Saturday, January 30, 2010

"Our Far East Partner"

The title of this post is the name of a propaganda film produced by the US Army sometime after the end of the occupation that I found at the Internet Archive. Makes for interesting viewing as we mark the alliance's fiftieth anniversary.

Professor Hatoyama holds forth

Before entering politics — the family business — Hatoyama Yukio was a fledging academic, a Stanford-educated engineer. His background as an academic is often on display when he delivers set piece addresses. He has a penchant for abstraction, for drawing upon broad principles and shying away from the nitty gritty details of policy. This tendency is perhaps common to all leaders, but Hatoyama seems to take particular interest in how to frame policies intellectually (see his persistent use of his pet term yuai last year).

Remarkably, Hatoyama only used the term yuai once in his latest address, his policy speech for the new ordinary session of the Japanese Diet. But in this speech Hatoyama once again spent an inordinate time discussing the abstract principles behind his government's policies, in this case the idea of "protecting life." It took nearly half the speech before the prime minister began discussing the specifics of his agenda.

And even then, the policies were discussed less in terms of specific items of legislation than in terms of goals to be achieved at some point in the future. Like his government's growth strategy, it is unclear how the Hatoyama government plans to get from where Japan is today to where it wants Japan to be in ten years. Japan faces serious, immediate problems, most notably continuing deflation. (For a reminder of why deflation is destructive, Brad DeLong recently linked to an old paper of his explaining "why we should fear deflation.") On this question of deflation, Hatoyama simply waved at his government's budgets and said that his government is promoting "strong and comprehensive" economic policies with the Bank of Japan. As the Economist reports, the truth behind the prime minister's statement is more complicated. On this question of deflation, what for most governments would be at the top of the agenda, Hatoyama breezed through it with nary a detail.

As was clear during last year's campaign, the DPJ under Hatoyama is much better on political and administrative reform than on the economy, promising reforms to the administrative and public-service corporations that have been a source for considerable waste through amakudari, writing the national strategy bureau into law, centralizing the cabinet's personnel management, and reorganizing agencies and ministries (perhaps for real this time, unlike the Hashimoto-era reforms that simply created agglomerated superministries). While this section is also short on policy specifics, it is at least rooted in a clear-headed assessments of problems in national administration and a consistent set of proposals to fix them.

The same cannot be said for Hatoyama's remarks on economic reform. Under the heading of "Turning crisis into opportunity — opening frontiers," Hatoyama renews his party's call for an economy and economic growth that serves individuals, instead of enslaving them. What follows is the familiar refrain of green technology as a chance to transform the Japanese economy, coupled with embracing Japan's links with other Asian economies, especially through the promotion of tourism (he speaks of "tourism policy" without stating what that means in detail). Similarly, turning to economically stagnant provincial Japan, he calls for the modernization of Japanese agriculture and the achievement of a fifty-percent rate of self-sufficiency in food production, although the only policy to which he refers is his government's plan for direct income payments to farmers, which could prove beneficial for Japanese agriculture but not without other policies. Hatoyama is a little better when discussing decentralization — he calls for the creation of an equal relationship between central and local governments and describes this year as year zero for the "regional sovereignty revolution," but once again, there are few specifics on how this will translate into legislation.

Compared to these sections on the government's agenda at home, the foreign policy section of the speech provides a useful guide to the Hatoyama government's thinking. This is in part due to the nature of foreign policy, which is more abstract and therefore involves fewer proposals in the form of legislation or regulation. A policy address can actually provide a useful guide to how a government approaches the world.

What does Hatoyama's address tell us about his government's worldview?

First, his government takes the US-Japan alliance seriously to the point of wanting to change it so that it is suitable for twenty-first century challenges. Tellingly, his section on the alliance discusses Futenma briefly — reiterating his promise that his government will have a plan by May, and that any plan has to square with the desires of the Okinawan people — but focuses mostly on transnational challenges, namely climate change, nuclear proliferation, and terrorism (briefly). He does not speak of deterrence or regional public goods. While it would be nice to get some statement on the security cooperation layer of what Hatoyama calls a multi-layered relationship, I understand what the Hatoyama government is trying to do. A US-Japan relationship that focuses on bilateral security cooperation to the exclusion of nearly everything else is inevitably an unequal relationship, a relationship in which the stronger US presses a weaker Japan to take on new roles and acquire new capabilities. A relationship in which the two countries discuss other issues, non-traditional security issues or development for example, is inevitably a more equal relationship.

Second, the Hatoyama government is determined to reorient Japan to Asia. For decades Japan has tried to square its Asia policy with the US-Japan alliance; henceforth Tokyo will have to figure out how the alliance fits in with its Asia policy. This change did not begin with Hatoyama, but it has definitely become more pronounced. What is clear in this speech and other statements by Hatoyama is that Japan is not "America passing" when it comes to China. Just as Japanese concerns about the US government's "Japan passing" were (are?) overwrought, so too are American concerns about the Hatoyama government's cozying up to China. Yes, the Hatoyama government wants a "strategic, reciprocal relationship" with China (a phrase that originated with Abe, by the way), but it also wants better bilateral relationships with South Korea, Russia, India, Australia, and the countries of ASEAN. He wants Japan to have numerous bilateral, trilateral, and multilateral relationships in the region, and he wants his country engaged in tackling transnational problems within the region and around the world. While there are plenty of obstacles standing in the way of realizing these foreign policy goals — not least the limits imposed on the government by the public's desire to see domestic problems fixed — these remarks provide some indication to how Hatoyama's government will act internationally.

