, and society for a while now, so I was happy when Tobias asked me to be a guest contributor.

Tobias's primary focus is on Japan's electoral politics and foreign policy, two areas about which I know relatively little. Like Tobias and many here, I'm eagerly awaiting the shape of a Japanese political "realignment" that I think must be coming soon; the pressure is building inexorably. But I think there's a big question that should be on our minds: If and when that realignment occurs, how will the victors — the DPJ or some new party or coalition — use their mandate to change Japan?

That is the question I want to try to answer.

True political revolutions bring not just a change in the style of management, but reforms to the institutions that shape the day-to-day workings of a society. Economists have long studied the importance of institutions in developing countries (see Dani Rodrik and Daron Acemoglu for example), but I see no reason why they should not be of crucial importance in rich countries as well. If we look at Japan's history, we find that its periods of greatest advancement — the Meiji and Taisho periods, in particular — involved big, sweeping changes to the institutions that governed Japan's economy and society. Those changes befell not just the institutions most commonly studied by economists — the electoral system, courts, public schools, and the bureaucracy — but social institutions like religions and the family. And, of course, it included the military, an institution whose importance would grow to encompass nearly all of Japanese life during the 1930s, only to vanish almost completely after World War II.

Today, Japan faces the problems of the twenty-first century with institutions that, in large part, were developed in the nineteenth and early and mid twentieth centuries. As challenges shift, institutions must keep up — but, as economists often note, institutions are "sticky." They don't like to change. Which is why the coming post-LDP political realignment is such an important moment: it will give Japan's leaders what is probably a once-in-a-generation opportunity to revamp many of Japan's institutions.

How should Japan's institutions change?

Effective institutions are a mix of what worked in the past and what seems wise for the future. Japan needs a political system that gives people more confidence in the leaders they elect and the parties to which those leaders belong. It needs a court system that is more participatory, and that elevates the rule of law above informal patronage- and status-based relationships. It needs a bureaucracy less corrupted by conflicts of interest. It needs universities that are more independently funded and more focused on research and undergraduate education. It needs religious organizations to take more active roles in building communities and providing social services like child care. It needs families that have enough time to spend together, where fathers are not separated from their wives and children by the demands of work.

If the party and leaders who take power after Japan's "realignment" can make these changes, I think Japan will be one of the world's leading nations in the twenty-first century, as it was in the twentieth.

Of course, that's just my opinion and my guess. But in the end, opinions and guesses are the driving force behind political change. I hope that mine, combined with what modest expertise I possess, can add to the discussion here at Observing Japan.

- Noah Smith

A new contributor

I have decided to introduce a guest contributor to Observing Japan.

Noah Smith is a Ph.D. student in economics at the University of Michigan, where he specializes in urban economics and macroeconomics. He has previously worked as an editor and research assistant in the economics department at Osaka University.

In light of the global financial crisis, I think his expertise will be a welcome contribution to the discussion at this blog.

Obama's Asia team takes shape

The Japanese establishment is undoubtedly breathing a sigh of relief following the announcement of the Obama administration's prospective Asia policy team, including the ambassador to Japan.

Not surprisingly, Kurt Campbell, reportedly close to Hillary Clinton, will succeed Christopher Hill as the assistant secretary of state for East Asia and the Pacific. Marine General Wallace Gregson (ret.), who retired as the commander of US Marines in the Pacific, will succeed James Shinn for Asia affairs at the Pentagon. Jeffrey Bader, a China specialist at the Brookings Institution and a foreign policy adviser for the Obama campaign, will be senior director for Asia at the National Security Council. And in perhaps the most noteworthy pick, Harvard Professor Joseph Nye will head to Tokyo to serve as ambassador.

Worried Japanese elites can take comfort in this lineup. Change, it seems, is for matters other than Asia policy.

While some press reports have called attention to Professor Nye's ideas about soft power, it is worth asking whether the Joseph Nye being sent to Tokyo is the "soft power" Joseph Nye or the Joseph Nye who was the architect of the 1996 version of the US-Japan alliance, the prime mover in the Democratic Party in the shift to remake the alliance into a more robust security partnership. Dr. Campbell, his deputy in the 1990s, may be an even more enthusiastic proponent of the Armitage-Nye vision of the alliance than Professor Nye himself. (Dr. Campbell and Michael Green, onetime colleagues at CSIS, have for a time been something of a bipartisan duo on the alliance.) As Dr. Campbell told me when I interviewed him for my master's thesis (2006), "What we’ve had over the past five years is a high level of engagement between the US and Japan that is unprecedented: a high level of engagement on a set of strategic issues in terms of bases, out of area activities and the like that is truly unprecedented, and extraordinarily impressive and it will be hard to match in the future."

So the Campbell-Nye team — with Professor Nye reporting to Dr. Campbell this time around — will undoubtedly reassure Japan's elites that their voices will still be heard in Washington. General Gregson, meanwhile, as commander of Marines in Okinawa and then the Pacific as a whole, is intimately familiar with issues related to the realignment of US forces in Japan and will ensure active leadership on the issue from the Pentagon.

I wonder, however, whether this team will be capable of moving the alliance in the direction I think it should go. Both Professor Nye and Dr. Campbell may ultimately be too connected with the status quo to push for a dramatic departure from the Bush administration's approach.

That said, I'm not completely without hope. I think even from Tokyo Professor Nye will be the central player in the debate over the alliance's future. While he played a leading role in building the 1996 alliance, his views are far more subtle than the China hawks who have made use of the framework he developed in the mid-1990s. Professor Nye — with Robert Keohane a major proponent of the idea of mutual interdependence — argued that the alliance could not simply be about containing China, that while strengthening the alliance was part of the equation, the decisions made by the allies would influence the character of China's rise. That is even more true today. As ambassador, Professor Nye could be instrumental in moving towards a bilateral approach to China that transcends security matters. He is trusted in Tokyo, and if he learns to listen more than his predecessor, his appointment could be a critical turning point for the alliance.

Given the likelihood that Professor Nye could be dealing with a DPJ-led government from early in his ambassadorship, I hope his first goal is building a new relationship with the leading opposition party. Jun Okumura suggests that the Obama administration will put pressure on the DPJ to change what he calls its "fantasy of a foreign and national security policy." I think Okumura is being a bit unfair to the DPJ. I have criticized Ozawa Ichiro in the past for his loopy foreign policy ideas (see this post), but I also think that one can go too far in criticizing the DPJ based on the outlandish statements of one DPJ politician or another. Insofar as we can tell, a DPJ government's foreign policy would involve a bit more assertiveness on the realignment question — the DPJ has indicated that it wants to revise the 2006 roadmap and the DPJ is reluctant to commit Japanese funds to Guam construction, certainly not without more assurances that Japanese money will be used properly — and greater focus on working with China and other Asian powers on regional cooperation. A DPJ-led government may be reluctant to commit the JSDF to combat missions abroad, suggesting a retreat from the globalization of the alliance during the "golden age." But is this such a bad thing? Have Japan's symbolic contributions abroad done anything more than provide cover for the Bush administration, while antagonizing segments of the Japanese public (as seen in Mr. Morita's book)? The US needs to work on rebuilding the alliance so that it rests on more than a narrow partnership between Washington and Tokyo elites. Not acting imperious to the DPJ is a good way to start building the new partnership. (For more on the DPJ's foreign policy, see this post.)

To sum up, I think there are reasons to hope that the Obama Asia team will introduce some change to an alliance badly in need of it. They are certainly familiar enough with Japanese concerns, but hopefully their familiarity will enable them to work forthrightly with Japanese officials of whatever party to find new avenues of cooperation that recognize Japan's limitations instead issuing demands to Japan's government. After the Bush administration sided with Japanese elites while alienating the Japanese public, the Obama administration has an opportunity to repair the damage and build a new relationship.

UPDATE: I may be premature in considering Professor Nye as ambassador. However, perhaps this post makes the case for why he should take the job.

Watanabe to LDP: I'm outta here

It appears that Watanabe Yoshimi is nearing a decision regarding his future in the LDP. With the second stimulus package scheduled to come to a vote on January 13, Mr. Watanabe could leave the LDP in a matter of days.

Mr. Watanabe appears to be working hard to exacerbate tensions with the LDP. Not surprisingly, the prime minister rejected his demands regarding the timing of a general election and administrative reform, with the LDP mocking them as reflective of Mr. Watanabe's "heroic delusions." Not that it was ever likely that the prime minister would cave to the demands of a discontent backbencher.

Mr. Watanabe has also been going after the prime minister on the question of administrative reform. He expressed his dissatisfaction with Mr. Aso's response to a question in Thursday's Diet proceedings, suggesting that he has "given up hope" in the possibility of Mr. Aso's eliminating the practice of amakudari. Mr. Watanabe plans to question Mr. Aso directly in Diet proceedings on Friday on the same matter, which appears like a prelude to a vote by Mr. Watanabe against the second stimulus package on Tuesday.

