Source: yahoo.co.jp
Monday saw the release by the Noda Cabinet of GDP figures for the period from July to September 2012, which showed a 3.5% drop in GDP, the largest since last year’s earthquake and tsunami disaster. For economic observers (and Minister for the Economy Maehara Seiji), this has triggered alarm bells that Japan is, yet again, in danger of falling into recession, making it the fifth (or sixth) recession suffered by Japan in fifteen years (E and E). According to Richard Koo, chief economist at the Nomura Research Institute, private sector saving in Japan is at 9% of GDP, a significant amount and one that is indicative of the contraction in the Japanese economy (this trend shared by many other countries with high levels of government debt to GDP, although in the case of Japan it has been exacerbated by over-reliance on government borrowing to fill the gap created by a lack of privately generated revenue).
At the same time that Japan’s government debt to GDP is at 230%, making it the highest of any industrialised economy (and on track to hit 270% by 2017), Japan is also facing a looming social security crisis in its aging population. In two years’ time, 1 in 4 Japanese citizens will be aged over 65. By 2022, 30% of Japan’s population will be over the age of 65 (Max Walsh, “Japan’s sorry state a lesson for others”, AFR November 13 2012, p.55). What this of course means is that bar a sudden surge in taxation revenue and welfare reform, Japan’s population is going to experience a calamity in aged care the likes of which modern societies have never been seen before. There will, in other words, be an increase in elderly deaths as a result of neglect rather than natural causes, an unprecedented situation for a modern state and one that will lead to condemnation of the state for its failure to provide the basic needs of its citizens.
While the Noda government has made attempts to redress the looming demographic crisis by pushing through legislation to raise sales tax rates and issue state bonds (which have led to splits within the DPJ, not to mention tough negotiations with opposition parties to gain their consent for such measures) , the standard government response to negative economic data has been to turn to the Bank of Japan to provide stimulus packages to bolster small increases in growth. The problem is that such measures are only temporary, and have not solved the more fundamental need for economic reform that lies at the heart of Japan’s current economic malaise (E). For the best part of two decades, economists, journalists, academics, indeed the whole span of Japan’s intelligentsia have been calling for greater de-regulation and reductions in trade barriers, tighter fiscal spending, prioritisation of FTAs, greater domestic market access for foreign companies and support for foreign investment in Japan in order to shake up a lethargic domestic market and increase competition among domestic industries. Yet the outcome of all this effort has been disappointing, to say the least. Despite evidence that twenty years of quantitative easing measures have done little to alleviate long term problems (and have instead exacerbated them by increasing public debt), no political party has approached questions of fundamental fiscal reform with anything like the sort of fortitude necessary to make them happen, and so old methods have been clung to out of the belief that they are the only (acceptable) means of dealing with large scale fiscal problems.
This makes recent speculation about whether Japan will formally join TPP negotiations with a view to becoming a member all the more intriguing while simultaneously undermining hopes that Japan will make a decision in its own best interests. At the heart of the argument against Japan joining the TPP is the Japanese agricultural sector. For Japan to agree to join the TPP would, according to the said industry (and former /current government ministers reliant on rural votes), destroy Japan’s agriculturally based businesses and eliminate Japan’s (already reduced) levels of food self-reliance. These concerns are, however, are mooted by the fact that Japan’s agricultural sector is already fossilised (a majority of farmers are aged over 60, and do not rely solely on farming as their main source of income), heavily subsidised (to the detriment of other, more profitable sectors), and long overdue for exposure to foreign competition. Any decision to join the TPP would have to followed by an equally firm response to attacks from the agricultural sector, something that neither the LDP nor DPJ have been willing to do while rural sectors provide both parties with a large source of votes (E). Hence the fact that PM Noda has been reviewing Japan’s position vis-à-vis the TPP (J) has once again led to suspicions that more members of the DPJ will exit the party rather than risk their re-election chances on an initiative that is not in their immediate interests (J).