With that in mind, this speech is still instructive even though it is short on policy details. Perhaps the most noteworthy lesson from this speech is what it says about the DPJ's political base. In one section Hatoyama discusses the goal of "not allowing individuals to be isolated." To that end his government will protect employment, regulate the use of temporary workers, and enabling women, the young, and the old to participate fully in the economy and make use of their skills. Combined with its advocacy for stagnant regions, there are hints here that the DPJ over time could become the party of outsiders and laborers (whose interests clash to a certain extent). The natural rival for this party would be a Koizumian party, rooted in the middle and upper classes, prosperous urban and suburban districts, and supported by big business. Given that the Koizumians have been virtually driven from the LDP, it is difficult, for the moment, to see the LDP becoming this party. For now, economic insecurity means both parties are competing to speak for the marginalized, but should the economy recover a cleavage of this sort may be likely.

Finally, reading this speech calls to mind another recent prime minister from a prominent political family whose speeches were long on vision and ideas (and phrases in katakana) and short on policy details: Abe Shinzo. Obviously there are major differences between how Hatoyama and Abe see the world — Hatoyama is at least interested in the problems facing the Japanese people today — but like Abe, Hatoyama seems disinclined to dirty his hands with crafting a detailed policy agenda or the messy work of making policy proposals reality (i.e., politics). I cannot help but wonder whether a leader who appears so uninterested in the details of his policies and so unwilling to fight for them can be successful in power.

Thursday, January 28, 2010

Upcoming television appearance

Readers in Japan will be able to catch me live on Sunday evening from 10:10pm, where I will be appearing on NHK BS-1 to debate the future of the US-Japan alliance with Okamoto Yukio, Michael Green, and Magosaki Ukeru.

General information is available here (in Japanese).

Monday, January 25, 2010

On the Nago election

My thoughts on the election of Inamine Susumu as mayor of Nago City can be found here, in the Wall Street Journal Asia.

Wednesday, January 20, 2010

Lest we forget

The US-Japan alliance turned fifty this week, and the allies celebrated by steering the conversation away from Futenma and releasing a 2 + 2 joint statement that reiterated why the alliance matters in the first place.

Kurt Campbell, the assistant secretary of state for East Asian and Pacific Affairs, also gave a press conference Tuesday that makes for interesting reading when it comes to thinking about the challenges the alliance faces going forward.

Campbell stressed that 2010 will be year for discussions within and between the two governments on the future of the alliance. He voiced a greater degree of understanding that the DPJ's early initiatives within the context of the US-Japan relationship are understandable given democratic politics than I think the Obama administration had done previously.

But while Campbell discussed areas of cooperation and the importance of deeper security cooperation, he did not say the US government hopes the outcome of bilateral consultations on security over the coming year will produce. To a certain extent, the US position is the same as it has been for decades and can be summarized in a single word: more. As a superpower that is facing burdens and challenges that will increasingly overwhelm its capabilities, the US needs allies like Japan to share the load now more than yesterday, and tomorrow more than today. More can be greater military spending or new military capabilities, constitution revision or reinterpretation, higher levels of foreign aid, or greater involvement in peacekeeping.

The problem, however, is that, as Brad Glosserman and Robert Madsen note in a Pacific Forum CSIS paper (not yet online), Japan may not be able to provide much more for years to come, if ever. Without substantial economic reform Japan may not be able to commit the material resources the US would prefer — and without serious economic reform the Japanese people will continue to have little or no interest in constitution revision.

In other words, despite the desire on the part of US officials from both parties to "strengthen" the alliance, the Yoshida consensus may continue to hold, in that Japan will continue to provide less security cooperation than the US prefers because its government is focused almost exclusively on economic challenges at home. The difference, however, will be that Japan's economic resources will likely continue to decline; withholding resources from the SDF today is for the sake of directing them into social security (above all) instead of using them to promote economic development as in the 1950s and 1960s. The question is whether the US will be able to live with a Japan that is, as Glosserman and Madsen note, more dependent on the US even as it is able to provide relatively less towards both its own defense and alliance cooperation.

As I've already written, fiscal constraints at home will not be the only factors preventing the realization of an "ever closer" US-Japan alliance. Whatever the latest headlines are concerning China's behavior, the lesson of the Koizumi years is that the Japanese people do not support a policy of unremittingly cold political relations with Beijing — and the lack of support for more military spending suggests that there is little stomach for an arms race. Japan is going to learn to live with a stronger, more confident China, and it will do so in part through closer relations with other countries in Asia.

Finally, while I am confident that the alliance will continue to exist in some form, it is worth considering ("lest we forget") how difficult it is to preserve an alliance aimed at an external enemy to an alliance that is, in Campbell's words, "basically aimed at no specific or particular nation." While some would off record that it is aimed at China, that would entail a discussion of what it means for an alliance to be "aimed" at a country. Given that we do not even know what Japan would do in the event of a war over Taiwan, it is hard to say that US-Japan alliance is "aimed" at China. Instead the alliance is chasing monsters of a smaller, more amorphous nature. Is there an alliance in history that has successfully transitioned from being aimed at some country or coalition to being aimed at "uncertainty" or instead of being against an enemy being for public goods? That's not to say it's impossible, but the Obama and Hatoyama governments have a difficult year ahead of them.

