Wednesday, March 26, 2008

Fukuda on the Razor's Edge

“I think the Diet is on the verge of collapse.”

The streets of Tokyo and other cities in Japan are strangely uncrowded these days. Many motorists are hoarding gasoline or making only necessary trips, in anticipation that the price of gasoline will drop substantially next week. Gas station owners are bracing for a huge influx of customers on April 1.

Negotiations between the government and the opposition Democratic Party of Japan (DJP) broke down Tuesday, which means that a “temporary” gasoline surcharge that has been in place for more than 30 years, expires on March 31, which is the end of the fiscal year in Japan.
But it will seem like a cruel April fools’ joke for Japanese consumers, since the tax is likely to be reimposed by the end of April. The tax amounts to 25 yen per liter. Its removal will bring the price of gas down to about 130 yen per liter, or about the price it was a year ago.

A ten-year extension of the gasoline tax passed the House of Representatives, the lower house of Japan’s bicameral parliament, in late February but has languished in the upper house, now controlled by the opposition. If the opposition takes no action by the end of April, the lower house can pass it again using its two-thirds majority.

Prime Minister Yasuo Fukuda’s political problems stemming from a divided national Diet are piling up. First there was the temporary demise of the navy’s refueling operation in the Indian Ocean, then the imbroglio over the appointment of a new Bank of Japan governor and now the gasoline tax.

In recent weeks the questions have shifted from when will Fukuda have to call a general election to how long he can hold on to power. Speculation is growing whether Fukuda may not last long enough to host the G-8 meeting in Hokkaido in July.

It is true that the problems stemming from a divided parliament would bollix any leader, but Fukuda has played his hand poorly, especially this past month. Exhibit A in the charge sheet is his handling of the pending vacancy at the Bank of Japan.

He waited until ten days before the incumbent’s term expired before nominating Toshiro Muto to succeed Toshihiko Fukui. When that nomination was voted down in the upper house, Fukuda simply put forth another candidate, Koji Tanami, a former administrative vice minister at the finance ministry..

For better or worse the opposition DJP has drawn a line in the sand – no senior bureaucrats from the Ministry of Finance! So what does Fukuda do but put forth another former finance ministry official, a virtual clone of the previous nomination. Just as predictably, the lower house voted that nomination down too.

So Fukuda is now in a real bind as he seeks to fill the now vacant post. Having seen two previous candidates humiliated in this fashion, what person with the stature needed for the post will agree to be nominated unless assured in advance that Fukuda has cleared it with the opposition leadership first? And is Fukuda capable of entering into this kind of genuine cooperation and consultation?

The temporary vacancy at the head of the bank since March 20 has caused relatively little practical dislocation of the markets so far, as both deputy governors were confirmed, and one, Masaaki Shirakawa, is serving as acting governor. But it is supremely embarrassing. The words “debacle” , “ farce” and a “national disgrace” are just some or the comments coming from the business community..

At a time when US Federal Reserve Chairman Ben Bernanke is in the news almost every day orchestrating rescues for major American banks, when international cooperation to prevent further collapse of the global financial system it is needed more than ever, it is excruciatingly embarrassing in Japan to see this important post waiting vacant..

Even members of Fukuda’s own party are speaking in apocalyptic terms. “I think the Diet is on the verge of collapse,” lamented Chief Cabinet Secretary Nobuttaka Machimura at a press conference. Fukuda himself has said he is at a loss what to do. The upper house’s obstinacy over the Bank of Japan appointment, is “incomprehensible,” he said

Yet behind all of the political maneuvering are real issues that seriously divide Japanese politics. The refueling issue of course, speaks directly to Japan’s role in the US alliance. As for the Bank of Japan, people have been criticizing the practice of parachuting senior bureaucrats into government institutes for years. The Japanese even have a word for it - amakudari or “descent from heaven”.

Even the gasoline tax relates to long-time criticism that the governing Liberal Democratic Party uses public funding to build needless roads and bullet train lines to maintain support in the countryside. The “temporary tax surcharge” is used exclusively for road construction. The opposition favors utilizing the gasoline tax revenues to help pay for other social services.