All of this is to be expected. Mr. Watanabe has made it nearly impossible to remain in the party and have any measure of influence: better a flight to the wilderness than internal exile. His exodus may, however, be a lonely one. None of his fellow reformists have stood up to be counted with him. For all their opposition, none has publicly stated his or her intention vote against the stimulus package. The LDP is taking seriously the threat of rebellion on Tuesday — Asahi reports that the party is trying to get every member to commit to voting for the supplemental budget, along with trying to sell the plan to a wary public — but it seems unlikely that Mr. Watanabe will have company if he decides to oppose the bill.

For an example of the attitude of Mr. Watanabe's fellow reformists, see this blog post by first-termer Yamauchi Koichi, in which Mr. Yamauchi expresses his agreement with Mr. Watanabe's policy ideas, but indicates that he will not take the step of leaving the party, preferring instead to continue to work on improving the LDP from within. This attitude seems to be shared by Yamamoto Ichita, who at the same time that Mr. Watanabe has drifted further into rebellion, has created yet another study group opposing some dimension of the government's agenda, in this case the plan to raise the consumption tax in three years' time. Mr. Yamauchi is one of eight members of the new study group. For all the fanfare that surrounds some of these groups, I'm not certain that they accomplish anything, and as Mr. Watanabe is learning, they apparently do little to build solidarity among ideological compatriots. (Indeed, in the midst of all this, Mr. Watanabe just joined a study group with former Koizumi lieutenant Takebe Tsutomu.)

So the question remains then as to what will happen when he leaves the party. The DPJ is reportedly reaching out to Mr. Watanabe, but whether he will take the opposition party's hand is unknown. Presumably he won't do so without some position of prominence being given in return.

The result is that if and when Mr. Watanabe votes against the government's stimulus package Tuesday, the Japanese political system will step into the unknown. Mr. Watanabe's leaving could be the first domino of a political realignment or it could be a futile, isolated step that marks the end of Mr. Watanabe's career.

Recommended book: Curing Japan's America Addiction, Morita Minoru

For Morita Minoru, a longtime political commentator, something is rotten in the state of Japan.

"Japanese politicians," he writes, "have made serving the American government a priority when they should be focused on serving the Japanese people. Japan has lost its sovereignty to the United States. Our nation has been invaded and occupied by invisible forces."

The above comes from Mr. Morita's first English-language publication, Curing Japan's America Addiction, a beautifully designed book published by Chin Music Press, a small Seattle-based press that "[believes] in giving voice to writers who have new ideas, new thoughts."

In what is a fundamentally conservative book — contrary to what co-translator Bruce Rutledge calls "the left's response to...Shintaro Ishihara's The Japan That Can Say No" — Mr. Morita laments the demise of postwar Japan at the hands of Japanese "neo-conservatives" like Koizumi Junichiro, Abe Shinzo, and their allies in the Japanese media. He believes that the Japanese establishment, including politicians, bureaucrats, and journalists, have betrayed their country by placing the interests of the United States before the interests of the Japanese people. Mr. Morita's attack on Mr. Koizumi is not a left-wing attack. Mr. Morita is in fact an unabashed supporter of the LDP's old conservative mainstream, an argument he makes at length in his 2007 book 自民党の終焉 (The end of the LDP). He believes that the old conservative mainstream — the "true conservatism," he calls it — created an egalitarian, middle-class society, and prevented Japan from remilitarizing while maintaining a healthy distance from the U.S.

For Mr. Morita, however, over the past three decades the LDP has gradually been remade in the image of the U.S. Republican Party, which in turn has resulted in the introduction of neo-liberal reforms that have served to create growing income disparities in Japan, destroy public services, and channel Japan's wealth to the U.S. While he criticizes Nakasone Yasuhiro, prime minister from 1982-1987, for moving Japan down the path of excessive dependence on the US, he reserves the bulk of his anger for Mr. Koizumi, perhaps because Mr. Koizumi has been blanketed with praise by the domestic and foreign press.

There is much to recommend in Mr. Morita's book. He writes with genuine feeling about the decay of Japan's rural regions and the growing income gaps. His critique of Japanese foreign policy is even more effective. He is particulary incensed by the effort by Japanese and American conservatives to provoke China and drum up confrontation with North Korea: as in the case of economic reforms, Mr. Morita believes that the hawkish foreign policies of Prime Ministers Nakasone, Koizumi, and Abe were more in the interests of American conservatives than the Japanese public. He writes: "The US-Japan alliance is strengthened as tensions between Japan and China rise. If the Asian region becomes unstable, American influence rises." He also deftly explores the corrosive impact of the alliance on Japanese domestic politics, chronicling how the LDP used threats to withdraw subsidies to Iwakuni to influence Iwakuni's 2008 mayoral election (discussed in this post). Mr. Morita's arguments are all the more powerful considering that his might be the only such book that has been translated into English.

But I cannot recommend this book without some reservations. This book is ultimately undone by Mr. Morita's anger at the state of his nation. Much like the American left during the darkest days of the Bush administration was desperate to pin every failing on George W. Bush, so too is Mr. Morita keen to blame Mr. Koizumi and, to a lesser extent, Mr. Abe for the problems facing Japan today. In this he overreaches, giving Mr. Koizumi far too much credit for transforming Japan. Clearly the structural changes that horrify Mr. Morita did not emerge overnight under Mr. Koizumi's watch. Income inequality may be more a function of Japan's demographics than any reforms implemented by Mr. Koizumi at Washington's behest. The education system was broken long before Mr. Abe made patriotic education a priority. The Japanese economy has been impacted more by companies departing Japanese shores than by successful regulatory reform (although as Len Schoppa argues, it is not entirely clear that the former is a result of the lack of the latter). Indeed, Mr. Morita completely skips over the post-bubble decade in order to lambaste Mr. Koizumi for his treachery.

This is a major failing of Mr. Morita's account of contemporary Japan. In his desire to defend the postwar system from its neo-conservative enemies, Mr. Morita blithely ignores the question of whether the postwar system was still intact by the time Mr. Koizumi took office in 2001. Arguably Mr. Koizumi — far from acting as an American stooge, implementing a US wishlist of regulatory reforms — was doing the best he could to rescue something from the wreakage. One could argue that Mr. Koizumi was mistaken in his priorities as he tried to build a new system, but Mr. Morita unfairly insists that Mr. Koizumi was not even acting in good faith in pushing for reform without sanctuary.

It is in this sense that Mr. Morita's conservatism comes through. Mr. Morita, for example, explicitly sides with the People's New Party in their fight against postal privatization, arguing that postal privatization has deprived small villages of service while leaving the privatized postal system ripe for the picking by American corporations. (How exactly US corporations would get at the newly created postal bank when an American hedge fund could not even manage to take over a sauce manufacturer is beyond me.) Mr. Morita ignores the role played by small post offices in perpetuating LDP rule and therefore stifling Japanese democracy, which Mr. Morita desperately wants to see strengthened. In this sense he wants to see the old LDP order restored; he supports Ozawa Ichiro's Democratic Party of Japan — Jiminto no shuen is a long argument on behalf of a change of ruling party — because he believes that it is the proper heir of the LDP's old conservative mainstream, now that the LDP has been "republicanized."

This is ultimately my problem with Mr. Morita. Despite his passionate account of the problems of contemporary Japan, he is woefully short on ideas for how to make Japan better. Like a good conservative, Mr. Morita's answers often involve appeals to the postwar past. But as admirable as the achievements of postwar Japan were, it is quixotic to long for their return. Indeed, was the golden age really a golden age? Japan may have been more equal and Japanese workers more secure, but as Schoppa argues, this social safety net was the result of the state's offloading welfare roles to companies and wives.Were rural areas that much better off, or were they facing the beginning of a long decline that continues to the present day?

It is little good looking back to postwar era for guidance. The postwar system is out of place in a globalized world, in which companies can move offshore or obtain capital from abroad with considerable ease. The idea of providing welfare indirectly — including through public works programs for rural areas — has grown too costly socially and fiscally. (Japan's fiscal situation also goes unmentioned in this book.) Providing a social safety net without swelling the national debt is a challenge that demands considerable creativity from Japan's politicians, creativity that has thus far been lacking.

Ultimately that is the problem: in the face of the new global economy, Japan has suffered debiliating intellectual paralysis that has prevented it from coherently negotiating the terms of its engagement with the global order. Mr. Koizumi and the neo-liberals have provided one approach, an approach that appears to have been eclipsed thanks to the global financial crisis. Mr. Morita and the remnants of the LDP mainstream have strived to provide another, but all too often it amounts to pining for a bygone era, the very essence of conservatism. In the debate between the two extremes — the Koizumian neo-liberals and the "paleo" conservatives who rail against "market fundamentalism" — there is a desperate need for a middle ground that can reconcile demands for higher levels of social protection with greater levels of economic openness. Japan may ultimately grope its way to a new grand bargain, especially as the neo-liberal alternative loses its glamour, but in the meantime it is struggling to find a set of ideas that offer the elusive blend of growth and protection.

Nevertheless, Mr. Morita deserves credit for fearlessly trying to diagnose Japan's problems, and Chin Music Press deserves credit for introducing his ideas to a foreign audience.

More on the alliance

A brief comment I contributed to The Nelson Report has been reposted at East Asia Forum, here.

Before the deluge

After an abbreviated recess, the Diet will reconvene today for its 2009 ordinary session.