Here's hoping that the two governments approach the task realistically, acknowledge the limits of each country's commitment, and shape their future expectations accordingly. Perhaps it is fitting that the year began with Japan's ordering its refueling ships home from the Indian Ocean, an appropriate reminder of the continuing political and economic limits on Japan's contributions.

Why the Hatoyama government matters

As the Hatoyama government's approval numbers have faltered and more recently plummeted, as reports about the inappropriately large role being played by Ozawa Ichiro in the government (despite not being a cabinet minister) have grown, as doubts about Hatoyama Yukio's abilities as a leader have deepened, and as the court of public opinion internationally has handed down the verdict that the Hatoyama government is not only embarrassing to Japan but "risky," I have struggled to keep an eye on the big picture. The twenty-four-hour news cycle makes it difficult to do so: our attention spans shortened, we expect immediate results and solutions to problems that have emerged over years and decades and will take nearly as long to solve. Every drop in public opinion polls triggers panic, every note of discord becomes a crisis, and, closer to home for this Bay Stater, every by-election holds the fate of the nation in the balance.

But given that Japan is in the midst of unprecedented political change, it is essential to take a longer view, to not get so bogged down in cabinet bickering or opinion polls and to consider why the DPJ government matters in the first place.

Many analysts — U.S. alliance managers impatient for Japan to play a wider security role regionally and globally, investors hungry for supply-side reforms — implicitly measure the Hatoyama government's successes and failures on the basis of its progress in advancing their policy goals for Japan. (I don't think it would be wrong to say that these groups are nostalgic for the days of Koizumi Junichiro.) Others might measure the government's success in terms of whether it deliveries on its manifesto promises. Still others might look to raw economic indicators. Few analysts, if any (myself included) have articulated what success and failure mean for a DPJ government. We are sailing in uncharted waters. We do not know how to judge this new government. Should it be judged by the above standards? By comparison with the LDP? If so, which LDP? With Koizumi's LDP? With Koizumi's successors? With foreign governments? How do we judge this government?

In the longer term, we will have to judge it on the basis of its policy achievements — ultimately any democratic government will bejudged on whether the voters believe that they are "better off" since the government took power than before — but for now, a mere 100 days into the Hatoyama government, there is but one way to judge the Hatoyama government. Is it restoring the Japanese public's faith in their government?

The "lost" decades did not just erode Japan's prosperity. It also eroded the public's confidence in their elected officials and public servants. Corruption, trillions of yen of wasteful spending, non-responsive institutions, stymied reform, the promise and despair of the LDP during and after the Koizumi years: the combination of these developments was to shred whatever trust the Japanese people had in their leaders. They watched as their institutions struggled to restart the economy, as poverty increased, as public services withered and even vanished from some corners of the country, as pensions vanished. The election of the DPJ was both evidence of the extent of the breakdown of public trust — at last the voters would try another party — but also of the limits of the public's cynicism, as they were willing to see whether another party could do better.

Accordingly, the DPJ's mandate, above administrative reform, above economic reform, above pensions reform, is restoring the Japanese people's trust in their government. The Japanese government has to be made transparent and accountable. The Japanese people deserve to know what their government has done and will be doing in their names. Because few of the problems that Japan faces can be solved without the government's being able to ask for sacrifices from the Japanese people — and the Japanese people will not accept sacrifices, particularly financial sacrifices, unless they can trust the government that is asking for them. How, for example, can Japan build a more robust welfare regime without raising taxes? And how can the government raise taxes if the public does not trust the government to use the public's money wisely and transparently?

The Hatoyama government has to restore public confidence in Japan's political leadership. Reform that weakens the bureaucracy and strengthens the cabinet helps, but it is not enough. The government has to look like a government that can be trusted. None of the problems facing Japan can be solved if the government does not have the trust of the people. And it is for this reason that Ozawa is a problem.

The Tokyo Public Prosecutors Office may well be fighting a spirited battle on behalf of the old guard, as Michael Cucek argues. But to a certain extent that is besides the point. In going all out to defend Ozawa, the Hatoyama government risks looking like anything but a force for greater transparency and accountability in Japanese politics. Even if he manages to survive this latest investigation, Ozawa still ladens the DPJ with his and Japan's recent political past. At some point the Hatoyama government will have to break with Ozawa simply because any government that depends on Ozawa will have to contend with his tendency to secretiveness, his messiah complex, and his political baggage, a terrible combination of qualities.

I recognize that Ozawa is still in some ways indispensable for the DPJ, seeing as how he is able to control the party's backbenchers and manage the party's elections. But it may be worth losing his skills if it helps the DPJ rebuild public trust and pass the reins to a new generation of political leaders with the public confident in the government and some reforms already in place. Because ultimately the Hatoyama government is something of a placeholder, a transitional government from LDP to post-LDP government. The problems facing Japan took years to emerge, and solving them — and adjusting to relative decline — will take just as long or longer to resolve. It will be on Hatoyama's successors to make the greatest progress in fixing them, but whether they will be able to succeed will depend on whether Hatoyama is able to restore the public's trust in government.

