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Issue 36, March 1999

New coalition in Japan

FOLLOWING THE budget and bills allowing the injection of public funds into the banking system, Keizo Obuchi's cabinet experienced a sudden outburst of optimism. Government ministers, conservative politicians and their supporters in the business community have been busy claiming 'the worst of the economic crisis is over', and that 'the economy is now on a recovery track'. They are attempting to temporarily boost the government's popularity, to buy time to manoeuvre. But, as one economist stated in a Reuters' report, 'the government has become 'the boy who cried wolf' and people are getting more and more sceptical'.

The formation of a coalition between Obuchi's Liberal Democratic Party (LDP) and Ichiro Ozawa's Liberal Party has provoked much speculation. Whilst it probably makes it easier to get legislation passed, the LDP government still does not have a majority in the Upper House. Therefore, the move cannot be explained in terms of parliamentary arithmetic alone. In reality, this development is a warning for the future as it signals a sharp turn to the right in policy terms. Obuchi is allying with the 'Thatcherite' Ozawa to rally support for a savage programme of cuts in living standards, deregulation and restructuring which he sees as necessary to restore the international competitiveness and profit levels of Japanese capitalism.

The government's target for economic growth for fiscal 1999 is 0.5%. However, most private forecasts predict growth of between zero and minus 1%. The IMF is predicting minus 0.5%, and its previous forecasts have been too optimistic. Even in business circles the bank bailout and budget stimulus have been greeted with widespread scepticism. Moody's Investors' Service downgraded the country's credit rating one day after the government announced its stimulus package. A recent Kyodo survey of business executives at major companies showed that 63 out of 100 believed the effect of the financial stabilisation measures would be limited, whilst only four said that the stimulus package will have considerably favourable effects on the economy. Even the big construction companies, who have most to gain from the stimulus package, fear that it will not compensate them for the fall in private-sector business investment.

  The large-scale issue of government bonds to finance the package has caused a collapse in the bond market exacerbating the problems of the banks with major bond holdings. Falling bond prices have also forced up interest rates, prolonging the credit cruch and increasing bankruptcies of small- and medium-sized companies. The rise in interest rates has led to a strengthening of the yen, hitting exports. The government is divided between what is at present a minority, who argue that the Bank of Japan should effectively print money to buy up bonds, and the majority, who argue this would lead to an explosion of state debt and even stagflation. It is clear that the government has reached the limit as far as large-scale fiscal programmes are concerned.

For the mass of the population now feeling the effects of the crisis, the situation is deteriorating further. Even the government expects unemployment to continue rising until 2001. The effects of the crisis are becoming daily ever more apparent in the form of the blue polythene 'shacks' of the homeless which line the riverbanks and fill the parks of urban areas. According to government figures homelessness has doubled in the past year to over 18,600 in the Osaka area alone. However, these figures mysteriously do not include Kamagasaki, the area of Osaka populated by the daily-paid construction workers, where even in 'normal' times homelessness is high. The increase in homelessness is a direct result of the exhaustion of unemployment benefits, which only last for a maximum of ten months (six months for most workers). Pious phrases about the 'need for a social safety net', and calls from the more radical unions to extend the period of benefit, have been met by government inaction.

An interim report of the prime-minister's Economic Strategy Council recently stated that the traditional Japanese social system 'overemphasizes equality and fairness', and that it should be reformed to create 'a sound, competitive society'. The claim that the present system is fair and equal, when the former head of NCB recieved a golden handshake of Y600m for leading his bank into insolvency whilst homelessness can be the reward for a lifetime of work, is laughable. However, this report shows the direction in which the government is moving. We can expect more legislation to 'de-emphasise' fairness and equality - like the government's proposals for 'tax reform' where those on high incomes receive income tax cuts, but 70% of wage earners will end up paying more.

  The recent agreement between Obuchi and Ozawa to establish 'new rules of national security' is another warning. Ozawa has argued that Japan should become a 'normal country' and revise its constitution so that it could send armed troops overseas. That would allow for Japanese involvement in operations like the recent attacks on Iraq. Not content with waging class war at home a section of the ruling elite would like to boost Japanese imperialism's ability to wage war to defend its interests abroad. A large section of the population now believes that things cannot continue as they are and that drastic change is needed. A recent Asahi Shimbun opinion survey showed 42% believe that the present economic and political system needs radical change, while a further 48% said that it needs some changes. The problem for the bourgeoisie is that most of the population seem to oppose the type of drastic change that they want to introduce: 61% opposed the government's tax cuts for the wealthy and 68% wanted a cut in sales tax; and most preferred a system with high taxes and good welfare provision to one with low tax and poor welfare. The poll showed that distrust in all the traditional pillars of the establishment - from politicians and bureaucrats to banks, scholars and police - has reached record levels: only 1% of the population thought politicans could be trusted, with 2% trusting the bureaucracy; and confidence in the banks has fallen from 52% in 1983 to only 7% today. The survey showed that 21% of those asked to choose the word that best describes Japanese society chose 'unequal', second only to 'confused' (31%) and just above 'selfish' (18%).

The Obuchi government's standings are still near record lows in the opinion polls. It has only survived this long, and succeeded in pushing through unpopular measures, because of the complete bankruptcy of the major opposition parties. Those voters who saw a vote for the Democratic Party in the Upper House elections last July as a vote for change have been disappointed. The Democratic Party is a pro-business party that has no real alternative policies to those of the Obuchi government. Instead of resolutely opposing the government and blocking its legislation they have supported it with only minor ammendments. In most of the guburnatorial and mayoral elections they are supporting candidates backed by the LDP. The same can be said for the Social Democratic Party and Komei.

The votes for the Japan Communist Party in the Upper House elections plus opinion surveys and referendum campaigns, like the one against the new Kobe airport, show the searching for an alternative by a section of the population. A left alternative of workers' parties, fighting trade unions and citizens groups against the tax reforms, deregulation, security guidelines and the government's pro-business policies could begin to fill the political vacuum that exists. The main obstacle to the creation of such an alliance is the conservatism and vested interests of the leaders of the labour movement. However, this obstacle can be overcome as pressure mounts from rank-and-file activists for action. In order to provide a real alternative to capitalist austerity, however, any such alliance would have to hammer out a fighting socialist programme of public ownership under workers control and management of the banks and major industries.

Simon Cole

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