Speaking of elections, on Wednesday night PM Noda made it clear that, if the LDP/Komeito opposition parties were prepared to support two DPJ bills to reduce the number of electoral districts (a plan initially advocated by the LDP/Komeito Coalition) and approve the release of debt reduction government bonds, then he will dissolve parliament on Friday with voting for House of Representative seats to take place one month later (J). As many commentators and editorials have noted (J), for a PM to announce the specific date for a general election on the floor of the House of Reps is a rare event in Japanese politics, and evidence that PM Noda, having decided that the falling popularity of the DPJ, internal party friction, a poor economic forecast, Ozawa Ichiro’s being found innocent (once again) of fiscal impropriety, and the possibility of a third national party gaining traction in DPJ seats (such as a coalition between Hashimoto Toru’s Reform Party, Ozawa’s People First Party, and the newly formed “Party of the Sun” of Ishihara Shintaro) may spell electoral annihilation for the DPJ should the situation be allowed to continue into the new year , and so bit the bullet and made his offer knowing that it would be accepted.
Yet as the WSJ Japan editorial pointed out, even if Abe Shinzo and the LDP were to return to power after three and a half years in opposition, what would this mean for the nation? Given the fact that the LDP were originally ousted in 2009 after the populace grew tired of ineffectual politicians mouthing empty platitudes, government rule by the DPJ proved to be just as disappointing as its predecessor. Hence it is difficult to believe that Abe and the LDP, as bastions of the old order of political rule, can offer any new initiatives (or shake-up long stagnant policies) to a cynical public who have seen government change hands only to end up in exactly the same malaise as before (J). Gerald Curtis has pointed out that what Japanese politics lacks at present is any sense of political leadership, of actually taking those decisions which ultimately will prove beneficial to the nation in the long term. This, Professor Curtis explains, is indicative of a political system that is still beholden to the bureaucracy, a situation that will not change for the foreseeable future (E). If Abe actually had the capacity to lead then there might be grounds for optimism, yet Abe is as captive to the interests of his party and its bureaucratic ties as he has ever been.
At the very least, the general election may produce some entertaining moments of unbridled bombast, rhetorical contortions, and hyperbole gone overboard. What it won’t produce is an answer to the slow disintegration of Japan’s political system, and might ultimately be ruled unconstitutional (given the fact that the electoral district map has not been finalised pending a decision from parliament, and that the Supreme Court of Japan has ruled that the current map is invalid).
At the same time that Japan’s government debt to GDP is at 230%, making it the highest of any industrialised economy (and on track to hit 270% by 2017), Japan is also facing a looming social security crisis in its aging population. In two years’ time, 1 in 4 Japanese citizens will be aged over 65. By 2022, 30% of Japan’s population will be over the age of 65 (Max Walsh, “Japan’s sorry state a lesson for others”, AFR November 13 2012, p.55). What this of course means is that bar a sudden surge in taxation revenue and welfare reform, Japan’s population is going to experience a calamity in aged care the likes of which modern societies have never been seen before. There will, in other words, be an increase in elderly deaths as a result of neglect rather than natural causes, an unprecedented situation for a modern state and one that will lead to condemnation of the state for its failure to provide the basic needs of its citizens.
While the Noda government has made attempts to redress the looming demographic crisis by pushing through legislation to raise sales tax rates and issue state bonds (which have led to splits within the DPJ, not to mention tough negotiations with opposition parties to gain their consent for such measures) , the standard government response to negative economic data has been to turn to the Bank of Japan to provide stimulus packages to bolster small increases in growth. The problem is that such measures are only temporary, and have not solved the more fundamental need for economic reform that lies at the heart of Japan’s current economic malaise (E). For the best part of two decades, economists, journalists, academics, indeed the whole span of Japan’s intelligentsia have been calling for greater de-regulation and reductions in trade barriers, tighter fiscal spending, prioritisation of FTAs, greater domestic market access for foreign companies and support for foreign investment in Japan in order to shake up a lethargic domestic market and increase competition among domestic industries. Yet the outcome of all this effort has been disappointing, to say the least. Despite evidence that twenty years of quantitative easing measures have done little to alleviate long term problems (and have instead exacerbated them by increasing public debt), no political party has approached questions of fundamental fiscal reform with anything like the sort of fortitude necessary to make them happen, and so old methods have been clung to out of the belief that they are the only (acceptable) means of dealing with large scale fiscal problems.
