Socialism Today                     The monthly journal of the Socialist Party
 
Home

Issue 32 contents

About Us

Back Issues

Reviews

Links

Contact Us

Subscribe

Search

Issue 32, November 1998

The Sun Sets for Japan's Leaders

    An international crisis
    The West demands inflation
    Into coalition

Japan never recovered from the economic crisis of the late 1980s. This economic stagnation, combined with the effects of the South East Asian turmoil, has reaped a bitter harvest for the LDP, Japan's ruling party. SIMON COLE describes the dawning of fundamental social and political change in Japan.

THE GOVERNMENT OF Keizo Obuchi, unpopular from its inception, has sunk to new lows in the opinion polls. A recent poll conducted by NHK (Japanese Broadcasting Agency) showed only 23% support for the cabinet: 57% opposed it and 40% wanted a general election 'as soon as possible'. The widespread contempt for the government is reflected in articles in the weekly magazines, the Japanese equivalents of the British tabloid, describing him as 'brain dead' and 'Takeshita's pet dog' (Takeshita was a previous premier and leader of a dominant party faction). They carry pictures of him asleep in the Diet. The selection as premier of Obuchi, who described himself as 'the least able candidate', marks a new stage in the decline of the ruling Liberal Democratic Party (LDP).

The demise of the LDP, which apart from a brief period in 1993-4 has held office since its formation in 1955, is a result primarily of the economic crisis and the failure of its economic policies. The Japanese economy has stagnated since the collapse of the 'bubble economy' at the end of the 1980s. Growth averaged only about 1% between 1990 and 1997, despite billions of yen being pumped into the economy on public works projects. These 'Keynesian' measures, whilst providing the LDP's backers in the construction companies with bumper profits, failed to spark a major upturn. Business circles feared that the resulting budget deficit was not sustainable in the long term, especially as Japan's rapidly ageing population would need greater spending on welfare. The previous government, led by Hashimoto Ryutaro, began to change tack, introducing a law limiting the deficit to 3% by the year 2000. It also cut back spending on public works, increased the amount the elderly have to pay for medical expenses and, in April 1997, increased the consumption tax from 3% to 5%. These measures succeeded in completely destroying consumer confidence and pushed the economy into recession.

  top     An international crisis

THIS DOMESTIC CRISIS was compounded by the Asian economic collapse of Autumn 1997, which cut exports and exacerbated the crisis in the financial system. The collapse meant a fresh burden of bad loans for the Japanese banks (now estimated at $1,000bn), which still had a hangover from the excesses of the bubble years. The government's financial deregulation measures, far from helping, have actually made the situation worse. When the government allowed Yamaichi securities to go out of business last Autumn, this further undermined confidence. The ending of restrictions on individuals opening foreign bank accounts and holding foreign currency has led to a flight of capital and a weakening of the yen, which has worsened the banks' finances.

Pressure mounted for a change of policy, in particular from US imperialism, which feared a Japanese collapse would push the world economy as a whole into recession. The Hashimoto government was forced to half-heartedly reverse course. It announced fresh public works expenditure and tax cuts in a desperate attempt to get the economy moving and to get consumers spending. However, the change of course came too late to save Hashimoto. With the government's policies in a state of disarray, the LDP suffered a devastating defeat in the July Upper House elections, losing 16 of its 60 seats up for re-election. Hashimoto was forced to take responsibility and resign.

The July elections shone a spotlight on the continuing disintegration of the LDP's traditional electoral base. As long as the economy was growing and the cold war continued, the LDP was able to maintain an alliance of business interests: farmers (who were guaranteed a protected market for their goods), the large urban small-business class (protected by regulations restricting large stores), and a section of better-off and politically more backward workers. This alliance is now coming apart at the seams. The government's deregulation and market-opening measures are a major reason for this. Opening markets to foreign agricultural produce, in particular fruit and beef, has cost it electoral support amongst the farmers. In Nagano prefecture, almost totally rural and a centre of fruit farming, the LDP gained just 17% of the vote, the Japan Communist Party (JCP) won 16%. Likewise, the removal of laws protecting small shopkeepers and other small business people, along with the difficulties they face due to the credit crunch, have cut into traditional LDP support in the urban areas. The consequences for those sections of workers hit by the deregulation measures have, of course, been even more severe. For example, the deregulation of taxi fares has led to a situation where it is not uncommon for taxi-drivers to work 16 hours a day, and to pay their employer to 'lease' their taxi. In the July elections the LDP failed to win a single seat in Tokyo or Osaka, the two biggest urban areas.

