Thursday, February 19, 2009

How can Japan be saved?

With the sudden departure of Nakagawa Shoichi from twin posts of finance minister and state minister responsible for the financial services agency (FSA), Yosano Kaoru has been elevated from state minister for economic and fiscal policy and now holds all three positions simultaneously, making him, to borrow a term from American politics, the Aso government's economy czar.

It is most likely a temporary arrangement; the government has indicated that he will stay in place until the budget is enacted, but thereafter the posts will be divided, either with Yosano being bumped back down to his state minister's post or with Yosano's becoming a "permanent" (insofar as anything about the Aso government can be described as permanent) replacement for Nakagawa.

Nevertheless, until that happens, Yosano bears a heavy burden — it is not for nothing that Ozawa Ichiro wished his go partner good luck, not least because Ozawa and his party will do all they can to make his life more difficult.

While he has a fairly straightforward task for the first month of his tenure, it is worth considering Yosano's views and speculate as to what might have been. Arguably, if Aso was sensible and chose his ministers — or at the very least his finance minister — on the basis of merit, Yosano would have been a fine first choice for the post he now occupies. While Yosano was perhaps denied the post due to his long advocacy of a consumption tax increase as the means to set Japan's finances right (and to Aso's need to reward Nakagawa for his loyalty), he has been nothing if not pragmatic, as he stressed at his inaugural press conference Tuesday. He has also, unlike the prime minister, been unflinchingly realistic.

While Aso has done everything in his power to play down the severity of the crisis and the responsibility of LDP governments for its severity, while repeatedly making the fanciful promise to make Japan the first country out of recession even as its economy declines faster than other developed countries, Yosano has served as the bearer of bad news. His speech at the start of the current Diet session is a good illustration of his thinking. The underlying idea is that if the government is going to ask for the people's forbearance, it must be straight with them. It must be forthright about crisis and the broader structural changes underway in the global economy, and must have a clear vision about how Japan should change over the long term in response to the crisis and broader trends.

This is consistent with his approach to politics as outlined in his 2008 book Dodotaru seiji / 堂々たる政治, which can be translated as Open Politics, in the sense of straightforwardness. It is telling that Yosano says, in the closing pages of the book, that his favorite word is "decency" (he uses the English), arguing that decency is a "weapon sustaining Japan" as it struggles to adapt. Yosano's vision of politics is not unlike Barack Obama's, in that he wants to deescalate conflict within the political system — he is a uniter, not a divider. He is opposed to "market fundamentalism," although not, he notes, opening Japan's economy more to the global economy. He wants to ensure, however, that the weak are protected. He also does what few in Japanese politics seem willing to do today: he defends the bureaucracy, suggesting that the failings of some should not condemn the good work done by most. Yosano stresses that there needs to be a clearer division of labor between bureaucrats and politicians, with the latter taking clear responsibility for big decisions about the direction of the state. (I heard Furukawa Motohisa, a finance ministry bureaucrat-turned-DPJ member, make the same argument in Tokyo last month.) It does no good for governance to demonize the bureaucrats and shift the blame for Japan's problems on their shoulders. He takes a nuanced view to the common reformist theme of "cutting waste," suggesting that while there are some wasteful expenditures that can be easily cut, other expenditures require more careful consideration as they can have tremendous impact on the life of citizens in forgotten corners of Japan. Similarly, he does not dismiss Nakagawa Hidenao's "Rising Tide" school offhand, but rather suggests that it is unrealistic to expect the automatic reconstruction of Japan's finances that Nakagawa believes will result if Japan simply gets its economy growing fast enough. With Japan's sinking deeper into recession, Yosano may not see his desired consumption tax increase any time soon, but the recession suggests that it might be a long time before Japan sees the kind of growth needed for a rising tide to lift all boats.

Yosano's thinking is strongly reminiscent of the LDP's old mainstream, a view that could be called "politics as administration." In another era, he might have been a successful prime minister governing in the "low posture" style, abjuring ideology while solving national problems.

The question, however, is whether Yosano's politics are appropriate for an era of faltering institutions, mounting economic insecurity, and the need for drastic change.

More than the debate over economic policy, this is the major difference between Yosano and Nakagawa Hidenao. Nakagawa's political vision is rooted in conflict. Arguably he subscribes to Carl Schmitt's view of the political, in which the political sphere is separated from other spheres of life by its divisions of the world into friends and enemies. As Schmitt wrote, "The political is the most intense and extreme antagonism becomes that much more political the closer it approaches the most extreme point, that of the friend-enemy grouping." [NB: I am not citing the controversial Schmitt to discredit Nakagawa.

Reading Nakagawa's Kanryo kokka no hokai 官僚国家の崩壊 (The destruction of the bureaucratic state), which was published around the same time as Yosano's book, I got the impression of Nakagawa as a politician in search of monsters to destroy. His bete noire, introduced in the introduction, is what he calls the "stealth complex:" a network comprised of the universities, the bureaucracy, the Bank of Japan, the financial world, and the media that works to retard reform and protect their vested interests. (He explicitly cites Eisenhower's military-industrial complex as his model.) He explores the way in which bureaucrats undercut political rivals by leaking information, how they dominate the policymaking process as "Japan's biggest think tank," and how through government by informal networks they have hollowed out the policymaking process so that no one is accountable. Japan, he argues, is ruled by a void. And in order to transform Japan, this stealth complex must be destroyed and politicians given firm control of policymaking, to which end he more or less endorses the Watanabe Yoshimi-Takahashi Yoichi-Eda Kenji administrative reform agenda, based on the notion that in hard times, bureaucratic rule must give way to political rule (a theme with deep roots in Japanese politics). The remainder of the book contains Nakagawa's countless ideas for Japan: a kinder, gentler market capitalism in which the Japanese people help each other without the government's intervention, a decentralized government and a bureaucracy reined in and accountable to the people, and a full embrace of the IT and green technology revolutions to revitalize the economy.