The situation facing Aso Taro, his party, and his country is dire, and growing darker by the day. The latest development is the tent village — is it appropriate to call it an Asoville or Aso-mura? — that has been growing in Hibiya Park, populated by unemployed temporary workers with nowhere else to go. From Monday the unemployed will relocate to four sites in the Tokyo area, but after next week it is unclear what will happen to them. Asahi reports that the denizens of the temporary village will be demonstrating at the Diet on Monday.

A crowd of unemployed workers sleeping in Hibiya Park, living on emergency food aid: it is with this backdrop that the LDP approaches what may be its final Diet session (for now) as Japan's ruling party.

Mr. Aso, in a press conference Sunday, did his best to remain positive, as is his wont. Far from heeding Franklin Delano Roosevelt's 1933 warning about "[denying] the dark realities of the moment," Mr. Aso insisted once again on speaking of a bright future while ignoring the ever bleaker present.

"The future," he said, "is built by us. We build. The future is bright...I want to build a bright Japan for all the people."

He insisted that the supplementary budget containing a second stimulus package must be passed before the end of the fiscal year. He repeated that he is not thinking about calling an election until the second 2008 supplemental and 2009 budgets are passed. He said that it is appropriate for the LDP to discuss a future consumption tax hike, following the restoration of economic growth. Finally, he concluded by saying that he is not worried about the possibility of rebellion by LDP malcontents, that he even understands their grievances.

It increasingly appears like Mr. Aso's anodyne remarks are intended not so much to reassure the public as to reassure himself. Perhaps it's working; maybe Mr. Aso really believes that a brighter future is right around the corner.

The reality, of course, is that it increasingly appears that not only will Mr. Aso preside over the continuing disintegration of the Japanese economy, he may also preside over a disastrous general election for the LDP and the disintegration of the LDP. Watanabe Yoshimi, the man in revolt, appears to be steeling himself for a break with the party. Speaking to his koenkai in Tochigi over New Year's, Mr. Watananbe told his supporters that he remains opposed to the government's two trillion yen payment plan and, moreover, that if the government does not continue to reform the bureaucracy — his pet issue — he is resolved to leave the party and place himself at the head of a popular movement. It remains to be seen whether Mr. Watanabe is bluffing. I'm inclined to believe he's not. Indeed, it appears that Mr. Watanabe may be setting the table so that it appears that the Aso government is to blame for his leaving for failing to accept his conditions (including an immediate dissolution of the lower house followed by a general election). The pertinent question then is whether anyone will follow him out of the LDP, or, failing that, whether a popular movement will materialize around him.

Unfortunately I'm pessimistic about both. The LDP's would-be defectors appear to have been sufficiently restrained by the party, at least until after a general election. As for the other alternative, would Mr. Watanabe be able to repeat Hosokawa Morihiro's feat of channeling popular discontent into a new micro-party that could propel him to power? Mr. Hosokawa's Japan New Party formed in 1992 and competed in upper house and local elections before the 1993 general election. Mr. Watanabe will have far less time. Would he be able to find enough candidates, not to mention enough field supporters, to make his movement into a factor in the post-election landscape? The presence of the DPJ will further complicate matters, potentially dampening enthusiasm that might otherwise have bolstered his movement.

In the meantime, Mr. Watanabe — along with Nakagawa Hideano and other reformists — will continue to agitate from within the LDP. Mr. Nakagawa began the year by declaring his belief in the need for a political realignment, and rejected all talk of a consumption tax hike. Discontent within the LDP will only grow in the coming months, whether or not Mr. Aso is prepared to address it.

Ozawa Ichiro is undoubtedly heartened by the news surrounding the start of the new Diet session. He reasserted the importance of putting the people's livelihoods first and, in a deft move, criticized both the government's delay in introducing a new stimulus package and the content of the stimulus package on offer. His point that a new stimulus package should reflect the DPJ's concerns too is a salient one, if only because the DPJ, as the master of the upper house, should be involved in the drafting of such an importance piece of legislation. The LDP still has not learned that the divided Diet means that consulting with the opposition should occur before the introduction of legislation. Of course, doing so would probably mean cutting side payments to important LDP and Komeito constituencies. (But the DPJ is the only party playing politics with an issue of national importance...)

Mr. Ozawa also voiced his approval of Mr. Watanabe's remarks before launching into an extended criticism of Mr. Aso's remarks. Addressing Mr. Aso's declaration that the key words for the Diet session are "security" and "vitality," Mr. Ozawa said, "While saying these words, the true figure of the Aso government is that by doing nothing for three months it created a political vacuum. I think the people really understand this. Therefore it's impossible for the people to be deceived by this word play."

In response to a question from a journalist, who wondered why Mr. Ozawa is spending so much time on rural districts, Mr. Ozawa reasserted the importance of the DPJ's campaigning in longtime LDP strongholds in rural Japan. He believes that the DPJ's message of opposition to market fundamentalism, competition, and the inequalities "that have resulted from globalization" can succeed across Japan — although he declined to offer specifics for what the DPJ is promise in place of these enemies.

For now, however, it seems that the DPJ will not be penalized for doing little more than campaigning on the basis of the insecurities, the grievances, and the anger of the Japanese people. The DPJ is setting the public agenda; the LDP is now talking of "protecting the people's livelihoods," not unlike Mr. Ozawa's "The people's livelihoods first." The party owns the issues that matter most to the public, and as the economy worsens may even appear to be a reliable steward of the economy compared to the LDP.

The DPJ should not be too upbeat. If current trends continue and if the DPJ wins this year's election, it may come to regret taking power thanks to a historic economic crisis that appears far from finished in Japan, not to mention everywhere else.

Mr. Aso's unbearable optimism

In his book Totetsumonai Nihon (2007), Aso Taro outlined an approach to governing Japan that amounts to a pep talk for the dispirited Japanese people.

Time and time again, Mr. Aso suggests that the key to saving Japan is for its people to rediscover and celebrate their "latent power," to look cheerfully to the future, and to accentuate the positive.

The best example of this may be his chapter on aging society, in which he calls for a new respect for the aged and permitting those who want to work to continue to do so. As an aside, does Japan really have a problem of elderly would-be workers being denied their opportunity to do so? And does Japan really want to be forced to rely on elderly workers?

In any case, Mr. Aso has once again shown his boundless optimism, bordering on the delusional, in his New Year's message.

Mr. Aso opened his remarks by praising the Japanese people for overcoming the slump that followed the bursting of the bubble. If it weren't for the "what is said to be a once in a century global financial and economic crisis emanating from America," he suggests, Japan would not be facing a crisis once again. In response the global crisis, Mr. Aso promised that his government would do everything in its power to make Japan the fastest country in the world to escape the global recession. As Ken Worsley notes, Mr. Aso neglected to provide any specifics for how he intends to meet this goal.

This is the point at which optimism turns into self-delusion. I say self-delusion because I don't think the Japanese people are fooled by Mr. Aso's promises.

The Japanese people know better than their prime minister that they did not in fact accomplish the feat of overcoming the bubble economy — Japanese firms were spared by growth in the US and China, but Japanese consumers did not see enough of the windfall to provide the Japanese economy with a stable foundation to weather a crisis. Contrary to Japan's being dragged into a "once-in-a-century" (there's that phrase again) global crisis despite having escaped its earlier downturn, Japan's latest crisis is the direct consequence of having failed to fix the Japanese economy. Despite the "longest postwar boom" — another phrase commonly heard from government officials in recent years — it appears that the boom did not to put Japan on surer footing.

The Japanese people do not need to be told this. They're fully aware that something is rotten in Japan, or else they would have been spending more. The last thing they need is a pep talk from the prime minister. But that's what he gave them in this speech. After promising to be the first country to escape the recession, Mr. Aso proceeds to remind the public of Japan's successful responses to bakumatsu and the occupation, and urges his audience to believe in Japan's "latent power."

I understand that optimism sells, that no politician wants to be seen as simply a bearer of ill tidings. But there is surely a middle ground between selling optimism and hope and peddling delusions. Franklin Delano Roosevelt, for example, managed the trick. In his first inaugural address, he diagnosed the problem facing the United States in clear, stark terms, and offered a way forward in terms no less stark. He also had a message for Mr. Aso: "Only a foolish optimist can deny the dark realities of the moment."

Mr. Aso should focus a bit more on the dark realities of the moment — and offer some more precise proposals for how he intends to escape them — instead of simply encouraging the Japanese people to believe in themselves and work harder, while denying the underlying causes of the current crisis.

Japan blogger fest

A gathering for bloggers and blog enthusiasts is being planned in Tokyo for the evening of January 17, and we would like to extend the invitation to any and all visitors who may wish to come. I will be in attendance, along with bloggers from Shisaku, Global Talk 21, Mutant Frog, Coming Anarchy and Trans-Pacific Radio.

Some of you have expressed interest in a nomikai. Even if you have already emailed me, please send an email to transpacificradio@gmail.com before January 8th. Please let us know how many folks you would like to bring along with you. Although we have a place in mind for the get-together, we will wait to see what the final numbers are like before confirming. We expect that the gathering will be held in either Shibuya or Shinjuku. After we have confirmed the numbers and location, we will send you an email letting you know exactly where and when (probably about 6pm) we will be meeting up on the 17th.