Some of the biggest criticisms of these practices have been advanced by “reformers” inside the LDP itself, although Fukuda has never been considered one of them. It seems as if it is taking an opposition party with some real leverage to bring them to the forefront.

I the face of these difficulties the Fukuda government’s approval ratings continue to slide. They are now in the low 30s. In addition to the problems associated with the divided Diet, the premier has other headaches, including the accidental ramming of a fishing boat by a destroyer. That incident and some other mishaps just cost the job of the chief of naval operations Admiral Eiji Yoshikawa.

Waiting in the wings, should Fukuda continue to falter again is former foreign minister Taro Aso, who lost out to Fukuda in the leadership contest that followed resignation of former prime minister Shinzo Abe last fall. He shared Abe’s hawkish outlook and obsession with nationalistic themes, such as revising the pacifistic constitution, ideas that do not seem to interest Fukuda.

But Aso has been expanding his outlook of late. He declined to serve as a minister in Fukuda’s cabinet and has been busy these past few months touring Japan and informing himself on issues of more concern to the general public, such as the pension system.

However, in any leadership contest he will be stymied by the fact that he heads the smallest faction in the Liberal Democratic Party, and there are others in the party who are beginning to measure the curtains in the prime minister’s office.

Monday, March 17, 2008

An Obsolete Mindset

The George W. Bush administration got a welcome early Christmas present last year in the election of the conservative candidate, Lee Myong-bak, as president of South Korea. It seems set to receive an Easter gift in Sunday’s presidential elections in Taiwan with the election of Ma Ying-jeou.

By most accounts, the former Taipei mayor and leader of the Kuomintang Party will defeat the ruling Democratic Progressive Party’s presidential candidate, Frank Hsieh, in the island’s presidential contest, March 22. It’s fair to say that both Lee’s predecessor, Roh Moon-hyun in South Korea, and Taiwan’s current president, Chen Shui-bian, were the Bush administration’s least favorite democratically elected Asian leaders.

Washington has been alarmed over Chen’s provocative moves concerning China, as recently exemplified by the referendum Sunday asking Taiwan voters if they want to join the UN under the name “Taiwan.” But it is even more concerned about what it perceives to be Taipei’s neglect of its own defenses.

Bush came into office promising to “do whatever it takes” to defend Taiwan. Early on, his administration proposed an extensive – and expensive – arms package, which inevitably raised objections in Beijing. Yet Taipei has repeatedly failed to appropriate the funds needed to acquire the weapons.

To be fair, it is the Kuomintang which has used its control over the legislature to block the appropriations, either out of concern that Beijing would consider the arms purchases as unnecessary or, more likely, out of sheer obstinacy. That may change once a KMT president is in office.

Of equal concern to Washington has been the fact that Taiwan’s defense budget steadily declined both in absolute terms and as a percentage of gross domestic product in the Chen years – just as China’s military budget has expanded exponentially. For his part candidate Ma has promised to raise defense spending to 3 per cent of GDP if he gains office. It had fallen to around 2.4% of GDP in recent years.

One thing that one can almost surely count on, whoever wins on Sunday, is a relaxation of the restrictions, restraints and disincentives placed in front of businesses investing more in China. Taiwan, of course, already has a massive stake in China. By some estimates the investments total more than $100 billion.

The pro-independence DPP, since it came to power eight years ago, has tried to discourage investment in the mainland and redirect it to other parts of Asia for fear that the island would become overly dependent on its arch-rival across the Taiwan Strait.

It has imposed investment caps, dragged its feet on regulations governing Taiwan’s investment in mainland banks, blocked efforts to establish direct transportation links, recoiled in anger when China lowered tariffs on such things as fruit and tried to direct investment inward through “invest in Taiwan” programs, or away from China toward Southeast Asian countries through its “Look South” campaigns.

None of this has been very successful in countering the extraordinary magnetic energy field of China’s vast and rapidly growing market just 90 miles across the Strait. Even before the election, the government was showing signs of bending on these restrictions in order to burnish its candidate’s credentials in the business community.