That is how we should observe the Hatoyama government. Its policy successes and failures matter. Its budget deficits matters, although I am with Taggart Murphy in wondering whether the Japanese government might have more time than many think when it comes to its indebtedness. But above all, its conduct in the eyes of the Japanese public matters. And on this score, it is simply too early to declare one way or another — although the resolution of this latest Ozawa affair could have considerable significance in determining whether the DPJ is able to rebuild public trust.

Wednesday, January 13, 2010

The Ozawa saga continues

Say what you will about Ozawa Ichiro, but he is nothing if not resilient. In the nearly three years since the DPJ took control of the House of Councillors, he has resigned as party president twice, reversing his decision the first time in November 2008, returning as acting president in charge of elections the second time in 2009 and surviving to serve as secretary-general of the DPJ in power. Despite investigations into illicit real estate deals and connections with the construction company Nishimatsu, despite the indictment of his aide, despite being the target of attacks by the LDP and the media, Ozawa has remained, bloodied, perhaps, but undaunted.

Has his long and storied career finally come to an end?

The latest blow to Ozawa is a criminal investigation by the Tokyo prosecutor's office of Ozawa's support group, the Rikuzankai, for failure to report properly a 400 million yen donation that was used to purchase housing for Ozawa's aides. Ishikawa Tomohiro, a former Ozawa secretary now serving as a member of the House of Representatives, may be indicted for his role in the scandal.

As perhaps a sign of the gravity of the situation, the Hatoyama government declined to comment. Unlike last year, when DPJ leaders joined Ozawa in questioning the motives of the prosecutor's office, the Hatoyama government is taking a wait-and-see approach. For his part, Ozawa apologized to the Japanese people for the "misunderstanding" and said that there was no criminal intent in the misreporting of the donation suspected to have come from the Kajima construction company.

Perhaps not coincidentally, Ozawa has begun a tour of the country in anticipation of July's upper house election. Sankei and Yomiuri, which have enthusiastically cataloged Ozawa's political interventions, have both reported that Ozawa is shifting to a "low posture" and question whether it is a function of the deepening investigation or the approaching upper house election.

For that reason, there may be a silver lining to Ozawa's being under investigation and increasingly away from Tokyo on the hustings. Namely with Ozawa preoccupied, the Hatoyama government may find it easier to dispel the notion that it is under Ozawa's thumb and use the forthcoming Diet session to move its agenda instead of having to fend of accusations that Ozawa is the real ruler of the country. Meanwhile, the Ozawa scandal is also keeping the LDP from becoming a more effective opposition party, which is good for the DPJ if not for Japan. Like the Hatoyama scandal before it, the Ozawa scandal seems like an inviting target for the LDP, an easy way to attack the government without having to consider the party's future. Yamamoto Ichita warns his party that the DPJ's mistakes will not be sufficient for the LDP to regain the trust of the public, but I suspect that his warnings will go unheeded.

Of course, that is slight comfort compared to the risk that Ozawa could take the government's support down with him. For now the government and the DPJ have little choice but to hope for the best.

Whatever the reality of Ozawa's role in the policymaking process, he is casting his shadow over the Hatoyama government. Remarkably, the Faustian bargain the DPJ made with Ozawa to merge with his Liberal Party — a deal made when Hatoyama was last the president of the DPJ — continues to dog the DPJ. Ozawa was instrumental in positioning the party to unseat the LDP and take power, but only if it took on Ozawa's baggage: his history as Tanaka Kakuei's lieutenant and a leader of the LDP's largest and most notorious faction, his secretiveness, his tendency to lunge for fleeting opportunities that backfire (cf. the breakdown of the 1993-1994 non-LDP coalition), and his tendency to speak a bit too freely for his own good. The DPJ, for better or worse, knew exactly what it was getting when it joined hands with Ozawa — and it has not been disappointed.

Regardless of how the investigation plays out, it may be time for Ozawa to leave, at least after the upper house election if he survives this latest scandal. As indispensable as he is on the campaign trail, he is hurting the government. If Ozawa is serious about wanting to change Japan for the better, he must ask himself whether the Hatoyama government would be better off with him in retirement — provided that the Tokyo prosecutor's office does not determine the terms of Ozawa's exit from politics.

Tuesday, January 12, 2010

A new alliance in the making

Foreign Minister Okada Katsuya has arrived in Hawaii for a Tuesday morning meeting with US Secretary of State Hillary Clinton. Following weeks of bilateral acrimony, the two will discuss negotiations to strengthen bilateral cooperation on the occasion of the fiftieth anniversary of the US-Japan mutual security treaty, signed fifty years ago this month.

For the moment it appears that the US will — not without displeasure — set Futenma aside while a defense ministry team considers possible alternatives for building a replacement facility at Henoko bay. In advance of her meeting with Okada, Clinton said, echoing a recent New York Times op-ed by Joseph Nye (more on this in a moment), that the alliance is more important than Futenma, and she and Okada will discuss ways to improve cooperation instead of dwelling on the contentious base issue.

