Thursday, August 11, 2005

Koizumi's Great Gamble

The political pressure on some of Japan’s legislators to pass the postal privatization bill was so great that one legislator actually committed suicide. Now many believe that Prime Minister Junichiro Koizumi is committing the equivalent of political hara kiri by dissolving parliament and calling for new elections next month.

Koizumi made good on his threat to call a special general election after the House of Councilors, Japan’s equivalent of the Senate, defeated his bills to privatize Japan’s post office, including its banking and insurance branches which contain assets equal to about $3 trillion (that’s with a “T”).

At this point, it is hard not to think that Koizumi is taking himself and the Liberal Democratic Party (LDP) he heads over a cliff. The resulting electoral debacle could have serious consequences not just for Japan but for U.S. policy makers, who have trusted the LDP to be a valued partner in Asian and world affairs..

Start with the fact that the LDP currently holds only a nine-seat majority in the House of Representatives (pardon me if I use their proper names, and not fall into the ugly habit of calling them the Lower and Upper House) augmented by the 34 votes of its coalition partner, the New Komei Party.

Next subtract 37 Representatives, who broke party discipline to vote against the postal privatization bills last July. (The bills actually passed the House of Representatives by five votes, but under Japan’s Constitution it is this body not the other one that is dissolved for a general election.)

Koizumi has promised that no rebel will get an official party endorsement. That means they will have to run as independents, or, more likely, they will try to sell themselves as representing the “real” LDP. The PM is currently recruiting opponents, which means at times having to parachute candidates from other parts of the country into districts where they are unknown.

Keep in mind that the reason most of the rebels opposed the postal bills was out of fear that privatizing the post office, which has more than 200,000 employees dotted all over the country, would fatally damage their personal political machines. One can imagine that these supporters will work like hell to keep their boy in the Diet.

If Koizumi cannot retain most of these seats, he will have to get his working majority out of the hide of the main opposition, the Japan Democratic Party. This may be difficult. After years of shuffles and reshuffles, the JDP seems to finally be getting its act together. It made important inroads in recent House of Counselors election and the voting for the Tokyo assembly.

Then there is the issue itself. “This is an election to ask voters whether they support or oppose postal privatization, and I believe a number of people will say yes,” Koizumi said defiantly. But how many people will be motivated to vote by this one issue is a good question.

Postal privatization holds out the promise of great benefits in the future. However, there is no popular groundswell behind it. It is very much a top-down reform. There’s nothing inherently wrong top-down reforms. The entire Meiji Reformation was accomplished through top-down reforms. But then Ito Hirobumi didn’t have to face the voters.

To the extent that the average Japanese voter thinks about postal reform, he probably likes things the way they are. After all, in these days when people get cash from faceless ATM machines, when they talk only to computers on the bank’s “hotline,” there is something touchingly human about the friendly postman personally coming around to your door to collect grandma’s savings.

The situation is somewhat analogous to President George W. Bush’s proposal to partially privatize social security, another top-down initiative with little real popular support. But one wonders whether Bush would go to the mat over his reform the way Koizumi has for his. It is hard to imagine that Bush would risk his whole administration and the Republican Party on such a gamble even if it were Constitutionally possible.

One thing that gives Koizumi some hope is his approval ratings going into the election. The last poll gave his cabinet a 47.3 percent stamp of approval. For Americans that may seem low, but in Japan it is, in fact, a very high rating. Several LDP premiers have had approval ratings that fell into single digits.

Though almost ignored in the U.S., the election could have serious foreign policy consequences. If Katsuya Okada, leader of the Japan Democratic Party, forms a government, he very likely would end the visits to the Yasukuni Shrine that irritate China and Korea. Indeed, there is evidence that the public at large is nervous about Koizumi’s annual visits, so it might be a good issue to run on.

He would likely withdraw Japanese soldiers from Iraq. Unfortunately for Koizumi, Samawah, where the Japanese are stationed, is in turmoil. One dead soldier might turn the entire election around. A new government would probably drop any plans to amend the country’s peace constitution and may not be as eager as Koizumi to move Japan militarily closer to the U.S., especially in helping come to the defense of Taiwan.

Then there is the issue of postal privatization itself. This is really the subject of an article by itself. It’s safe to say that any tinkering with a pot of wealth roughly equal to a third of the entire gross domestic product of the United States cannot help but have enormous implications for Japan and the rest of the world.

I’ll simply quote a key passage from a study by Jetro: “If the Japanese public . . . begins to invest their postal savings in private banks and other investment vehicles, the country’s economy will never be the same. Huge amounts of pent-up household capital would be moved into private financial markets. This would help to bolster not only Japan’s incipient economic recovery but, over time, financial markets around the world.” See more here.

November marks the 50th anniversary of the founding of the Liberal Democratic Party. This amazing organization held power virtually without break during those five decades. It would be ironic if this year spelled the electoral defeat and possible crackup of this historic party. Or, it could be the year the LDP gains a whole new lease on life. That is Koizumi’s great gamble.

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