  Despite the growing unpopularity of the government there is still a contradictory consciousness amongst the mass of the population. There is a desire for 'change' or 'reform', but no clear idea of what that reform should entail. A large section of the population perceive the crisis as a result of the 'bad economic management' of the Hashimoto and Obuchi governments. The Democratic Party, a liberal pro-capitalist party backed amongst others by the big company unions, was the main beneficiary of this mood in the elections. It gained the support, for example, of both those reacting against the consequences of the government's deregulation and those advocating further deregulation and free-market measures. Cobbled together only months before the election, it has no real policies. Its major asset is its leader, Naoto Kan, popular for the role he played in exposing the supply of HIV-infected blood products to haemophiliacs. However, the big increase in support for the JCP, whose vote rose from 3.5 million in the Upper House election in 1992 to over 8 million votes in 1998, shows that a section of the population at least are looking for a left-wing alternative to the pro-business parties.
  top     The West demands inflation

THE TASK FACING the Obuchi government has been compared to that of a bald man trying to pull himself out of a morass by his hair. Hashimoto had already carried through tax cuts and fiscal stimulus measures demanded by the US. Obuchi has announced another six trillion yen in tax cuts, heavily weighted to benefit companies and high earners, but most commentators now admit that in the present climate this money will be saved rather than spent. Western economists such as Paul Krugman have urged that the government should commit itself to a long-term policy of printing money to deliberately inject inflation into the system, in an attempt to stem the deflationary spiral. Some Western leaders are now demanding the Japanese bourgeoisie adopt the very opposite of the economic measures that they themselves are pursuing at home.

The government is also being urged to take decisive measures to overcome the bad loan crisis. Here too they face a major dilemma. With the liberalisation of financial markets many Japanese financial institutions are unable to compete. The long-term interests of Japanese capitalism demand a rationalisation of the financial sector. They have been urged by some quarters to let 'inefficient' banks go to the wall. The problem with this is that in the short term it would probably worsen the situation. It was the failure of Yamaichi securities which led to last Autumn's stock market collapse. Rather than simply allowing them to fail they are looking to the state to manage a reorganisation. This is the logic behind the Obuchi government's establishment of a 'Bridge Bank'. However, the centre/right opposition has opposed this as insufficient, advocating the temporary nationalisation of banks, to be followed by privatisation once the bad loans are liquidated with the use of government money. With either of these proposals, workers through their taxes would end up bailing out the spivs and speculators, and even a rationalisation would mean a fire sale of currently overvalued land and stock assets held by institutions earmarked for liquidation, giving a further impetus to deflation.

  All the indications are that the slump is deepening. Even the Economic Planning Agency now admits the economy is in 'a prolonged slump'. Unemployment reached a record 4.3% in June. This figure underestimates the real number of unemployed. In July unemployment fell to 4.1% but the number in work actually decreased! This decrease was due to the increasing number of married women workers and workers nearing retirement age giving up a hopeless search for work. They are not counted as unemployed in the official statistics. For the first time youth unemployment is higher than amongst the over-50s. Some economists have estimated that 10-13% of workers employed by Japanese companies are 'surplus to requirements'. Although the idea that Japanese workers have a 'job for life' is a myth, or at best a half-truth, mass firings of workers on permanent contracts have not been seen for decades. With a social security system geared only to deal with short-term unemployment, social tensions could well reach explosive proportions. Mass redundancies would also have a corrosive effect on the post-war social contract, whereby workers are expected to show loyalty to their company in return for employment security and company welfare provision.

The Obuchi government appears hopelessly inadequate to deal with the devastating economic and social crisis facing Japanese capitalism. Most commentators do not expect this government to last very long. At the latest it must hold an election before 2000. It will probably be lucky to last through the Autumn. Obuchi even had difficulty in finding a finance minister. All of the LDP's big players refused the job, regarding it as a poisoned chalice. In the end, former premier Miyazawa took the post. At 78 years old this will probably be his last appointment: he doesn't have to worry about his future career and, as the finance minister generally held responsible for the excesses of the bubble years, he doesn't have much of a reputation to lose either!

  top     Into coalition

A DEFECTION OF only 15 LDP representatives would deprive the government of its majority in the Lower House. Obuchi's rival in the leadership election, Kajiyama, is already rumoured to be making overtures to the opposition. Although it can't be ruled out that the government may limp on till next year, a defeat for government legislation in the Upper House, or further financial shocks, could lead to attempts to remove Obuchi. In these circumstances the LDP would probably try to avoid a general election, which would mean a humiliating defeat for it, by agreeing to go into coalition.

