Tumultuous Phase ahead in Japanese Politics as DPJ loses Polls in Upper House

The ruling Democratic Party of Japan (DPJ) faced a stinging setback in the Upper House election held on 11 July 2010. It won just 44 of the 121 seats it contested, which is far short of the previous total of 54 and much less than the 60 seats needed to claim a majority in the Upper House. Japanese voters were disappointed with the party’s apparent inability to deliver on promises to revamp Japan’s “sclerotic postwar order.”1 This will negate the efforts that Prime Minister Kan Naoto has to make to put the economy in shape. In a strong rebuke to the Kan government, voters deprived the DPJ and its tiny ally of a majority less than a year after the DPJ swept to power with lots of promise and hope.

The ordinary voter has emerged as a new star in Japan’s political scenario. After tolerating the LDP for decades and now having seen the dismal performance of the DPJ, the Japanese voter did not hesitate to punish the political class for its policy misdeeds. As a consequence, Japan now has a “twisted Diet,” in which the opposition controls the Upper House and the ruling parties maintain control of the Lower House.

DPJ’s partner, the People’s New Party (PNP), drew a blank in these elections, while the main opposition party, the Liberal Democratic Party (LDP), won 51 seats. Though the DPJ controls the powerful Lower House, it would need the cooperation of other parties to pass most of the bills in the Upper House as Prime Minister Kan aims to revive the flagging economy and cut Japan’s massive public debt.2 The DPJ will face pressure from all quarters as it lacks the two-thirds majority in the Lower House that would have allowed it to bypass the Upper House.

After taking over the reins from Hatoyama Yukio, Kan’s priority has been to address Japan’s shocking financial situation. Warning that Japan was in danger of financial collapse, as Finance Minister Kan had proposed a hike of 5 per cent in the consumption tax. Though this was a bold move that came just before elections, the poll was seen as a referendum on the nine-month-old leadership of the party. Bringing such a tax proposal before an election – a political no-no in almost every democracy – and then vacillating when people expressed displeasure did put question marks on his leadership skills. It created an impression that the Democrats were ineffective as a party in power.

After the historic victory in August 2009, the DPJ’s fortunes changed due to financial scandals and disputes over the Futenma air base. Even as the DPJ was getting over these shocks, Hatoyama’s sudden resignation in June 2010 following criticism over his indecisive leadership was another blow to the party. The DPJ may find it even more difficult to implement its promises to strengthen social welfare and assert control over the powerful bureaucracy, especially in the situation of split majority.

Opinion polls had predicted a tough race for the Democrats, particularly after Hatoyama’s popularity had plummeted. Though the party chose Kan to succeed Hatoyama, his approval ratings too fell after he proposed to increase the consumption tax.3 Now, the DPJ may be forced to seek a coalition partner if it wants to pass bills to reform the nation’s economy. If it fails to forge a coalition, the country may see renewed political paralysis leading to the possible dissolution of Parliament and call for new elections. One possibility seems to be of approaching the opposition parties to cooperate on a policy-by-policy basis. The other possibility could be inviting the Your Party (a new party formed a year ago by disgruntled former LDP and DPJ members), which advocates small-government policies and which has emerged as an important party with 10 seats in a hung parliament. If its President Yoshimi Watanabe sticks to his position of not entering into a coalition with the DPJ, its role as a “gatekeeper”4 in the Diet would add a new dimension to Japanese politics.

Public perception of the DPJ’s performance seems to be divided; while some people are willing to give a reprieve to the party, others do not expect the DPJ to do wonders in just nine months. According to Professor Naoko Taniguchi of Tokyo Institute of Technology, the voters see a “leadership crisis” in Japan. This was for the first time since the mid-1950s that a party other than the LDP had been an incumbent party going into a national election. With Hatoyama’s fate in mind, Kan tactfully avoided foreign policy issues (particularly the Futenma base issue), which proved to be Hatoyama’s bete noire, and focused on economic issues, a strategy chosen to regain the party’s credibility with the voters.

Economic Issue

Kan warned the people that what happened to Greece could happen to Japan as well if the debt situation was not checked in time. For, Japan has “the highest proportion of outstanding debt in relation to GDP among major economies.” According to the Ministry of Finance, Japan’s gross national debt in 2010 was 181 per cent of GDP. Kan is aware that Japan needs to issue 44.3 trillion yen worth of new government bonds to pay for the 92.3 trillion yen budget of 2010. Tax revenue for the year is expected to fetch the exchequer only 37.4 trillion yen. “Servicing the national debt now uses 22.4 per cent of that budget, well in excess of spending on public works, education, science and defence spending combined.” The Kan government faces the real predicament of avoiding a Greece-like financial meltdown. Even if it were to go ahead with raising the consumption tax from the current 5 to 10 per cent, it would be inadequate to repair the country’s finances.5

However, the comparison with Greece may be flawed. Unlike Greece, which is a member of the Eurozone, Japan has the advantage of being able to pursue an independent monetary policy. While half of the Greek debt is held by foreigners, Japan is entirely self-financing.6 Japan has also deep pockets, implying that at least on paper it has the potential to pay off a lot of the outstanding debt. This realization itself will help avoid a crisis in confidence. If Japan can use its plentiful financial assets judiciously, the crisis may not be as serious as feared. Indeed, if one goes by the OECD or IMF definition, Japan’s net general government debt could be slightly less than 100 per cent and therefore not alarming.

LDP’s stand

The largest opposition party, the LDP, managed to put the brakes on its sinking popularity and performed better in the Upper House election. However, the young LDP legislators expressed displeasure with their party President Sadakazu Tanigaki over his failure to get a majority in the Upper House. This group of legislators wants both Tanigaki and the Secretary-General Tadamori Oshima to go, though this is unlikely to happen. This is because in the past the party has lost people’s support due to frequent leadership changes. Since 2006, when Prime Minister Abe Shinzo assumed office, the party leadership has changed every year. Under the circumstance, Tanigaki can expect to hold his post till September 2012 when his term expires. The LDP must be itching to regain power, which it had done once earlier by teaming up with the Social Democratic Party and the now defunct New Party Sakigake after losing in 1993. A similar turn of events is unlikely to happen any time soon since the LDP has only 116 seats in the 480-seat Lower House. One also reads rumours that the LDP is toying with the idea of forming an alliance with some influential coalition leaders, such as former DPJ Secretary-General Ozawa Ichiro and People’s New Party Leader Kamei Shizuka (sacked by Hatoyama).7 Tanigaki will fight hard to prevent the emergence of a grand coalition with some breakaway DPJ members so that he can remain at the helm till September 2012. But if a split develops within the LDP, politics in Japan will see a different ball game.

• 1. The New York Times, 11 July 2010, http://www.nytimes.com/20210/07/12/world/asia/12japan.html?_r=2&ref=worl……
• 2. http://mdn.mainichi.jp/mdnnews/national/news/20100712p2a00m0na004000c.ht……
• 3. http://mdn.mainichi.jp/perspectives/column/news/20100712p2a00m0na014000c…
• 4. “Bad for the DPJ, worse for Japan,” The Economist, 12 July 2010, http://www.economist.com/blogs/banyan/2010/07/japans_upper-house_electio…
• 5. Paul Jackson, “Could Japan Collapse?” The Diplomat, 8 July 2010, http://the-diplomat.com/2010/07/08/could-japan-collapse/.
• 6. Peter Tasker, “The Perils of Naoto Kan”, Newsweek, 7 July 2010, http://www.newsweek.com/2010/07/07/the-perils-of-naoto-kan.print.html
• 7. http://mdn.mainichi.jp/perspectives/column/news/20100712p2a00m0na002000c…