We hope to see you all on the 17th of January!

The lessons of 2008

I have already written one retrospective essay on 2008 in Japanese politics, but I wanted to look back in more detail at this year's events and crystallize the year into a handful of lessons.

As 2008 enters its final days, what have we learned about the state of the Japanese political system?

First, and most importantly, the LDP cannot govern itself, let alone Japan. The dominant theme in Japanese politics since the 2007 upper house election was been Japan's "twisted" Diet, with the LDP-Komeito coalition's controlling the lower house (and therefore the government) and the opposition DPJ's controlling the upper house. The DPJ has not hesitated in using its control of the upper chamber to stymie, delay, or complicate the coalition government's agenda — the signature battle being the fight over Fukui Toshihiko's successor as president of the Bank of Japan during the 2008 ordinary session of the Diet — but Prime Ministers Fukuda Yasuo and Aso Taro may have been more hampered by divisions within the LDP and between the LDP and Komeito. Thanks to the government's supermajority in the lower house, the government has the ability to get its way on any issue but for matters like appointments requiring the approval of both houses (hence the BOJ fight). While the coalition government has been reluctant to use the supermajority for fear of public disapproval, would the government have to fear public backlash if the DPJ stood in the way of a government proposal that had broad public approval?

The problem has been that the governing parties have been unable to draft proposals that have broad public approval.

Not for want of good intentions: at least under Mr. Fukuda, Japan had a prime minister who was acutely aware of the colossal challenge facing his country — and that was before the global financial crisis consumed Japan. (See this post on Mr. Fukuda's speech opening the ordinary session.) Mr. Fukuda, however, sat at the head of a party at war with itself, bitterly divided over its identity. Selected as LDP leader on the basis of a "grand coalition" of factions, throughout his tenure Mr. Fukuda resorted to a balancing act among the party's factions and ideological tendencies, which resulted in Mr. Fukuda's gaining a reputation for having no policy agenda to speak of — and in plummeting public approval figures throughout 2008 until Mr. Fukuda resigned the premiership in September.

And when Mr. Fukuda did decide to take a stand on an issue, he suffered for it. Central to the 2008 ordinary session of the Diet were the related questions of the extension of the "temporary" gasoline tax and the dedicated use of gasoline tax revenue for road construction. The DPJ refused to approve the extension in the first half of the Diet session, meaning that in April 2008, the start of the new fiscal year, the Japanese public received a gasoline tax cut (I didn't hear too many complaints about that). Certain members of the LDP did not want to see the special account for road construction take a hit, so they fought hard for the reinstatement of the tax via the lower house supermajority. With petrol prices high, the Fukuda government courted a public backlash if it were to reinstate the tax. Therefore, to make the case for an extension, the government decided to argue that the tax revenue was needed, but not necessarily for road construction; Mr. Fukuda instead decided that he would push a plan to shift gasoline tax revenue earmarked for road construction into the general budget. This plan, floated as the prime minister was trying to win the DPJ's support for extending the temporary gasoline tax, immediately threw the LDP into chaos, pitting young reformers, who backed Mr. Fukuda, against the LDP's "road tribe," which fought against a clear and present danger to their privileges and had broad sympathy within the LDP. Mr. Fukuda had to struggle against the party establishment, and arguably lost the battle — the road construction budget was passed as presented, and the question of the special fund postponed to the extraordinary session, at which time Mr. Fukuda was no longer even premier.

Mr. Fukuda's preferred issues fared little better. Remember that Mr. Fukuda began the year talking about the importance of consumer affairs and "listening to the voices of the people?" 2008 in consumer affairs will be remembered mostly for further instances of tainted products. And as for listening to the public? As 2008 ends, the 2007 pensions scandal remains unresolved and the LDP has created a new mess after rolling out a controversial health care system for citizens over 75 that involves automatic deductions from pensions.

The situation has, if anything, worsened under Mr. Aso's stewardship. In part Mr. Aso has been hindered by what he and his advisers have repeatedly called a once in a century financial crisis, as if that somehow relieves the LDP of culpability for the disastrous turn for the worse in Japan's economic fortunes. The government is no closer to solving Japan's fiscal crisis; the LDP is still mired in a debate over whether and when to raise the consumption tax. And as Nakagawa Shoichi, Mr. Aso's finance minister, recently told the Financial Times, fiscal consolidation is on hold as long as Japan's economy falters.

As the year comes to a close, it is difficult to recall what the LDP was actually able to agree on and implement. Even a new fiscal stimulus package has proven controversial within the LDP and the coalition government, and as a result has been postponed until the new year.

As 2008 ends, divisions within the LDP are more pronounced, the party's ability to govern more questionable, and, as a result, Japan's future grows ever darker.

Accordingly, the Koizumi revolution is a distant memory. It is hard to believe that little over two years ago the foreign press could write of a confident new Japan under the leadership of its youngest postwar prime minister, booming thanks to the efforts of outgoing Prime Minister Koizumi Junichiro.

What changed?

What became clear over the course of 2008 is that Mr. Koizumi achieved less than it seemed at the time. Corporate Japan boomed, but all too little progress was made in strengthening stagnant regions (despite the "Trinity" reforms), wages failed to rise along with economic growth, and the government made little headway in figuring out how to pay for the social safety net desired by the bulk of the aging Japanese public. Mr. Koizumi was much more effective in destroying the old LDP — see above — than in remaking the Japanese economy. As has become clear in midst of the global financial crisis, Japan remained all too dependent on trade with the US and China. Far from revolutionizing the Japanese economy, under Mr. Koizumi Japan's economy may have become even more of a "dual" economy, divided between efficient, global exporters and stagnant domestic sectors still dependent on government protection. At the same time, microeconomic reforms led to more use of temporary and part-time workers who do not receive the same benefits as regular workers — saving money in good times and, as we're seeing today, provided a stock of laborers who can be laid off in bad times.

Whether or not this makes for good economics is one question; whether it makes for good politics (for the LDP) is another. The LDP has been tarred with neglecting the wellbeing of the Japanese people: of the elderly, who fear for their economic security in retirement; of the young, many of whom are now relegated to the pool of irregular laborers, perhaps for life; and of rural citizens, who wonder how they will make their livings. At the same time, the LDP has also been criticized for abandoning Koizumi-ism. Its young reformists, concentrated largely in urban districts, fear that they will pay the price for the party's having shuffled off the legacy of Mr. Koizumi.

The former prime minister's followers are now a marginalized group within the LDP, and their continued future within the party is increasingly in doubt. In 2008 it became clear just how powerless the Koizumians are. They failed in their battle against the "road tribe," succeeded in passing some form of administrative reform over the objections of LDP reactionaries thanks only to a compromise with the DPJ and the work of crusading adminstrative reform minister Watanabe Yoshimi. Little wonder that by the end of 2008 Mr. Watanabe was speaking openly about overthrowing the Aso government, going so far as to vote with the DPJ when it proposed a resolution calling for an immediate dissolution of the lower house and general election.

Mr. Koizumi's legacy, it seems, was reducing the LDP to warring camps, bringing the party to the verge of collapse.

At the same time, the DPJ, while still a relatively unknown quantity, is far from being the rabble the LDP insists it is.

2008 showed that a DPJ-led government is increasingly conceivable, a finding confirmed in recent public opinion polls. For example, a Yomiuri poll taken in early December found that sixty-five percent of respondents are willing to give the DPJ a chance to govern. Despite the LDP's efforts to paint the DPJ as dangerously irresponsible, too divided, and led by the too dictatorial Ozawa Ichiro, the public is increasingly receptive to the leading opposition party and its mercurial leader.

The DPJ has been remarkably disciplined over the course of 2008. In part the DPJ's task has been simple. The party has had to stay reasonably united while the LDP struggled to find a consensus on issue after issue. On policy questions, it has been opportunistic, but what opposition party in a democracy isn't opportunistic? It largely succeeded in being trapped by the government on any given policy issue, adjusting its tactics as the political situation changed.

In the meantime, the party bolstered its policy credentials — see Mr. Ozawa's rebuttal to Mr. Aso's maiden policy address — and continued its work at the grassroots level, the pet project of Mr. Ozawa.

In fact, the unreported political story of 2008 may be how remarkably competent the DPJ was. It could have gone differently: the party came under fire from the LDP and big media for the uncontested reelection of Mr. Ozawa as party leader in September, and in the months leading up to the election, Mr. Ozawa's leadership was criticized by various DPJ young turks, but Mr. Ozawa emerged unscathed from the leadership fight and is now amazingly polling higher than Mr. Aso. If the LDP hoped to run the next general election campaign as a personal campaign against Mr. Ozawa as opposed to a campaign against the DPJ's ideas, that option may now be futile (if it ever stood a chance of success in the first place). Meanwhile, the DPJ set the policy agenda for 2008. From the beginning of the year, the LDP has been forced to battle the DPJ on the opposition party's terms, the issues that won the DPJ the 2007 upper house election. The discussion has focused on pensions, health care, budgetary waste, the gasoline tax and road construction, and administrative reform, issues which for the most part the public sees as DPJ strengths (see this recent Yomiuri poll). While at times DPJ members have grumbled about Mr. Ozawa's tactics, he has ably kept the DPJ's ideological divisions from undermining the party at critical moments in its battles with the LDP.