Naoto Kan called in a recent speech for the formation of an 'Olive Tree' coalition. This was interpreted in the media to mean a coalition which would even include the JCP. The JCP, however, has made gains in the past period because, unlike the centre parties, it has not been seen as part of the political establishment. In most mayoral elections voters face a choice between a candidate backed by all of the major parties and a JCP-backed candidate. As far as policies are concerned there is little to chose between the LDP and bourgeois opposition parties like the Democratic Party. In fact, the 'liberal' opposition may be more keen to press forward with deregulation, weakening the labour laws and privatisation of the post office, than the LDP with its strong links to the government bureaucracy. While the JCP has made electoral gains, the vote for the Social Democratic Party (SDP) has fallen from 12% to just over 7% in July. This has been its reward for slavishly backing first the opposition and then the LDP government, abandoning most of its traditional policies. It has suffered from splits of the major part of its right wing to the Democratic Party and a section of its left to the New Socialist Party, which won about 1.6% of the vote in July.

Unfortunately, the leaders of the JCP do not appear to have learnt the lessons of the Social Democratic Party's demise. Seizing on Kan's words they are now rolling head over heals in wooing the Democratic Party in an attempt to pave the way for their entry into a coalition government. From a position where they ruled out any kind of united front with others on the left, they have now shifted to a position of calling for 'co-operation' with the Democratic Party and 'independent conservatives'. In a move reminiscent of the SDP's abandonment of its policies they have offered to 'freeze' their opposition to the US/Japan security treaty for the duration of a coalition government. There are strong forces within the Democratic Party opposed to any inclusion of the JCP in a coalition government. In particular, the leaders of Rengo, the right-wing union federation, are for their own reasons extremely hostile to the JCP. For the moment at least, it seems unlikely that it will be brought into government, though this cannot be ruled out at some time in the future.

  A DEFECTION OF only 15 LDP representatives would deprive the government of its majority in the Lower House. Obuchi's rival in the leadership election, Kajiyama, is already rumoured to be making overtures to the opposition. Although it can't be ruled out that the government may limp on till next year, a defeat for government legislation in the Upper House, or further financial shocks, could lead to attempts to remove Obuchi. In these circumstances the LDP would probably try to avoid a general election, which would mean a humiliating defeat for it, by agreeing to go into coalition.

Naoto Kan called in a recent speech for the formation of an 'Olive Tree' coalition. This was interpreted in the media to mean a coalition which would even include the JCP. The JCP, however, has made gains in the past period because, unlike the centre parties, it has not been seen as part of the political establishment. In most mayoral elections voters face a choice between a candidate backed by all of the major parties and a JCP-backed candidate. As far as policies are concerned there is little to chose between the LDP and bourgeois opposition parties like the Democratic Party. In fact, the 'liberal' opposition may be more keen to press forward with deregulation, weakening the labour laws and privatisation of the post office, than the LDP with its strong links to the government bureaucracy. While the JCP has made electoral gains, the vote for the Social Democratic Party (SDP) has fallen from 12% to just over 7% in July. This has been its reward for slavishly backing first the opposition and then the LDP government, abandoning most of its traditional policies. It has suffered from splits of the major part of its right wing to the Democratic Party and a section of its left to the New Socialist Party, which won about 1.6% of the vote in July.

Unfortunately, the leaders of the JCP do not appear to have learnt the lessons of the Social Democratic Party's demise. Seizing on Kan's words they are now rolling head over heals in wooing the Democratic Party in an attempt to pave the way for their entry into a coalition government. From a position where they ruled out any kind of united front with others on the left, they have now shifted to a position of calling for 'co-operation' with the Democratic Party and 'independent conservatives'. In a move reminiscent of the SDP's abandonment of its policies they have offered to 'freeze' their opposition to the US/Japan security treaty for the duration of a coalition government. There are strong forces within the Democratic Party opposed to any inclusion of the JCP in a coalition government. In particular, the leaders of Rengo, the right-wing union federation, are for their own reasons extremely hostile to the JCP. For the moment at least, it seems unlikely that it will be brought into government, though this cannot be ruled out at some time in the future.


Home | Issue 32 contents | About Us | Back Issues | Reviews | Links | Contact Us | Subscribe | Search | Top of page