It is about time that the Obama administration stepped back from the brink. The administration ought to have known better. It is one thing to state that the US government understands the Hatoyama government's political constraints; it is another to act on the basis of this recognition and play it cool, recognizing that perhaps there is something unseemly about the US government's leaning heavily on the first Japanese government headed by a party other than the (longtime US client) LDP to abandon a campaign promise within weeks of taking power.

Nye's counsel of patience is well-timed and appropriate — as is his admonition that "a victory on Futenma could prove Pyrrhic" if it comes about through a heavy-handed approach to the Hatoyama government. Also appropriate is his reminder that the bilateral relationship is about China, as it was when Nye was at the Pentagon spearheading the review of the alliance in 1995. "Integrate, but hedge," writes Nye.

The problem, however, is that 2010 is not 1995. Japanese leaders and the Japanese public remain concerned about China's rise, but Japan's economy is far more dependent on China's than it was in 1996 when the US and Japan reaffirmed their security relationship. If anything, the idea of a threatening rise seemed clearer in 1996, when China was menacing Taiwan, than today, with China, its economy growing even as the developed economies struggle to recover from the global financial crisis, continuing to modernize its armed forces. Today China is an indispensable participant in global meetings but also, perhaps, a hegemon in waiting in East Asia. At the same time, the value of the US-Japan alliance as a security relationship may be less valuable today than in 1995. It would only be sensible for Japanese officials to wonder about the value of the US deterrent after what Stephen Cohen and Brad DeLong call "the end of influence." As they write in their new book by that title: "As money alters power relations, the United States is not simply becoming dependent — but it is no longer independent, either. That is a major change. And China is no longer helpless and cowed in face of the superpower hegemon; it has got a grip on it. Indeed, while the world peeks in, the two countries are realizing that they have thrown themselves into an intimate economic embrace with, to say the least, very mixed feelings."

The alliance is by no means valueless, but the terms certainly have changed. Japan can no longer afford to be wholly dependent on the alliance as its hedge against a violent turn in China's rise, because the US commitment may be less than ironclad. Even politically, Japan has plenty of reasons to desire good relations not just with China — as it watches the US develop the bilateral relationship described by its current secretary of state as the world's most important — but with other countries in the region that eye China warily even as they profit from its rise. The Futenma feud has, to a certain extent, drawn attention away from the Hatoyama government's other initiatives: the prime minister's multilateral diplomacy, but, more importantly, his visit to India, his government's first negotiations with Russia over the Northern territories (of particular importance to Hatoyama as the grandson of Ichiro, who restored Japan's relations with the Soviet Union in 1956), and the possibility of a rejuvenated partnership with South Korea. Analysts who see Japan's foreign policy decision as a dichotomous choice — the US or China — are missing the reality that Japan prefers to be dependent on neither, or rather prefers good relations with both (a "dual hedge") and moreover close relations with other countries in the region as a hedge against US-China competition and cooperation. It will take time for these diplomatic initiatives to bear fruit, but the Hatoyama government is moving forward with a clear vision. It recognizes the need to enhance Japan's influence in the region, and by signaling a renewed willingness to make amends for Japan's wartime past and a desire to deepen Japan's economic ties within the region (an important theme of the government's new growth strategy), the Hatoyama government is developing an Asia-centered foreign policy.

The question for the US and Japan going forward is what role the alliance can play in this more fluid regional environment. The hope that the US and Japan, along with other democracies, could present a united front tasked with integrating China peacefully has proven unrealistic. Instead the most salient division in the region may be that separating the US and China from the region's middle and small powers. Accordingly, the security relationship will be scaled back (as discussed here), making the dispute over Futenma that much more of a distraction. The future of the US-Japan relationship may be a hard security core linked to the defense of Japan and some form of US forward presence in Japan (in the same way that Singapore has facilitated the US forward presence in the region), looser political and economic cooperation in the region, and closer cooperation on global issues like climate change, nuclear non-proliferation, and the like.

What remains to be answered is how long the US will be willing and able to maintain forces in the region — and how much of the cost of basing them in Japan Tokyo will be willing to bear. The answer to these questions remains to be seen, but in time Ozawa Ichiro's offhand remarks last year about the US forward presence one day being reduced to the Seventh Fleet (and air force elements, as he later added) could prove accurate.

These changes will take years to unfold, and they are not foreordained: exogenous shocks of one form or another could take the region and its major players in different directions than that outlined here.

But the dream of 1996 has passed. The US-Japan relationship will be looser and less security-centered than alliance managers had hoped following the 1996 security declaration, the 1997 guidelines, and the Koizumi government's support for the Bush administration in Western and Central Asia.

Wednesday, January 6, 2010

Kan will replace Fujii

As expected, Fujii Hirohisa announced his resignation as finance minister on Wednesday. Hatoyama Yukio wasted no time naming his replacement: Kan Naoto will shift over to the finance ministry, and Sengoku Yoshito will take over for Kan as head of the national strategy bureau while continuing to run the government revitalization unit.