In short, while the party has certainly benefited from the LDP's disarray, Mr. Ozawa and the other DPJ leaders deserve credit for their grace under pressure and the deftness with which they have checked the DPJ's tendency towards disarray of its own.

None of this is to say that a DPJ government would be a panacea for an ailing country. If the DPJ manages to win the 2009 general election and form a government, it will be no less hampered by events than its LDP-Komeito predecessors. It will still have to balance reforms that ease the insecurities of citizens left behind by Mr. Koizumi's reforms, while forging ahead with the structural transformation of the Japanese economy and solving the fiscal crisis — all in the midst of an economic crisis that shows no signs of abating in the coming year. Nevertheless, a DPJ-led government would be a welcome change from the decrepit LDP-led governments that have ruled in recent years. Regime change would contain the possibility of a genuine break with the recent past; whether the DPJ fulfills the potential of regime change would depend on the abilities of its leaders and the response of the public to the new government.

Finally, 2008 had lessons for Japanese foreign policy, namely the US and Japan cannot live with or without each other. As Japan prepares for the Obama administration, it is clear that the US-Japan alliance is not healthy. The biggest change in 2008 was that the Bush administration provided Japanese elites with a new reason to be unhappy with Washington when it removed North Korea from the state sponsors of terrorism list. The Japanese establishment reacted with "shock" when the decision to delist was announced in June. Combined with the impact of the global financial crisis, as 2008 ends Japanese leaders are left wondering whether they can continue to rely on the US as an ally. They will be watching the Obama administration's every move for clues.

At the same time, however, Japan has little choice but to continue to work as a loyal ally of the US. Japan will grumble about Washington — and grumble louder if the DPJ takes power — but it is not prepared to break with the US in any significant way. Japan has no alternative in the near term to the alliance. Japan may have inched closer to China over the course of 2008, sending an MSDF vessel on a port visit, holding an upbeat summit when Hu Jintao visited Japan in May, and concluding a minor agreement concerning the East China Sea EEZ, Japan's leaders still face a tightrope walk in Japan's relations with China. In my first post of 2008, I insisted that the China hawks are "bankrupt," and I remain no less convinced today that this is the case. Developments in 2008 illustrated that there is little public support for a more belligerent approach to China. What we learned in 2008, however, is that the Japanese people want their government to be more assertive in negotiations with China (see this post). But a desire for greater assertiveness does not translate a support for remilitarization, constitution revision, and the rest of the conservative agenda.

The public is not ready to break with the US and is not prepared to bandwagon with China. The government is left trying to find a middle path between the region's two superpowers, not unlike other countries in East Asia.

All of which suggests that Japan's global presence is diminishing. Despite presiding over the G8 in 2008, despite launching a successful bid for one of the rotating Security Council seats, despite the ambitions of its prime ministers, Japan's voice is fading internationally. Given Japan's economic woes, this trend is unlikely to reverse itself in 2009. While Japan's leaders had plenty to say about their country's role in 2009 — for my part I was impressed with Mr. Fukuda's foreign policy vision — they had fewer ideas about how to act on their ideas. Japan still does not know how it can act as a regional and global leader in the coming decades as its power wanes relative to China (provided China weathers the economic crisis with minimal domestic disorder). Its economy faltering, its people insecure, its armed forces constrained by law, budgets, and values, it is unclear what basis Japan will have for claiming a leadership role in the region. Mr. Aso has tried to make the case for a soft power basis for Japanese leadership, but Mr. Aso and other advocates of soft power have failed to explain how the popularity of manga, anime, and J-Pop will translate into political affinity for Japan and will enable the Japanese government to achieve its goals.

In short, 2008 was a hard year for Japan, a year of uncertainty for its leaders and hardship for many of its people. Japan's ancien regime is exhausted — we clearly are witnessing a second bakumatsu — but it is unclear whether a restoration waits in the wings, or whether this will be a bakumatsu without end.

Mr. Watanabe's rebellion

On Wednesday the House of Representatives voted on a DPJ-backed resolution calling for an immediate dissolution of the lower house followed by a general election.

Watanabe Yoshimi broke with the LDP and voted for the resolution, backing his words with action. He stated that he was prepared for whatever punishment the LDP intends to mete out for his rebellion.

The LDP did opt to censure him. According to Asahi, the LDP has "admonished" Mr. Watanabe, admonishment being the second lightest of the LDP's punishments for disobedient party members. Nikai Toshihiro, head of the LDP's general affairs council, argued that Mr. Watanabe should be expelled from the party, but his proposal was rejected.

In a press conference after the vote, Mr. Watanabe made clear that his vote is not a prelude to a break with the LDP and the formation of a new party. He claimed that he acted alone, not bothering to consult with his fellows. Later in the press conference, he spelled out his credo: "...Party before faction, state and people before party. This is the starting point for a member of the Diet." It seems that Mr. Watanabe was acting in defense of Japanese democracy; he views a general election at this juncture as essential to making progress in solving the problems that plague the Japanese polity. A simple act, but considering that none of his colleagues joined him, an act that may have taken more courage than meets the eye. Despite the bold talk from other reformists, not one did anything more than offer tepid "understanding" of Mr. Watanabe's vote. Naturally his vote garnered praise from the DPJ — Hatoyama Yukio made a congratulatory phone call — which hopes to draw LDP rebels away from the party before a general election. Ozawa Ichiro suggested that if Mr. Watanabe is willing to leave the party, he will discuss electoral cooperation with him. (Not a particularly meaningful offer, I think: there is a reason that the DPJ has yet to pick a candidate to run against Mr. Watanabe in Tochigi-3, namely that Mr. Watanabe has been quite successful in past elections.)

This will not be last we hear of Mr. Watanabe. By giving him a light slap on the wrist, the LDP has ensured that Mr. Watanabe will defy the government again at his next opportunity. Mr. Watanabe dared the party to expel him, but it refused, perhaps out of fear that booting the rebel reformist could finally open the eyes of his colleagues that the party has no place for them. Of course, that may be too much to expect. The LDP, terrified that Mr. Watanabe will encourage others to follow him, acted quickly and softly in the hope of quieting talk of rebellion and not making Mr. Watanabe out to be a martyr. Time will tell whether the party's response will succeed. Mr. Watanabe said in an appearance on TV Asahi Thursday that there is the possibility of further defiance of the government when the second stimulus package comes to a vote next year.

Journalist Uesugi Takashi suggests that there is little danger of the bill's being rejected because the controversial portion — a fixed income and residential tax cut included to assuage Komeito — is not a separate bill but simply part of the larger supplemental budget bill (hence the DPJ's calling for the controversial portion to be submitted as a separate bill). Uesugi instead sees another battle over the plan to move highway funds to the general fund as the critical point when LDP reformists may decide to break with the party.

For now it is simply impossible to predict whether Mr. Watanabe will be able to gather enough rebels to deprive the government of its supermajority. It appears that Nakagawa Hidenao's argument that there shall be no moves towards realignment before a general election has won the day in reformist circles.

Nevertheless, I give Mr. Watanabe tremendous credit for standing up against the government. In what was, to paraphrase W.H. Auden, a low, dishonest year, Mr. Watanabe has provided a glimmer of hope that there might be a leader in either party capable of rising above the pusillanimity that has characterized the behavior of all too many leading Japanese politicians over the past year.

Endgame

As 2008 enters its final week, the LDP and Aso Taro, its beleaguered head, are being written off as doomed in the year to come.

No one, it seems, is willing to offer an explanation for how the LDP can save itself in a general election. The LDP may yet win the general election, but its fate is out of its hands.

Some are starting to measure the LDP's coffin, so to speak. AERA, a weekly magazine, notes that Yamada Shinya, an elections forecaster, has predicted that the DPJ will win 230 seats to the LDP's 191 seats. Mr. Yamada foresees sluggish turnout and notes the importance of the change in the Communist Party's election strategy — nothing too different from my own assumptions about the next election. (I have started — and hope to finish — my own analysis and predictions for the 300 single-member districts.)

In the meantime, Mr. Aso's situation continues to worsen. The latest blow to his government is a dispute with Komeito. Last week Koga Makoto, the LDP's chief elections strategist, noted that it was strange that the LDP would tell supporters to vote for the LDP in single-member districts and Komeito for proportional representation seats, a statement interpreted as a hint that the LDP is reconsidering the terms of its electoral partnership with Komeito. Mr. Koga was quick to reassure Komeito that the LDP remains committed to working with Komeito to win a majority for the coalition — the LDP can hardly afford to do otherwise, given the support Komeito is said to provide for LDP candidates. Komeito head Ota Akihiro was dissatisfied enough with Mr. Koga to call for an apology. The question now is whether LDP candidates will receive the support from Komeito that they have received in the past. Will Komeito voters continue to be loyal to their party or will they stay home or vote against LDP candidates in a general election? Along with the JCP question, the Komeito vote is of course an important variable in determining whether the LDP will be returned to power.