The government is lifting some of the restrictions that have prevented the island’s banks from taking full advantage of the liberalized banking market on the mainland. That has forced some banks to make an end run around the rules by investing in Hong Kong banks that have increased access to China under the Comprehensive Economic Partnership Arrangement.

As president, Ma will almost certainly enlarge on these measures and introduce others such as expanding the existing “charter” flights between Taiwan and the mainland and possibly going all the way by allowing direct transportation links. It is time to give up the obsolete mindset of the past few years and see China for what it is, the gateway to the region’s and the world’s markets.

Sunday, March 09, 2008

Something in the Air

The weather in Tokyo is turning warmer, the plum trees are in blossom and the waiting rooms in clinics that specialize in nose and eye problems are filling up with people suffering from runny noses, sneezing and bloodshot eyes.

Tokyo is known for many things: the Imperial Palace gardens, cherry trees in the springtime, super crowded commuter trains. But it has a more dubious distinction. It is also the world capital for allergies, especially for hay fever, known to the Japanese as pollen sickness.

Of course this is no secret to the bulk of the people living here, especially the estimated six or seven million who are prone to pollen allergies (based on general rule that 15- 20 percent of the Japanese population suffers from hay fever).

Tokyoites know that by the time the plum trees start to blossom in early March it is time to stock up on antihistamine tablets, eye drops, herbal medicines and face masks. The most susceptible to pollen may avail themselves of allergy shots and other more exotic remedies.

One might wonder whey an affliction usually associated with rural areas should affect the world’s largest urban conglomeration. The answer goes back to the years just before and just after the end of World War II. In those hardscrabble years, people denuded the forests of the nearby mountains to make charcoal to keep warm and cook food.

In the 1950s and 1960s the Japanese government undertook a successful reforestation program, planting millions of cedar trees, a cheap, fast-growing native tree and a prodigious pollen producer. Unlike in the U.S, where ragweed is the main pollen source, cedar and cypress trees cause the most suffering in Japan.

It was expected that these trees would be cut to produce timber, but Japan has found it more economical to import lumber from the U.S. and Canada, so they have been left standing. Now 40 to 50 years of age, they have reached their pollen producing peak, pumping literally tons of the irritant into the atmosphere.

The pollen seasons peaks in late February, but just as it dies down, the pollination of the cypress trees begins to kick in. So for those who suffer from both pollens, there is an unbroken period of sneezing and sniffling through the end of April.

Ironically, it is Tokyo’s urban nature that compounds the problem, since the pollen particles fall on asphalt pavements or on the roofs of buildings rather than being absorbed in the soil. Here they are picked up and blown around in little invisible eddies and whirlwinds.

The inexorable march of suburbia to the west has eliminated many of the farms and windbreaks that had once helped keep much of the pollen from reaching the city. But now the urban area of Tokyo extends to the very foothills of the mountains.

The forest agency, which had earlier planted 4.5 million hectares of cedar trees, now proposes to cut them down and reseed the areas with different broadleaf trees that produce less pollen. The goal is to halve the number of cedar trees by 2017.

Much of the impetus for this expensive program comes from Tokyo Governor Shintaro Ishihara who famously suffered a bad bout of hay fever in 2005, a particularly bad year when the pollen count soared some 4,000 percent over the previous year.

Hay fever is thought to have a measurable impact on Japan’s economy, both in a negative and a positive way. The Dai-Ichi Life Insurance Research Institute estimates that the economy lost about $3 billion due to absenteeism in the memorable hay fever year of 2005. On the other hand, Dai-Ichi Life also estimates that Japanese spend more than $6 billion a year on hay fever prevention products, such as eye drops and face masks.

In recent years the hay fever season has merged with the yellow dust peril to aggravate the woes of allergy sufferers. Yellow dust is the term Japanese use for dust that originates in China’s Inner Mongolia province and other parts of Central Asia and is blown east in prevailing winds.

When it settles, cities are bathed in a kind of yellow haze, similar to smog, and the dust particles get into everything. Television stations weather reports plot the approaching dust and recommend that people refrain from hanging washed clothes out of doors. In more extreme cases, the yellow dust can cut visibility to the point where airports close temporarily.

