Abe and the Triumph of the Old LDP
National elections and leadership transitions were a dominant theme of 2012. In China, General Secretary Hu Jintao passed the baton to Xi Jinping as expected. Russians brought Vladimir Putin back to serve another term as president, Americans reelected President Barack Obama, and South Koreans elected their first woman president, Park Geun-hye.
Japan also ended up holding a general election in 2012—on December 16, a month after Prime Minister Yoshihiko Noda abruptly dissolved the House of Representatives. The timing was unexpected, but the results were not: the Liberal Democratic Party, led by former Prime Minister Shinzo Abe, swept the Democratic Party of Japan from power in a landslide. On December 26, Abe was designated prime minister by the National Diet and launched his new cabinet. It was the sixth time in six years that Japan had replaced its top leadership, a record unparalleled among the world's major powers.
In the following I offer a brief assessment of this electoral reversal and the immediate outlook for government policy under a resurgent LDP.
Fragmentation and the LDP Landslide
The December 16 election dramatically altered the balance of power in the House of Representatives. The DPJ, which came to power in 2009 by winning 308 lower house seats, was left with just 57, while the LDP surged from 119 to 294.
Under the electoral system adopted a decade ago, the House of Representatives has 480 seats, of which 300 are chosen in single-seat districts and the remaining 180 are assigned by proportional representation. The seismic shift brought about by the 2012 general election occurred mainly among the 300 single-seat districts, where large, entrenched parties have a decisive advantage. The LDP won 237 of these seats—a full 84%—leaving the DPJ with only 27.
The magnitude of the DPJ's losses reflects the depth of Japanese voters' disillusionment with the party they chose in 2009 to lead them into a new era. The DPJ had promised not only new policies but fundamental changes in the way government works. That commitment had resonated deeply with an electorate fed up with government waste, inertia, and corruption after more than a half-century of LDP rule. Unfortunately, the DPJ government not only failed to deliver on most of its pledges but sank into dysfunction as party in-fighting and friction with the bureaucracy undermined the operation of government at the most basic level.
Another factor contributing to the LDP's landslide was the frenetic formation of new parties in the weeks leading up to the election. The field was crowded with candidates from a total of 12 parties—the largest number ever. In addition to groups led by locally-based politicians like the mayor of Osaka and the governor of Shiga Prefecture, a spate of ad hoc parties sprang up, as many DPJ politicians, intent on saving their own careers in the face of their party’s dismal approval ratings, abandoned ship and scrambled aboard one political lifeboat or another. Most of these makeshift parties had no chance of winning in the single-seat constituencies but fielded candidates there anyway in hopes of boosting their share of the vote in the proportional-representation races. The large number of candidates worked to the LDP's benefit by splitting the vote of people seeking an alternative.
In this connection, it is worth noting that the LDP's total single-seat-district tally of 25.64 million votes actually fell short of its performance in the 2009 election, when it garnered 27.30 million votes in these constituencies. An overall decline in voter turnout is partly responsible for this paradox, but party fragmentation is another reason the LDP managed to more than double its strength in the lower house with fewer votes than in the previous election, when it went down to a decisive defeat.
It's the Economy . . . For Now
The newly launched Abe cabinet has vowed to reverse years of deflation and stimulate economic growth. Even before the election, Abe's pledge to work with the Bank of Japan toward a target of 2% inflation had a salutary impact on the market, pushing Japanese stock prices up and the yen's value down.
Abe's cabinet lineup reflects his focus on revitalizing the economy. As his minister of finance and deputy prime minister, Abe has tapped former Prime Minister Taro Aso, who shares Abe's faith in an expansionist fiscal policy. He has also resurrected the Council on Economic and Fiscal Policy—inactive over the past three years of DPJ rule—as an advisory body for macroeconomic issues, and will use the newly established Economic Revitalization Headquarters to support decisions on short-term stimulus measures.
At the top of the agenda is the drafting of a 10 trillion yen supplementary budget for fiscal year 2012 ending March 2013, to be followed by the fiscal 2013 budget. The government needs to rev up the economy quickly, or it could come under tremendous pressure to reject the planned consumption tax increase when it makes a final decision in the fall of 2013. The cabinet's economic priorities are also apparent in its flexible stance on resuming operations at the nation's idled nuclear power plants, a message the markets have found reassuring.
Meanwhile, when it comes to foreign policy, the hawkish proclivities that overseas media reports have played up are nowhere in evidence—nor are they likely to be any time soon.
In the run-up to the LDP's September 2012 party election, Abe branded himself as a dyed-in-the-wool nationalist. He took a hard line on Japan's territorial disputes with China and South Korea and raised the possibility of retracting previous government apologies for past Japanese aggression and brutality—including the 1993 statement by Chief Cabinet Secretary Yohei Kono apologizing for the recruitment of Korean comfort women and the 1995 statement by Prime Minister Tomiichi Murayama expressing contrition for Japanese militarism. He has also threatened to reopen old wounds by visiting Yasukuni Shrine, where war criminals are honored alongside Japan's other war dead. Abe has called for a revision of Japan's war-renouncing Constitution and recognition of the Self-Defense Forces as full-fledged armed forces. All these positions have stoked concerns overseas, especially in China and South Korea, where the media have sounded the alarm over the installation of a right-wing nationalist cabinet.