Kan's appointment was to a certain extent obvious. Having been deeply involved in the budgetary process, he is better able than most to defend the budget in Diet debates in the months to come. While Sankei — who else? — sees this move as the latest battle in the struggle between Hatoyama and Ozawa Ichiro for power (seriously, their article uses description of Hatoyama's facial expression — "disinterested" — when he answered a question about Ozawa's role in picking Kan to suggest that Hatoyama's answer that Ozawa wasn't involved masks something), moving Kan to the finance ministry will not hurt Hatoyama politically. Kan is a Hatoyama stalwart, has an independent following among the party's backbenchers, and is one of the few DPJ members with previous ministerial experience. As I suggested yesterday, it does raise questions about the future of the new cabinet organizations created by the Hatoyama government, both of which are now headed by Sengoku, but the role to be played by these bodies was already uncertain, and, as Michael Cucek suggests, might make their work more coherent. As finance minister, Kan may be more of a deputy prime minister than he was when he was actually deputy prime minister. He will be more visible as finance minister, having more opportunities to present the government's policies, and, if Ozawa is in fact wielding undue influence, Kan is in a better position to push back.

That is, unless Kan is occupied fighting the finance ministry's bureaucrats. While Fujii was one of their own number, Kan is very much not. After all, Kan made his name during the mid-1990s when as minister of health he fought his own ministry's bureaucrats over their response to an AIDS-tainted blood scandal. His early involvement — when he was at the peak of his popularity — in the political party being formed by the Hatoyama brothers gave the DPJ a boost during its first years. But by the same token, Kan has not made many friends in Kasumigaseki. While during the campaign he backed away from overheated anti-bureaucrat rhetoric, he remains on uneasy terms with the bureaucracy, including the finance ministry's officials. (Back in October, Kan gave a speech in which he referred to bureaucrats as oobaka/大ばか, which translates literally as great fools but also has some more colorful translations, for mindlessly squandering public money.)

It's possible that Kan's relationship with the ministry will be more antagonistic than Fujii's, but, on the other hand, given that the partnership between the Hatoyama government and the finance ministry is a matter of convenience for both sides — and that the ministry was shifting the DPJ's direction even before Fujii was tapped as finance minister — Kan may be able to maintain the relationship Fujii forged. And if Kan lasts in the job, he will be in a position to introduce lasting changes to the budgeting process, as discussed here.

Meanwhile, it bears asking whether Kan's appointment will have any consequences for the government's economic policies. We got a glimpse at Kan's thinking recently when he debated Takenaka Heizo, Koizumi Junichiro's reform czar, at a meeting of the committee responsible for drafting the government's latest economic strategy. Takenaka advanced his supply-side structural reformism: deregulation, privatization, and tax reform to encourage more investment by the private sector. Kan answered by defending the DPJ's focus on the demand side, stimulating more consumer spending. At the same time, Kan is adamant about cutting wasteful spending. Given Kan's role in drafting the government's economic strategy, his appointment will not make much difference in the outline of fiscal policy over the medium term.

But on other policy areas, Kan's views are less clear. He has stated that it is too soon to debate tax reform, including a consumption tax increase. It is unknown how far he will let the yen's value rise, although in a speech in November, Kan fingered the high yen as a cause of Japan's stagnant growth and said that the government would watch market developments carefully.

In short, the transition from Fujii to Kan will matter more in terms of its political ramifications for the Hatoyama government than for economic policy. Kan was already playing an important role in economic policy. Moving him to the finance ministry gives him more formal power as an economic policymaker.

Finally, it is worth noting just how unusual it is that Kan is now finance minister. Thirty years ago, Kan was first elected to the Diet as a candidate from Eda Saburo's Social Democratic Federation, which split off from the Socialist Party. Today he is the head of the ministry that is the very heart of the Japanese establishment. While it is common to point to DPJ politicians like Hatoyama and Ozawa and conclude that the DPJ is a pale imitation of the LDP, Kan's career shows that the DPJ's victory has brought new politicians with different backgrounds and different concerns from LDP politicians to the fore.

Tuesday, January 5, 2010

Masuzoe threatens the LDP

In a press conference at LDP headquarters Tuesday, Masuzoe Yoichi, the upper house member and former cabinet minister who is one of a handful of politicians respected by the public, said that while he will try to do what he can within the LDP, he said that his ultimate aim is a political realignment — and that he would not rule out any possibilities, including leaving the LDP to form his own party.

In the meantime, he is, in the best LDP tradition, forming a study group that will no doubt serve as a focal point for his reform movement.

Masuzoe has, of course, already criticized LDP president Tanigaki Sadakazu for his ineffectual leadership. The question, however, is what Masuzoe can do to realize a political realignment.

To do so he would have to be able to draw defectors away from both the LDP and the DPJ. Doing the latter will be difficult: Ozawa Ichiro has enough carrots and sticks at his disposal to ensure that the DPJ's backbenchers won't stray. Seeing as how the backbenchers thus far have little reason to defect for policy reasons, it is hard to see how Masuzoe could entice DPJ defectors. Which leaves the LDP. While Masuzoe is popular with the public and was a welcome presence on "two-shot" campaign posters for LDP candidates last summer, it is unclear just how much support he has within the LDP. He has prided himself on his independence, which has been good for his public image but bad for his ability to organize LDP members in a reform movement.

Given the current circumstances, a Masuzoe movement could wind up as little different from Watanabe Yoshimi's Your Party, which has been irrelevant since the Hatoyama government took power. And as I've previously discussed, reform within the LDP appears to be at a standstill. Tanigaki welcomed the New Year by calling for the Hatoyama government to resign, dissolve the House of Representatives, and call a snap election. (Seems a bit farcical for the LDP to challenge the DPJ on corruption.)