Of course, events may render all of these factors irrelevant in a general election. If the bottom continues to fall out of the Japanese economy — Japan Economy Watch and Ken Worsley's Japanese Economy News are essential sources for the bad news — it may simply be impossible for the LDP to reverse itself in time for a general election. The latest news is that in its monthly assessment of the Japanese economy, the government has determined that the economy has worsened (as opposed to weakened) for the first time since February 2002. There appears to be no end to the bad news. Little surprise that the prime minister's approval ratings may be headed into the single digits, having fallen to 16% in a recent Mainichi poll.

The most pressing question now is how long the government will wait before calling an election. Abe Shinzo, quickly becoming a younger version of Mori Yoshiro, has called for the election to be delayed until May at the earliest, until after the passage of the 2009 budget. I expect that Mr. Aso will wait until he has a budget in hand before going to the voters, although I do not expect the budget to make much of a difference. The Aso government and the LDP have simply been overwhelmed by problems: sluggish domestic demand, a shift to reliance on temporary and part-time workers, growing pensions and health care liabilities, an intolerable debt burden, stagnant regions, and so on. The economic crisis is only exacerbating these problems. The result is that the LDP is on the brink of collapse. The party has simply overwhelmed by a cascade of systemic failures. As Thomas Homer-Dixon, a political scientist at the University of Toronto wrote in The Upside of Down, "When a society has to confront a bunch of critical problems at the same time, it can't easily focus its resources on one and then move on to the others."

The LDP, trapped by previous decisions that created or exacerbated these problems, is unable to take a definitive step in any direction. This is the essence of the LDP's ongoing debate over tax reform and a consumption tax increase. The government needs more revenue to meet current and future liabilities without increasing the national debt; for a number of LDP members, most notably Yosano Kaoru, the economy minister, a consumption tax increase appears to be the answer to the government's problems. But passing a consumption tax — or even committing to a timeline for phasing in a consumption tax — is a thorny political problem that has involved tortuous negotiations within the LDP and between the LDP and Komeito. Facing an election and an economic crisis, Mr. Aso has been understandably reluctant to make a firm commitment to the timing of a consumption tax increase. A consumption tax increase may solve one problem, but it may exacerbate others (sluggish domestic demand, low growth, and perhaps growing social inequality, as a consumption tax increase would presumably hurt low-income Japanese most). Japan is ensnared in a web from which there is no easy escape.

Not surprisingly, a recent Yomiuri-Waseda poll found that the public more disappointed in the LDP than hopeful about the DPJ. Regime change alone will not cut Japan's Gordian knot. It is entirely plausible that a DPJ-led government will be equally stymied. But the public is at least willing to give the DPJ a chance, an entirely reasonable proposition given the LDP's record.

It may be, however, that Japan's problems are insoluble, and Japan still has a long way to fall. The greatest reason for pessimism may ultimately be that despite having experienced nearly two decades of stagnation, the establishment has yet to come up with any better ideas for organizing Japanese society. As a result, the global financial crisis, rather than providing an opportunity for Japan to take a leadership role, has paralyzed Japan. To return to Thomas Homer-Dixon, he argues that an essential quality for dealing with crises is a "prospective mind."

"We can't possibly flourish," he writes, "in a future filled with sharp nonlinearities and threshold effects — and, somewhat paradoxically, we can't hope to preserve at least some of what we hold dear — unless we're comfortable with change, surprise, and the essential transience of things, and unless we're open to radically new ways of thinking about our world and about the way we should lead our lives. We need to exercise our imaginations so that we can challenge the unchallengeable and conceive the inconceivable. Hunkering down, denying what's happening around us, and refusing to countenance anything more than incremental adjustments to our course are just about the worst things we can do."

Despite the best efforts of Koizumi Junichiro, I fear that this is precisely how the Japanese establishment has responded to the lost decade. Public debates are stale. Even minor change is watered down. Or as Yeats wrote, "The best lack all conviction, while the worst / Are full of passionate intensity." Watching the irresolution of the LDP's reformists, and the strength with which the LDP's old guard resisted any attempt to redirect gasoline tax revenue away from road construction earlier this year, I cannot help but think that Japan simply lacks the ability to adjust, that despite a history of making radical changes in the face of crises, the current crop of leaders is simply not up to the task. Perhaps as bad as things look today, they aren't nearly bad enough to force radical change — the decay of an economic system hardly compares to the threat of colonization and the blow of defeat and occupation. After all, despite the lost decade, Japan remained the world's second-largest economy, its companies respected globally. Perhaps Japan is more capable of responding to short, sharp shocks than to prolonged, barely visible social problems.

Of course, Japan is hardly alone. I was reading Thomas Homer-Dixon Sunday while waiting in Boston's Logan Airport, where the TV was tuned to CNN's Late Edition. Wolf Blitzer was struggling to moderate a discussion between Democratic Congressman Barney Frank and Republican Congressman Eric Cantor on the financial crisis. Congressman Cantor insisted that when apportioning blame for the crisis, Congress must bear much of it for encouraging risky lending, which is to say that it is not necessarily the market but the government that failed.

I can think of no better illustration of what Homer-Dixon calls "hunkering down, denying what's happening around us, and refusing to countenance anything more than incremental adjustments."

Alliance addenda

After seeing the response to my recent post on the US-Japan alliance, I find it necessary to develop a few ideas further.

First, MTC rightly points out that an alliance based on the partnership of Japanese conservatives and their counterparts in Washington is by no means doomed, because the organizations pushing this line "deal death as a matter of course. They will not be deterred by mere logic, economic constraints or human feeling." I fully grant this point. Just because history (or perhaps, History) does not favor their argument does not mean that the conservative grip on the alliance will weaken. The advocates of an alternative vision of the alliance — a vision of the alliance that does more than prepare for a worst case scenario with China that may never come (or that may be hastened by the decisions of the alliance) — must push back, fighting back in the halls of academia and think tanks and in the pages of journals.

Second, I must correct myself: technically speaking the 1996 alliance is not rooted in an alliance between Japanese and American conservatives. It is rooted in an alliance between Japanese conservatives and the American foreign policy establishment (FPE). There is sadly a dearth in creative thinking on the alliance in Democratic corners of the FPE, the think tankers and academics who will likely fill important Asia policy positions. In particular, Joseph Nye, who as assistant secretary of defense for international security affairs in the mid-1990s gave his name to the initiative that produced the 1996 bilateral security declaration and with it the 1996 alliance, and Kurt Campbell, who worked deputy assistant secretary of defense for East Asia during the late 1990s, are the Democratic Party's senior Asia hands and both view the alliance along similar lines as Richard Armitage and Michael Green, their Republican counterparts. Campbell has in fact praised the work of his Republican successors in strengthening the alliance.

Jun Okumura captures precisely this reality on this post regarding a meeting between senior DPJ officials and the "U.S. Democratic Party," as reported in the Yomiuri Shimbun. On a visit to Tokyo, Nye and John Hamre, president of CSIS (home to Michael Green) and an undersecretary of defense in the Clinton adminstration, as well as Green and James Kelly, assistant secretary of state for East Asia and the Pacific in the Bush administration, met with Hatoyama Yukio, Kan Naoto, and other DPJ officials. The point of the meeting, as Jun notes, was to deliver the message to the DPJ that the bipartisan consensus on the alliance is intact — the DPJ should not expect that it will get much traction in its desire to redefine the terms of the 2006 realignment agreement.

The reality, however, might be more complicated. As Jun notes, none of the aforementioned mandarins is in President-elect Obama's inner circle. Is this a message from Mr. Obama? From the Democratic Party? From the FPE? Perhaps we should read this meeting and its message as a message from the guardians of the 1996 alliance, nothing more, nothing less. Confident that they remain responsible for the alliance in Washington, they are apparently planning for the possibility that their conservative partners are forced to cede power to the DPJ. While the media is reporting this as the beginning of an exchange of opinions between the US and Japanese Democratic parties, the presence of Messrs. Green and Kelly suggest that it was nothing of the sort: the alliance mandarinate was issuing a warning.

Finally, I want to respond to comments to my previous post.

First, one anonymous commentator argues that the idea that China has any influence over Washington as a result of its debt holdings is "ridiculous." A second commentator argues that the fundamental arrangement of the alliance — bases for protection — is unchanged, and that not too much has changed with the decline of the 1996 alliance. I will address these comments together because they're linked.

The alliance today is about China. The 1996 alliance was one way of thinking about China. While the alliance managers vary in the extent to which they support engagement with China, they uniformly support strengthening the security relationship, extending the alliance to distant conflicts, improving alliance interoperability, and broadening the alliance to include cooperation with other US allies in East Asia. They are in agreement about the importance of dismantling domestic constraints on Japanese security policy, although naturally they respect the Japanese democratic process. It is an approach to the alliance that sees the alliance as "the core of the United States’ Asia strategy." (For an outline of the consensus on the alliance, see the second Armitage-Nye report — discussed at length in these posts.) They believe that the alliance is important as an end in and of itself, because of shared interests and shared values, which is another way of saying that no matter how much it appears that the US and China have common interests regionally and globally, the Sino-US relationship can never replace the US-Japan relationship because of shared values.