But running through it all — and through his writing at his blog — is the need for someone to blame for Japan's problems; someone other than the LDP, that is. His politics clearly require an enemy against which to direct political efforts, much like Koizumi Junichiro's emphasis on the "opposition forces" within the LDP who stood in the way of reform.

In short, between Yosano and Nakagawa there are two very different approaches to politics, two very different ways of tackling the problems facing Japan. With the implosion of the conservatives, it may in fact be these two men who are left fighting over the wreakage of the LDP after the next general election. MTC wonders what exactly Nakagawa is planning (i.e., whether he intends to bolt the party at an opportune time), but it may be the case that he is prepared to fight it out within the ranks of the LDP, that he's convinced that Japan's system is a two-party system and since one party is unacceptable to him — if his writings about the DPJ are to be believed — he has no choice but to fight on to remake the LDP.

And while Yosano himself is an unlikely prime minister, his worldview could provide the right mix of concern for Japan's downtrodden and an emphasis on (as Ozawa says) change so that things can stay the same.

The question, however, is which approach to politics is most likely to get things done. That, after all, is what the public has been waiting for for years: a government that will move deliberately to tackle the problems that both Yosano and Nakagawa believe ail Japan. I think Koizumi's enduring popularity has less to do with the content of his policies than that for the first time the public saw a government in action. Perhaps at times it was only the appearance of action, but it was a significant enough departure that I think voters still appreciate the former prime minister, much to the chagrin of writers like Morita Minoru. Which suggests that Nakagawa may be right that a confrontational approach is the only way to break the establishment and set Japan on a new course. Yosano's "softly, softly" approach simply expects too much goodwill from all actors, probably more goodwill than is possible in the midst of economic collapse.

But at the same time Nakagawa is far too forgiving of the LDP: the bureaucracy is as powerful as it is because it has governed hand in hand with the help of an LDP unable to govern itself. And I'm not convinced that the LDP can reform itself to become the party Nakagawa envisions without a cataclysmic defeat that forces the party into opposition.

Ultimately the picture that emerges from both books, however, is that the range of policy ideas in Japanese politics today is fairly limited. There is a general consensus that some form of decentralization is necessary, with varying degrees of scope. There is a general consensus in a broad swath of the political class of the need to reform the bureaucracy drastically and forge a new relationship in which the bureaucracy is an instrument of the cabinet. There is a growing sense of the need to develop and draw upon the skills and expertise of Japanese outside the bureaucracy. There is an acknowledgment of the need to fix the government's finances, with the debate focusing on the extent to which trimming waste from the budget will solve the problem. (and it is unclear where exactly the DPJ falls in this debate, seeing as how they've done everything they can to avoid talking about a consumption tax increase).

(Of course, what's missing from this consensus is the most pressing problem of all: how to replace foreign demand for Japanese goods with domestic demand for Japanese and foreign goods as the basis for Japanese economic growth.)

Given that an agenda has more or less coalesced, the overriding question in Japanese politics then is who can get the government moving. After watching three consecutive LDP prime ministers crash and burn, the public seems unconvinced that LDP is up to the task, no matter how passionately Nakagawa fulminates against the bureaucracy and castigates the DPJ as an enemy of reform. Nakagawa's diagnosis may be right, to an extent, but his cure has been tried, and it has failed. The LDP is too dependent on the bureaucracy for policymaking and its members too free to manipulate policy and undermine the prime minister to make the policies both Nakagawa and Yosano see as necessary.

It is entirely possible that the DPJ, should it form a government, will be no more successful — Japan may languish for years to come. If it does, it won't be for lack of recognition of what's wrong with Japan but rather due to an inability to reshape the system of government wholesale.

Good luck, Mr. Yosano (and Mr. Nakagawa).


Anonymous said...

Yosano Kaoru as you describe him in this article sounds like the kind of politician that Japan and the LDP needs at this time of uncertainty and division within the country and party. A politician who advocates and embodies straightforwardness could help dispel the cynicism and strife that seems to be the common denominator in the upper ranks of the LDP today. Unfortunately Yosano lacks the flashiness and personal charisma of Koizumi and as you say is something of a throwback to the era of colorless conservatives who ran Japan for much of the post-war. Yosano's economic views seem very sensible and solid to me. The Financial Times had an article on Yosano a few weeks ago in which they attributed to him the view that with its dire fiscal condition, Japan would be unable to become an engine of recovery for the global economy at this time. In other words he rejects the Keynesian path which has been adopted by the US and Britain and pushed by the FT, for Japan to follow.

Anonymous said...

As an addendum to my previous comment, I might add that though I have been critical of Koizumi in the past, I have to admit that he did combine both an attractive personal charisma and some substantial ideas for reforming the economy. He also persisted long enough in pursuing his ideas as PM to get results. At first I despised his economics czar Takenaka Heizo who appeared as a rather cocky (unJapanese-like) minister but recently had to rethink the reasons why Takenaka had to push as hard as he did to make the changes that were needed. I don't recall where (perhaps it was a WEF session) but Takenaka explained that the reason he had to push as hard as he did was because the major banks at first refused to do a thorough audit of their balance sheets in order to ascertain the trustworthiness of the values of assets and liabilities on the balance sheet.