Reforming the LDP — or, alternatively, building a second major political party — will not be simply a matter of changing the party affiliations of politicians in Tokyo. Ozawa spent the 1990s trying to build a second major party in Tokyo and failed. Masuzoe will have to build a movement from the ground up, recruiting new candidates (preferably ones who are not hereditary politicians), crafting new policies that critique the DPJ's approach to public problems while offer constructive proposals, and genuinely starting a new style of politics. The DPJ itself is trapped between a new style of politics and the old way of politics, as Hatoyama's and Ozawa's scandals suggest. The DPJ's campaign over the summer pointed the way to a new, less personalistic style of politics in which political parties build and maintain national brands and in which national party leaders are capable of disciplining backbenchers and keeping them on message.

The biggest problem for Masuzoe may be policy. In the past I've referred to his way of thinking as "humane reformism." A critic of Koizumi Junichiro's populism, Masuzoe has, like the DPJ, stressed a focus on improving health and welfare services. I have a hard time seeing how the ideas expressed here, for example, are different from the ideas of Nagatsuma Akira's, Masuzoe's successor as minister of health, labor, and welfare. Like other rich democracies, political competition in Japan is increasingly based on valence issues, issues that the public is nearly uniformly opposed to or in favor of, perhaps with the exception of foreign policy. On the issues of greatest concern to voters, the two parties have either already converged or will converge to a narrow range, leaving the parties to compete in terms on issues like corruption, leadership, and the ability to follow through on its proposals. If the DPJ's reforms of the policymaking process stick, this last issue will be crucial. The flip side of the DPJ's introduction of political leadership is that it will be harder to blame the bureaucrats.

Given these constraints, Masuzoe may be better off staying in the LDP, getting it to take his ideas seriously, develop an LDP brand that can challenge the DPJ's on the issues voters are most concerned about, and change how the LDP practices politics so that the LDP can have at least some credibility when it challenges the DPJ on corruption. He is right to look the DPJ, which succeeded in part because it was more top-down and less hereditary than the LDP.

Fujii will depart

On Tuesday, Fujii Hirohisa, the seventy-seven-year-old finance minister who was hospitalized late last year, indicated that he will in all likelihood resign his post sometime soon. While he is officially waiting for his doctor's advice on his health, Fujii seems determined to resign.

In trying to dissuade Fujii from leaving, Prime Minister Hatoyama said that since Fujii "gave birth to a child" (the budget), he should stay on "to raise it." Fujii, however, insists that he will not be able to handle the strain of budgetary debates, suggesting that he will likely be gone before the ordinary Diet session opens on 18 January. (For those who want some groundless speculation about the reasons for Fujii's departure, Sankei has it all: declaring that it is "difficult to understand" the "suddenness" of the resignation of a seventy-seven-year-old cabinet minister who had to be hospitalized for exhaustion, it turns to Ozawa Ichiro — Sankei's villain of choice — to argue that Ozawa hounded Fujii to exhaustion, and, moreover, that Fujii was about to be hit with a political finance scandal from his days as secretary general of Ozawa's Liberal Party.)

Hatoyama's metaphor is probably not far off the mark. Considering that it seemed unlikely that the government would get its budget done before year's end after it ordered the finance ministry to cease work and decided to start over from scratch, it seems likely that Fujii bears considerable responsibility for completing the budget on schedule — to the detriment of his own health. A recent Foresight magazine article documents the extent to which the finance ministry has become unified with the government, thanks to the employment of Fujii and cabinet office deputy Furukawa Motohisa. The article suggests that there is some surprise in this development, but I must admit that I am not surprised at all. As the DPJ-led government struggles to cut wasteful spending and reform national administration, I expected it would increasingly find an ally in the the finance ministry, which, after all, still possesses useful skills for political leaders even if the political leaders are establishing the country's priorities. For all Foresight's evidence about links between the finance ministry and the government, there are few signs if any that the ministry has been calling the shots. While Fujii has been relatively quiet as finance minister— especially compared to some of his ministerial colleagues — I suspect the finance ministry's willingness to cooperate with the new government has a lot to do with Fujii's influence and experience with the ministry.

For the same reasons that I thought Fujii would make a good finance minister (and why it was wise of Hatoyama to coax him out of retirement and convince him to campaign again last year), his resignation will be a blow to the Hatoyama government. Replacing him will be a challenge. Not only will Hatoyama have to find someone who can control the finance ministry but he will also have to find someone capable of resisting or ignoring the machinations of Kamei Shizuka, which Fujii was able to do. Sankei provides some names of potential successors — Kan Naoto, the deputy prime minister, Sengoku Yoshito, the head of the government revitalization unit, or Noda Yoshihiko, one of two finance vice ministers — but of these three, perhaps only Kan is up to the challenge. Kan does not have Fujii's stature within the ministry, but he has been the DPJ's most eloquent spokesman on changing the budgetary process and is a significant enough figure within the DPJ that he would be equal to the job. The same could not be said for Sengoku or Noda. Of course, appointing Kan as finance minister would spell the end of the national strategy bureau as an important group within the government. Its development delayed, without a leading figure like Kan at its helm the NSB would likely become little more than a research and advisory body for cabinet ministers than a policymaking actor in its own right. While this development may be for the best, it will be a consideration as the Hatoyama government considers how to proceed following Fujii's resignation.