This makes recent speculation about whether Japan will formally join TPP negotiations with a view to becoming a member all the more intriguing while simultaneously undermining hopes that Japan will make a decision in its own best interests. At the heart of the argument against Japan joining the TPP is the Japanese agricultural sector. For Japan to agree to join the TPP would, according to the said industry (and former /current government ministers reliant on rural votes), destroy Japan’s agriculturally based businesses and eliminate Japan’s (already reduced) levels of food self-reliance. These concerns are, however, are mooted by the fact that Japan’s agricultural sector is already fossilised (a majority of farmers are aged over 60, and do not rely solely on farming as their main source of income), heavily subsidised (to the detriment of other, more profitable sectors), and long overdue for exposure to foreign competition. Any decision to join the TPP would have to followed by an equally firm response to attacks from the agricultural sector, something that neither the LDP nor DPJ have been willing to do while rural sectors provide both parties with a large source of votes (E). Hence the fact that PM Noda has been reviewing Japan’s position vis-à-vis the TPP (J) has once again led to suspicions that more members of the DPJ will exit the party rather than risk their re-election chances on an initiative that is not in their immediate interests (J).
Speaking of elections, on Wednesday night PM Noda made it clear that, if the LDP/Komeito opposition parties were prepared to support two DPJ bills to reduce the number of electoral districts (a plan initially advocated by the LDP/Komeito Coalition) and approve the release of debt reduction government bonds, then he will dissolve parliament on Friday with voting for House of Representative seats to take place one month later (J). As many commentators and editorials have noted (J), for a PM to announce the specific date for a general election on the floor of the House of Reps is a rare event in Japanese politics, and evidence that PM Noda, having decided that the falling popularity of the DPJ, internal party friction, a poor economic forecast, Ozawa Ichiro’s being found innocent (once again) of fiscal impropriety, and the possibility of a third national party gaining traction in DPJ seats (such as a coalition between Hashimoto Toru’s Reform Party, Ozawa’s People First Party, and the newly formed “Party of the Sun” of Ishihara Shintaro) may spell electoral annihilation for the DPJ should the situation be allowed to continue into the new year , and so bit the bullet and made his offer knowing that it would be accepted.
Yet as the WSJ Japan editorial pointed out, even if Abe Shinzo and the LDP were to return to power after three and a half years in opposition, what would this mean for the nation? Given the fact that the LDP were originally ousted in 2009 after the populace grew tired of ineffectual politicians mouthing empty platitudes, government rule by the DPJ proved to be just as disappointing as its predecessor. Hence it is difficult to believe that Abe and the LDP, as bastions of the old order of political rule, can offer any new initiatives (or shake-up long stagnant policies) to a cynical public who have seen government change hands only to end up in exactly the same malaise as before (J). Gerald Curtis has pointed out that what Japanese politics lacks at present is any sense of political leadership, of actually taking those decisions which ultimately will prove beneficial to the nation in the long term. This, Professor Curtis explains, is indicative of a political system that is still beholden to the bureaucracy, a situation that will not change for the foreseeable future (E). If Abe actually had the capacity to lead then there might be grounds for optimism, yet Abe is as captive to the interests of his party and its bureaucratic ties as he has ever been.
At the very least, the general election may produce some entertaining moments of unbridled bombast, rhetorical contortions, and hyperbole gone overboard. What it won’t produce is an answer to the slow disintegration of Japan’s political system, and might ultimately be ruled unconstitutional (given the fact that the electoral district map has not been finalised pending a decision from parliament, and that the Supreme Court of Japan has ruled that the current map is invalid).
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