Depressing Historic Context of DPJ Victory from Nikkei Business

The Nikkei Business Magazine is a weekly print publication that is perhaps the Japanese equivalent of the Economist. In a recent article, they produced the following chart in their cover article to explain one context of the two parties in Japan — instead of the banal left v.s. right, liberal v.s. conservative, salaryman v.s. farmer dynamic, the article looks at the dynamic between the party promoting economic equality and the party promoting structural reform.

Reform v.s. Stability in Japan's political parties-small
Click image for a larger version of the scan.

To ensure that everyone can understand this post and participate in the discussion in the comments, I’ve translated the chart:

Reform v.s. Stability in Japan's political parties-translation

The Nikkei narrative goes something like this: following the bubble bursting in the early 90s, the LDP advocated economic stability and maintaining economic equality instead of structural reforms. Many reformers inside the LDP left the party to form a number of smaller parties. (For more context, see my recent post on the graphical timeline of the DPJ.)

However, several years later it was Koizumi who transformed the LDP in a party that advocated structural reform. In some ways this undermined the DPJ’s core platform and brought the pro-Koizumi members of the LDP to overwhelming victories. But after the Koizumi era, the DPJ effectively turned itself into the party that would correct the inequities of the Koizumi structural reforms, and the LDP old guard, never comfortable with being the party of reform in the first place, waffled on the issue of economic equality v.s. structural reforms until it abandoned the reform platform before the election — but too late to benefit from the shift in the public’s concern.

This type of fluctuation in the policies and philosophies between competing political parties isn’t new — it’s a natural development in party politics that political scientists call realignment. (To note one clear example for US readers, the Democrats were the dominant political party in the conservative South for a century from the 19th century until the 1960s, after during which time there was a slow reversal that resulted in the region becoming a stronghold of the Republican Party — the names of the parties didn’t change, but their constituents did.) That being said, it’s depressing to read an analysis that ultimately concludes that with the exception of the charismatic Koizumi, the party advocating the status quo and rejecting structural reforms is the party that wins.

DPJ supporters want to believe that the DPJ is still the party of reform. I wish this was the case — but as I see it, the DPJ is getting the little things right and the big things wrong. Minor improvements such as ending the kisha club system that grants preferences to big media and allowing married couples to keep separate names are welcome reforms. But as of this morning, the leadership appears to agree with Kamei Shizuka that borrowers should be able to skip repayments on loans, which will spread the “zombie company” phenomenon to Romero-esque levels. That’s definitely a policy heavily favoring so-called economic equality and not structural reform.

4 thoughts on “Depressing Historic Context of DPJ Victory from Nikkei Business”

  1. Koizumi himself was making an argument for economic security. He characterized budget trimming and privatization as moves that created a firmer economic foundation. It’s just that he got tired and left the political scene, opening himself up to opponents who painted economic program as a diabolical plot by the rich to gouge the poor.

    If the LDP had the energy to press on with the Koizumi program the public would still have listened. Instead, their response to the financial crisis was a wishy-washy corporate bailout program that the DPJ criticized as a continuation of the corporations-first policies of the LDP.

    The DPJ’s programs differ markedly from the LDP in that they focus on direct handouts and domestic demand stimulation at the expense of traditional public works. At least in this aspect they do offer a clear break with LDP policies and certain aspects of their program (strong yen!) do constitute major structural reform for the economy. Another is the elimination of dependent tax deductions which will push many more women into the labor force (with their maiden names intact!)

    The Nikkei always falls short when their gushing love for corporations (especially the biggest ones) gets in the way of their analysis. I am on board when they argue that the DPJ’s employment policies are about 30 years outdated, but it’s just not as simple as saying the party that argues for the status quo wins.

  2. “If the LDP had the energy to press on with the Koizumi program the public would still have listened.”

    Yes, and this is where Koizumi’s strategy was completely wrong. Instead of leaving the LDP and joining/forming a party that would promote his reformist agenda, he got impatient and hijacked the LDP, which he should have known would dither once he was gone and there were no suitable candidates to continue his legacy. In retrospect he generated the backlash we are seeing now. A flash in the pan, he will be. I think Japanese people will look back on him like they look back on Nakasone: with equal amounts of nostalgia and feelings of “what the hell were we thinking.”

    But I’m not sure about the idea of the DPJ as the party-of-structural-reform-forced- to-change-its-ways-to-screw-the-LDP-of-Koizumi line. I know the LDP did steal certain policies off the DPJ, but the current DPJ policy agenda (which includes repositioning ministers so that they have real authority, abolishing its policy research council so the party has less of a say over policy, and replacing workfare with welfare to allow greater labour mobility) are no less a structural change to the Japanese system of government than was Koizumi’s efforts to remove the FILP from the hands of the bureaucrats through postal privatisation. So I’m not really sure that the Nikkei has this right.

  3. “do constitute major structural reform for the economy. ”

    Missed that! The question is though, how consistent have these policies been for the DPJ?

    It is interesting. What you basically have is the classic Keynes/Smith split that has dominated political discourse in the West forever, but in a Japanese context both of these can be seen as “structural reform” because of the system of government spending set up since Japan modernised.

  4. And touching on the Kamei Shizuka situation — I’m not totally convinced this isn’t a way for Hatoyama to tone down Kamei’s comments in public while giving him a good scolding behind the scenes. A “trial balloon,” if you will.

    I would like to believe that if his plan to allow businesses to suspend repayment of principal for as long as three years shows any real momentum (and with Fujii as finance minister I have my doubts), there will be real outrage from many sectors of the economy — including banking — as well as the opposition.

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