The media will try to spin this development as another blow to the government, but as usual, a bit of perspective is necessary. For once a senior minister is leaving office not because he has said or done something that embarrassed the government or (provided that Sankei's rumor-mongering is just that) because he has been found to have engaged in corruption, but because he is simply not up to the task physically. The Hatoyama government will replace him — not without some difficulty— and soldier on. Hopefully his successor will last longer in the job.

Sunday, January 3, 2010

The unrealistic DPJ?

In the Wall Street Journal, Ian Bremmer and Nouriel Roubini recently warned of the dangers of the Hatoyama government's "unrealistic" policies and advising Prime Minister Hatoyama Yukio to follow Barack Obama's lead.

Hatoyama, they tell us, needs to face up to reality. He "needs to become 'Hatobama,' a pragmatist ready to disappoint ideological allies and assuage centrist fears of a policy agenda his country simply can't afford."

They knock Hatoyama and the DPJ for "ambitious" and "contradictory" promises, repeat unquestioningly the Washington line that the DPJ risks undermining the US-Japan alliance (more on this in a moment), and finally worry that the DPJ is too strong, too unhindered and therefore could run up Japan's debt without triggering growth, producing an "an unnecessarily turbulent 2010." Hatoyama needs to become less ideological and more willing to compromise, like Obama.

The central premise of this op-ed is that if Japan struggles, it is because of the unthinking ideology of the DPJ and not because of the intractable problems that years of misrule by the LDP left for the DPJ to solve. There are several critical gaps, however, in this op-ed.

First, aside from suggesting that Hatoyama become more willing to "assuage centrist fears" — whatever those are — they offer few indications as to what the Hatoyama government should be doing. What, if anything, should the government scale back? What should it be doing instead? Japan's national debt is obviously a problem, but, on the other hand, given that the government has managed to run up the national debt to such considerable heights without facing disaster, it seems that Japan is in uncharted waters when it comes to the its debt-GDP ratio.

Second, and related to this last point, Bremmer and Roubini are vague about the consequences of the Hatoyama government's policies. "Unnecessarily turbulent?" What does that mean in real-world terms? More importantly, how much more turbulent could it get compared to 2008-2009? Alternatively, might not turbulence simply be the natural by-product of an electoral victory that even these authors recognize as "historic."

Third, their praise of the American system and its veto points and their recommendation that Hatoyama should act as if he faces a similar environment is strange considering that the DPJ is deliberately trying to move away from a system characterized by a surfeit of veto players, a system that prevented the LDP from introducing reforms that might have reoriented Japan away from its export-led growth model years ago. After years of governments paralyzed by a cumbersome policymaking system, a bit of turbulence may be a small price to pay for a government capable of articulating and implementing policies without having them die by a thousand cuts at the hands of lower-level bureaucrats and parliamentary backbenchers.

Bremmer and Roubini are right to call attention to the contradictions in the DPJ's program, but again, they do not consider that these contradictions are rooted in the contradictory challenges facing the Hatoyama government. As I have discussed in this post and elsewhere, the DPJ faces a trilemma: get the national debt under control, build a more robust social safety net, and develop a new economic growth model rooted in more consumption by Japanese and more investment in sunrise industries, which has heretofore been woefully deficient (with the additional wrinkle of cutting Japan's carbon emissions to 25% below 1990 levels by 2020). In other words, the Hatoyama government isn't just trying to engineer a "recovery": it is trying to, it needs to, construct a new economic model to replace the broken model of growth finally shattered by the global economic crisis. Economic growth alone is not good enough. Had the Japanese people wanted that, they could have returned the LDP to power, which as always promised growth plain and simple.

The problem is not that the Hatoyama government is too ideological, although perhaps on certain issues this complaint has some truth (temporary laborers, for example) — the problem is that the government runs the risk of being mired in these contradictory tasks, unable to deliver satisfactorily on any of them. This is an all-too-real risk, but if the Hatoyama government fails, it will not be on account of a lack of pragmatism.

The same goes for the US-Japan alliance. For all the talk of the DPJ's ideological inflexibility — whether out of conviction or a desire to preserve its coalition with the SDPJ and PNP — the DPJ-led government has proven to be flexible on the Futenma question. Trying to thread the needle between abandoning its promises to the Japanese people outright and saying no for the sake of saying no to the US, the Hatoyama government is trying to develop a constructive alternative to the 2006 agreement. And, meanwhile, when Americans talk of the Hatoyama government's "undermining" the alliance, I cannot help but wonder whether that is a threat or a prediction. If the DPJ damages the alliance, it will be as much the result of the Obama administration's reaction to the Hatoyama government as of the Hatoyama government's actions regarding Futenma.

The point is that both at home and abroad the Hatoyama government has been remarkably open to "pragmatic" solutions to the problems facing Japan. Indeed, if the government's public support has fallen it is because the government has been too yielding, the prime minister too reluctant to commit to a line of policy.

Hatoyama himself is certainly aware of the challenges before him, noting on his return to work Monday that 2010 is a "do-or-die" year for Japan.