I think the "shared values" approach to the alliance is mistaken. It seeks to create distance between the US and Japan on the one hand and China on the other when what the three countries must be do is find a way to bridge the wide differences that separate them. As the current economic crisis is illustrating, the fates of the US, China, and Japan are linked. The US-Japan-China strategic triangle is a non-zero sum relationship. America's loss is Japan's loss is China's loss; and the impact of the economic crisis within China will likely be felt in Japan and the US.

None of this is to say that the nineteenth-century liberal argument that free markets will lead to perpetual peace is right. What the liberals failed to appreciate is that while global commerce may transform national interests, those interests are not translated into policy without concerted effort on the part of national elites. Elites have to recognize that economic links have transformed their nations' interests and then act to protect those interests. Both Japanese and American conservatives — especially Japanese conservatives — have chosen to minimize the significance of their countries' dependence on the Chinese economy. Accordingly their vision of the alliance emphasizes the security hedge against China rather than efforts to diminish the need for a hedge against China.

I am not arguing that the US-Japan security relationship is dead. Nor am I arguing that it should be dissolved. The alliane is an important aspect of US Asia policy, but for too long the US FPE has failed to asked why. If it is important only because Japan gives the US bases, then frankly the alliance is a necessary but insufficient guarantor of the future stability of the region. The value of the alliance must be measured by how it contributes to regional stability, namely the incorporation of China into a leadership position in East Asia with as little friction as possible. The 1996 alliance has strengthened those actors in Japan most averse to cooperation with China, which has the ironic consequence of diminishing Japan's importance to the US as an ally.

What is needed now is a new alliance that seeks more than just a hedge against a violent turn in China's rise. Accordingly, the alliance needs to be more than just a partnership of national security elites in the US and Japan. Japan and the US ought to be talking about more than just the proper arrangement of US forces in Japan or how Japan can make its token contributions to missions abroad; the focus of every US-Japan bilateral meeting of any significance should be finding new ways to build a trilateral relationship with China. An alliance that's simply a matter of bases for forward-deployed US forces and some tactical and operational cooperation between US and Japanese armed forces is an alliance that increasingly irrelevant to the future of East Asia.

The alliance is dead, long live the alliance

Barack Obama's inauguration is just about a month away. His transition team is gradually filling in cabinet-level positions. His Asia and Japan policy teams are as of yet unknown, however, leaving Japanese elites to continue to fret about Japan's place on the Obama administration's agenda.

They have good reason to worry.

The reasons to worry have nothing to do with the myth of the Democratic Party's hostility to Japan and predisposition to China. After all, Richard Nixon, the pioneer of Japan passing, was a Republican, and Bill Clinton inherited his trade agenda from George H.W. Bush. No, the reasons for concern are far greater than the Japanese establishment's irrational fear of Democrats.

The post-cold war US-Japan alliance, born in 1996, is dead. It is far from certain what will take its place.

The 1996 alliance — born out of the 1996 reaffirmation of the alliance signed by President Clinton and the late Hashimoto Ryutaro — sought to restore security to its position of prominence in the alliance and rebuild the Chinese wall that had separated security and economics in US-Japan relations until the 1980s. Japan's economic slump made it a less worrisome partner, and China's bullying of Taiwan appeared to provide a target for greater security cooperation, with North Korea's playing a supporting role.

The process of bolstering the alliance stalled after the conclusion of the new guidelines for security cooperation in 1997, but the Clinton administration bequeathed to the Bush administration a framework for deeper security cooperation with Japan. Specifically, it was bequeathed to the group of alliance hawks, led by Richard Armitage, who assumed important positions in the new administration in 2001. Mr. Armitage and his colleagues took the baton passed from their predecessors and developed a particular form of security cooperation following 9/11. As the US prepared for the global war on terror, the US would treat Japan as a first-rank ally, akin to the United Kingdom; learning the lesson of the Gulf War, the US would not issue marching orders to Tokyo but would appeal to Japan's conscience as a major world power to do the right thing by supporting US efforts in some form. The material value of Japan's contribution was inconsequential; what mattered was Japan's showing the flag, not how much oil it was pumping in the Indian Ocean. In exchange, Japan under Koizumi Junichiro became a trusted ally of the Bush administration, which after 2003 needed all the friends it could get. Of course, the US wouldn't be perpetually satisfied with refueling missions and unarmed humanitarian relief missions, but by encouraging Japan with high praise (the frequent refrain during the first half of this decade about the alliance being "the best ever") the US could gradually push Japan in the direction of a more active security role.

This new partnership was cemented not in the Middle East but in Northeast Asia, as the US and Japan moved in lockstep in the six-party talks after 2002, taking a hardline against North Korea on nuclear weapons, missiles, and Japan's abductees, a pact sealed by Ambassador J. Thomas Schieffer's March 2006 visit to Niigata — to the beach from which North Korea abducted Yokota Megumi — and President George W. Bush's meeting with Megumi's mother Sakie in April 2006. In the background loomed China, resulting in the inclusion of the peaceful resolution of the Taiwan Straits crisis as a common strategic objective for the first time in the February 2005 Security Consultative Committee (2+2) statement. It was also cemented via ever deeper cooperation on missile defense in Japan and broader cooperation between US Forces in Japan (USFJ) and the Japanese Self-Defense Forces (JSDF).

This partnership was not nearly as durable as it appeared. First, it was more a partnership of elites than a partnership of nations. Alliance hawks in the US forged a strong relationship with their resurgent Japanese counterparts to promote an alliance agenda that served both their interests. As William Overholt wrote in Asia, America, and The Transformation of Geopolitics (reviewed here):

As the 21st century began, the United States decided to bet its entire position in Asia on the alliance with Japan. In effect, it has bet not just on the Japanese nation but in particular on a newly assertive national-security elite that represents a rather narrow and unrepresentative slice of Japanese society. In all of American history, the United States has never before made such a bet anywhere in the world, with the arguable exception of the bet on Britain in World War II. The current bet is not on the Japan of 1945 or 1975 or 1989 (the year before the bubble burst) or 2000, but on a rearming Japan with an economy, a polity, a foreign policy, and a military evolving faster and more unpredictably than those of any other advanced country, under a new and increasingly right-wing leadership that wants to rebuild national morale by reengineering a failed vision of the first half of the 20th century rather than through an inspiring new vision of the future. Rarely in world history has such a power made such a consequential bet.

Abe Shinzo was the symbol of the US bet on the Japan's neo-conservatives. As Sunohara Tsuyoshi, a Nikkei reporter, documented in the introduction to his book Japan Hand, Michael Green, then National Security director for Japan, Korea, Australia, and New Zealand, saw potential in Mr. Abe, who was deputy chief cabinet secretary at the start of the Koizumi government. Mr. Green effectively made Mr. Abe a project, working to give the future prime minister a direct pipeline to the top of the US government. While serving as LDP secretary-general, he visited Washington in April 2004, where he delivered a speech at the American Enterprise Institute hailing the alliance's new golden era and making the case for constitution revision. On that visit he also met with Mr. Green, Mr. Armitage, Donald Rumsfeld, then-National Security Adviser Condoleeza Rice, and Republican congressional leaders, at which time he was effectively branded a future prime minister of Japan. Mr. Abe had to still be selected by the LDP, of course, but the backing of the US administration surely helped propel Mr. Abe to the premiership despite having no ministerial experience aside from serving as chief cabinet secretary. Mr. Abe, in short, was a direct product of this alliance between US conservatives and Japan's "newly assertive national-security elite."

The death of the 1996 alliance began with the decline and fall of Mr. Abe. The conservative partnership did not expect the Japanese people to deal so harsh a blow to Mr. Abe in the 2007 upper house elections. They failed to appreciate that the Japanese public would have little interest in a debate on constitution revision while Japan's regions stagnated, while the pensions system collapsed, while the national debt prompted questions about how the government would meet its liabilities. (See this post for a discussion of the binational conservative establishment's shock at Mr. Abe's defeat.) They also didn't expect that the DPJ would have considerable success in undermining the illusion of the robust security alliance by forcing a debate on the MSDF refueling mission. The DPJ ultimately lost the battle to block the mission's extension, but in their opposition they exposed how farcical the whole thing was: the lack of accountability in how the mission was conducted and the mismatch between the rhetoric and the reality of the mission (i.e. the contrast between rhetoric that focused on Japan's responsibilities to the international community and the reality of heavy-handed US pressure on Japan to extend the mission, spearheaded by Ambassador Schieffer). By forcing a debate on the refueling mission, the DPJ punctured the image of a golden era. Far from being a sign of how far the alliance had come, the refueling mission became a sordid affair, marked by the whiff of corruption on the part of Japan's defense trading companies and the newly formed ministry of defense and the cowardice of the Japanese establishment, which despite bold rhetoric about contributing to the war on terror was actually not prepared to make real sacrifices to help the coalition in Afghanistan.

But the 1996 alliance was doomed for reasons beyond Japanese domestic politics. The post-1996 security partnership was designed for a unipolar world. Naturally it flourished after 9/11, in the heady days of "shock and awe," as the Bush administration swaggered and flexed the US military's muscles. Accordingly, in some sense the 1996 alliance was a casualty of the Iraq war.