This being Japan, various exotic remedies have been proposed over the years to lessen the burden. One pharmaceutical company touts its olive leaf extraction product as a way alleviating hay fever symptoms without causing side effects such as drowsiness.

An institute associated with the Ministry of Agriculture, Forestry and Fisheries touts a new kind of genetically engineered rice the eating of which may produce an immune tolerance. The rice is said to produce an amino acid that mimics the cedar pollen and helps produce immunities.
However, the Health Labor and Welfare Ministry has been slow to classify the engineered rice as a safe food, disappointing many sufferer who had hoped it would be available from this year’s harvest.

This time of year newspapers carry stories filled with tips on how to prevent or at least alleviate the symptoms of hay fever. They all seem to boil down to the same piece of advice: find and wear a good face mask or stay indoors.

Sunday, March 02, 2008

Back to the Future

Well, he’s back. Last week Thailand’s former prime minister, Thaksin Shinawatra, returned to his country for the first time since he was ousted from power in a coup d’etat in September, 2006, there to face charges of corruption, which he will probably beat.

When the generals took power on that rainy night in Bangkok, it looked like Thaksin and his supporters were finished. But in an amazing turnaround his allies and supporters, if not the ex-premier himself, are now back in the saddle.

It’s as if those 17 months under partial martial law were nothing but a rumor.

To recap some of the recent events. After the Thai Rak Thai Party was disbanded, Thaksin’s supporters regrouped under the banner of the Peoples Power Party. It won very close to a majority in parliament in the first post-coup general election in December.

PPP leader Samak Sundaravaj had little trouble recruiting some smaller parties into a coalition and formed a government with himself as prime minister. The new premier lost little time getting into hot water with some boorish comments denying any deaths in the October 6, 1976, massacre of protesting students at Thammasat University.

Next he announced that a priority of his new government would be a renewed war on drugs. One of the criticisms levied against Thaksin, at least among human rights advocates, was his anti-drug trafficking campaign, in which some 2,500 people are said to have been murdered in extra-judicial killings.

Thaksin, it is said, gave tacit approval to the killings when he told the police to eliminate drugs from society through the use of “extreme measures”. This new emphasis is a “cause for worry”, wrote The Nation newspaper.

Samak said that he wouldn’t shed a tear if 5,000 drug pushers were killed by their own kind. “Such crass statements from government leaders who claim a public mandate through a democratic election go against the very principle of the rule of law, intoned The Nation.

It almost makes one nostalgic for the gentlemanly former interim prime minister, Suraya Chulanot, who administered the country during the post-coup months.

I don’t recall that drug use has been such a concern of late. As far as I can remember, it was not a prime concern of the previous administration. One issue that was a growing concern was the expanding insurgency in Thailand’s three southernmost provinces. And here the new government doesn’t have much to say. But in truth, the generals who took power in 2006 didn’t accomplish much on this front either. Drive-by shootings and assassination squad murders of opponents of separatism remain too commonplace.

On the economic front, one is not likely to hear much about the “sufficiency” economy, which is one of the pet theories of the King, and thus was at least given lip service during the interregnum months. The new government favors pro-growth policies that used to be called “Thaksinomics.”

As for Thaksin himself, he will be spending most of his time defending himself from various corruption charges. His first action on landing in Bangkok on February 28 was to go to court and post bail. (Ironically, Thaksin’s nemesis, publishing mogul Sondhi Limthongkul, was convicted of criminal libel the day after the election and is free on appeal).

The generals who seized power made much of Thaksin’s supposed corruption. Yet during the months they were in power they seemed to come through with few of the goods. It is true that Thaksin gamed the system for his personal and political advantage, but that may not be enough to convict him of anything.

That included the sale of his telecoms empire, the Shin Corp, on which he realized a huge personal profit and paid no taxes. That transaction, though technically legal, angered the people, especially as it went to a foreign (Singaporean) entity, and it of his new government would be a renewed war on drugs. One of the criticism levied against thaksin
led directly to his downfall.