For now, however, Abe seems unlikely to tackle this agenda. The top political priority for his cabinet over the coming months is positioning the LDP to win the July 2013 election for the House of Councillors, which the opposition forces currently control. Until the LDP can break the opposition's hold on the upper house, it will face major roadblocks passing any legislation other than that relating to the budget. For this reason Abe is likely to focus his early efforts on popular pump-priming measures, rather than embark on foreign-policy and defense initiatives that would almost certainly invite disorder in the Diet, cut into the cabinet's approval ratings, and jeopardize the LDP's chances in the July upper house election.
Abe may be serious about establishing a cabinet-level national security council and revising the government's interpretation of the Constitution to allow Japan to exercise its right to collective self-defense, but he is unlikely to pursue these pet projects before the upper house poll. Rather than repeat the DPJ's mistake of tackling too much at once and accomplishing nothing, the new LDP cabinet will opt to play it safe with a view to building support in preparation for July's election
The LDP's Rise, Fall, and Rise
The biggest concern with the Abe cabinet is that it seems to have given new life to the old LDP, reviving the same outdated approach to politics and policymaking that voters rejected just three years earlier.
Formed from the merger of two leading conservative parties in 1955, the LDP was able to remain at the helm for decades by building a mutually beneficial three-way partnership with the bureaucracy and key industrial lobbies. What made this profit-sharing “iron triangle” sustainable were the ever-increasing revenues generated by Japan's rapidly growing economy. By generously targeting these government resources in the name of "redistribution of wealth," the LDP secured the political loyalty of business interests and rural constituencies and built a nearly unshakable power base.
But entrenched power breeds political corruption. In the late 1980s and early 1990s, the public soured on the LDP in the wake of incidents like the Recruit and Sagawa Express influence-buying scandals. Meanwhile, the rapid economic growth that had sustained the LDP machine came to an end with the collapse of the 1980s asset-price bubble. Still, successive LDP administrations ignored this fundamental change and continued the big-spending policies that had kept it in power over the years. This is how Japan's public debt (central and local government combined) ballooned to twice the nation's GDP—dwarfing the overspending that has brought countries like Greece and Spain to the brink of default.
The LDP's historic defeat in 2009 was a public verdict against the LDP's way of running the country. Now the party seems to be regarding its December landslide as a mandate to resume exactly where it left off.
New Challenges for a Déjà Vu Government
An important mechanism by which the LDP maintained its mutual back-scratching arrangement with the bureaucracy and industry was the party's internal policy committees, in which senior LDP politicians met to set government policy in various areas. The powerful Tax System Research Commission, which exerted an iron grip over tax policy through the 1990s, played a key role on the revenue side, distributing government favors in the form of tax breaks. Business groups focused intense lobbying efforts on the panel, which then worked to revise the tax code. The DPJ objected to this arrangement, and when it took power, it established a government tax panel whose meetings were publicly streamed over the Internet.
One of the first things the LDP did after last December's election—even before Abe had taken office—was convene a meeting of the Tax System Research Commission to begin deliberating revisions to the tax code for fiscal 2013. After the meeting, Chairman Takeshi Noda justified the practice as a means of exerting political leadership over revenue issues instead of leaving the decisions to ministry officials.
Around the same time LDP headquarters began holding meetings of the various divisions of the party's Policy Affairs Research Council, the organs through which the LDP accommodated key interest groups via government expenditures. The Diet members who streamed into those meetings are zoku giin —the same politicians who kept the old LDP machine running through their policy efforts in behalf of powerful industry groups and other lobbies.
Tax and budget bills are first approved by the cabinet and then submitted to the Diet for deliberation. The initial policy decisions are thus the responsibility of the cabinet. The DPJ argued that the intervention of party politicians allied with vested interests led to corruption and irrational policy. Unfortunately, the DPJ's approach went too far in excluding party politicians from the policymaking process and contributed to the internal dissent and divisions that hastened its fall from power.
Rather than seek a happy medium, the LDP seems bent on resurrecting the old system wholesale so that powerful business lobbies can once again use the zoku giin to influence government policy .
Meanwhile, the cohesive internal factions that defined the old LDP are on the rise as well. All in all, the new government seems intent on a return to the “bad old days.”
But the environment in which the LDP is functioning has changed dramatically. Japanese society has aged and continues to age rapidly. The days of high-paced growth and ever-rising tax revenues are behind us. The government can no longer delay painful fiscal reforms. Yet policy by zoku giin tends always toward higher spending and lower revenues. The approach that helped maintained the political status quo during the era of rapid economic growth could propel Japan headlong toward a full-blown debt crisis.
Can the government maintain fiscal discipline in the face of the party's built-in bias toward wasteful spending? Shinzo Abe's old LDP and déjà vu cabinet are facing a brand new challenge—one for which they seem singularly ill-prepared.