First, US difficulties in Iraq altered the US calculus globally. Would the Bush administration have made such a drastic about-face on North Korea had Iraq gone successfully? If the US could still credibly threaten regime change in North Korea, would Christopher Hill have been given the freedom to negotiate a new agreement? The shift on North Korea, occurring in the immediate aftermath of both North Korea's presumed nuclear test and the aforementioned US-Japan "pact" on North Korea by which the US signaled that the abductees were a priority for the US, has had profound consequences on the alliance, not least of all on the neo-conservatives who now wonder whether they can rely on the US security guarantee.

The shift on North Korea coincided with a pronounced softening in Sino-US relations. The US increasingly needed China as a "responsible stakeholder." With the US bogged down in the Middle East, it needed calm in East Asia — and found that China was the key to maintaining the status quo in North Korea and the Taiwan Straits, the two greatest flashpoints. Accordingly, US North Korea policy increasingly amounted to beseeching China to intervene with Pyongyang to keep North Korea committed to the six-party talks and leaning on Taiwan not to provoke China. At the same time, the US became increasingly indebted to China, thanks in part to the Bush adminstration's decision to finance the Iraq and Afghanistan wars via deficit spending, creating what Niall Ferguson has called "Chimerica." As Admiral William Fallon, formerly head of US Pacific Command, noted in an interview with the Boston Globe last month, China's position as the number one creditor for the US alters the Sino-US agenda. As Fallon said, "The size of the country and its influence is staggering. So we've got to figure this out. There were people who warned me that you'd better get ready for the shoot 'em up here because sooner or later we're going be at war with China. I don't think that's where we want to go."

With both the US and Japan economically interdependent with China, the 1996 alliance's vision of a security partnership that would essentially be preparing for the big war with China has become increasingly unrealistic. Indeed, the global economic crisis may completely transform the strategic landscape by making it clear just how much the three corners of the East Asian triangle need each other. How can the 1996 alliance possibly survive a new system in which China plays "the role of a vigilant creditor" vis-a-vis the US? Negotiations on trade imbalances and the relative values of the dollar, renminbi, and yen will be thorny, but next to these issues the security agenda pales in significance.

And so the 1996 security-centered alliance is dead.

The shell of the alliance will continue to exist, barring the outbreak of war in Northeast Asia. (I don't think the alliance would survive a shooting war.) But will the Obama administration and the Japanese government — whoever is at its head — be able to find a way to build a new alliance?

There are a variety of opinions on how the allies should proceed. Japan's conservatives may be the most confused about the future of the alliance. They had invested their energy in using the alliance as a vehicle for promoting their desire for an independent Japan — greater security cooperation with the US would lead to constitution revision, collective self-defense, and normalization — and a de facto cold war with China, but with the US shift in its relations with North Korea and China the US appears to be as less reliable ally for the Japanese right. Under the Obama administration, conservatives will likely shift to a position on the alliance akin to General Tamogami Toshio's, arguing for a more independent Japanese defense posture and more vocal disagreement with the US, particularly on issues like North Korea. Indeed, General Tamogami may literally become the posterchild of this line of argument. As he argued in his APA contest essay, while "good relations between Japan and the United States are essential to the stability of the Asian region," Japan needs its own preventive strike capabilities and greater diplomatic clout. It is difficult to imagine what the alliance would look like were this scenario to come to pass, but I can imagine that one consequence of Japan's developing independent deterrent capabilities (conventional or nuclear) would be to push the US closer to China, in effect balancing between the two.

If the Obama administration decides to press Japan on history questions — which Sakurai Yoshiko believes is in the offing — it will give the Japanese right a convenient excuse for pressing for a more independent defense posture, but the seeds of that shift were planted in the Bush administration's about-face on North Korea.

It may take years before we learn the extent to which the Bush administration's shift on North Korea affected Japan's hawks, who were "shocked" by the US decision earlier this year to remove North Korea from the list of state sponsors of terrorism. But judging by their initial reactions, the impact has been profound. The impact has also been felt at the popular level. The Cabinet office's annual foreign policy attitudes survey, released earlier this month, recorded a new low in respondents who view US-Japan relations favorably: 68.9% said they see the relationship favorably, compared with 76.3% who answered favorably last year, and 28.1% who see the relationship unfavorably (an increase of eight points from 2007). Mainichi claims that the US government attributes the drop to the US shift on North Korea, hardly surprising considering that the greatest source of concern for the Japanese public in Japan's relations with Noth Korea remains the abductions issue (among respondents, 88.1% see this as an object of concern, compared with only 69.9% who see the nuclear issue as a cause for a concern, a five-point drop from 2007). A recent Yomiuri poll on the US-Japan relationship recorded a similar slip in Japanese public trust in the US, with North Korea explicitly cited as a reason for lower trust in the US.

In the short term, however, it is difficult to say what impact any of this discontent will have on the relationship. Aso Taro is handicapped by the crumbling economic situation and is in no position to devote considerable effort to reimagining the alliance. The LDP is working to build ties with the new administration, but it seems to be driven more by the need to build links where none exist than any particular policy agenda. The DPJ, anticipating that it will have the opportunity to work with Mr. Obama, is working on deepening its links with the incoming administration; Okada Katsuya, possibly Ozawa Ichiro's successor as DPJ president, visited Washington earlier this month for meetings with people in Democratic foreign policy circles.

The Obama administration and a DPJ administration might cooperate well in building a new alliance less focused on purely security matters. The challenge is calibrating the right level of security cooperation so the allies can focus on other, more pressing matters. Security cooperation must be downgraded to but one conversation among several in the alliance. Getting Okinawa and Guam right will help — I'm encouraged by reports that Mr. Obama's Japan team is open to renegotiating the 2006 realignment agreement. Seeing as how the 2006 agreement is already delayed, the US and Japan might as well get it right. This point will undoubtedly be debated at length in the debate over the 2009 budget, which will include a request from the ministry of defense for 100 billion yen for realignment. I expect that DPJ will strenuously resist this request, perhaps using the economic crisis as an additional pretext for opposing it.

But there is still the need to develop a bilateral agenda that encompasses more than security. With the 1996 alliance dead, what will take its place?

My problem with the new AEI report from Michael Auslin and Christopher Griffin is that the answer they provide to this question is basically to deny that the 1996 framework is dead. While acknowledging that the alliance is in a new era, their answer is more of the same: ever greater security cooperation whether in East Asia or globally. Rather than seeing the golden age of the 1996 alliance as having passed, never to return as the result of structural changes, they maintain that the problem is the Japanese domestic political situation, which has halted the process of reforming Japanese national security policy and the national security establishment. The task is to press forward with more and closer security cooperation, creating what they call a "normal alliance." This normal alliance would be a vehicle for the promotion of liberty in East Asia, in cooperation with other democratic alliances in the region (reminiscent of Mr. Abe's arc). As they write, "...The U.S.-Japanese alliance should reorient itself to become an active promoter of political, social, and economic liberalization. Tokyo and Washington should seek to enhance and promote the goal of making democracy, free markets, and transparent security policies the norm in Asia."

This statement is wholly at odds with Asia as it exists today. I'm not certain that the alliance is capable of promoting democracy in Thailand, let alone in Burma, North Korea, or China. And China, as the region's leading trader is a more critical partner as far as free markets for goods and investment are concerned. Of course, Auslin and Griffin are largely concerned with China. In their words, "China is also the only legitimate military threat to long-term stability in the Asia Pacific." They cite China's plans to build a blue-water navy, a distant prospect at best and something that does not necessarily threaten the US or Japan. They acknowledge economic interdependence, but are much more interested in preparing for the worst-case scenarios with China than with getting the trilateral relationship with China right so to stave off the worst-case scenarios. They are trying to resurrect the partnership between conservatives in Tokyo and Washington that produced the "golden age," only it is unclear who is still willing to sign on to this agenda in either Washington or Tokyo. Having been burned in North Korea, I suspect Japan's neo-conservatives will be less enthusiastic about ever deeper security cooperation that has proven to be one-sided in favor of the US. Moreover, I'm not clear whether there is public support in Japan for the kind of alliance they envision. The Japanese people may view East Asia as a frightening neighborhood — see the aforementioned Cabinet Office poll — but that doesn't mean that they're ready to support remilitarization and more vigorous security relationships regionally and globally.

In Washington, the pendulum appears to have shifted away from the China hawks, particularly with Secretary of Defense Robert Gates slated to stay on in the Obama administration. The emphasis appears to be increasingly on stability and order in Asia, instead of the "freedom" agenda desired by Auslin and Griffin. Of course, the greater the emphasis on stability, the greater the need to cooperate with China.

It is still unclear to me what the US-Japan alliance will become, but I'm convinced that what it won't become is the normal alliance outlined by Auslin and Griffin. It may ultimately be the case that the alliance is destined to be limited to ensuring the defense of Japan but little more, with Japan providing token contributions internationally and playing a slightly greater role in providing for its own defense, but little more. As long as Japan is hamstrung by structural problems — its demographics, its shambolic economy, its public finances — it will be unable to be the vigorous partner that, as Sheila Smith argues, Washington needs in the midst of the crisis. But if Japan cannot find a way to overcome its problems, it will not be the partner Washington (and Beijing) need in Asia as they try to build a new, stable regional order.