The Liberal Democratic Party has been arguably the most stable and successful democracy since it was formed in 1955 – holding power for all but ten months of its 50-year reign (Callick 2005; McCurry 2005; Stewart 2005). However in recent months this resilience has been tested by the current Prime Ministers, Junichiro Koizumi, determination to privatise Japan Post’s personal insurance and household saving businesses by 2017 (Agencies 2005; BBC 2005b; McCurry 2005; McLeod 2005b; Pilling 2005; Sieg 2005; SMH 2005). After a vote of no confidence, Koizumi called a snap election to resolve the matter at the possible sacrifice of the both his leadership and the LDP holding power. Irrespective of whether the LDP receive a majority vote and forge ahead with Koizumi’s reform agenda there will be significant political and economic consequences for both Japan and the region.
Japan Post is effectively the world’s largest bank. Holding accounts of around A$3.91 trillion constituting a quarter of Japan’s total personal savings it is used by a staggering 85% of the population (CSM 2005; FPCJ 2005; SMH 2005; Stewart 2005). With around 300,000 employees across 25,000 offices, Japan Post is also Japan’s largest insurance company servicing three in every five people (Agencies 2005; Sieg 2005; SMH 2005). Perhaps because of the economic importance of this state-owned “Godzilla bank” (BBC 2005b), Japan Post has historically acted as a political tool in swaying voters in the rural areas (Amyx et al 2005, 29; McLeod 2005; Stewart 2005) and funding government projects (Amyx et al 2005, 26; McCurry 2005). Predictably, Koizumi’s plan to privatise Japan Post’s banking and insurance businesses faced opposition within the LDP as well as outside it as a result.
The internal division was first evident when Koizumi put the reforms to the lower house without first consulting his own Policy Affairs Research Council or the LDP’s Executive Council as had been customary (Amyx et al 2005, 28). Secondly, although the reforms passed through the dominant lower house on 5 July 2005 with a slim 233 to 228 vote (Pilling 2005). Intense pressure ensued and the dissenting members have been denounced, while one Minister even committed suicide after he was allegedly forced to vote for the bill after earlier declaring his opposition to it publicly (Japan Today 2005; Yomiuri Shimbun 2005). The third and most dramatic sign of the LDP’s instability came on 8 August 2005 as the upper house rejected the moderated ‘six-bill package’ 125 to 108 vote against. It is reported some 37 of the 138 LDP and coalition partner New Komeito members crossed the floor when the bill came in front of the 242-member upper house (Callick 2005; Dore 2005; Japan Times 2005; McCurry 2005; McLeod 2005b; Stewart 2005; Yomiuri Shimbun 2005). Rather than risking taking the bills back to the lower house to secure the required two-thirds majority which is required under Article 59 of the Japanese Constitution (Agencies 2005), or perhaps lacking the political conviction (EU Business 2005), Koizumi challenged the stability of the LDP and its rule of the government by calling a shock election for 11 September 2005. Regardless of the result of the election and thus the fate of the postal reforms, there is likely to be ramifications both domestically and regionally along the following spheres:
Political and Governmental:
Since Koizumi came to power in 2001 on the premise of privatising Japan Post, a central bank bureaucrat has stated that Koizumi’s reformist agenda merely masks underlying political motivation to decentralise his own party (Amyx 2004; SMH 2005; Stewart 2005) and diminish the ‘iron triangle’ between the government, businesses and bureaucrats (McCurry 2005; see also Curtin 2005). Koizumi has always personally avoided and indeed, sought to diminish, the 20-year influence of the Tanaka faction and its successor the Hashimoto faction, who have relied heavily on Japan Post both politically and economically (Amyx et al 2005, 38; see also Curtin 2005; McCurry 2005; Whitten 2005). It is widely estimated that the LDP receive around one million votes in this way from predominantly rural areas and so reform is not so popular among its benefactors or those who fear services and jobs will be lost as claimed (FPCJ 2005; McCurry 2005; McLeod 2005). Just days before the election opinion polls suggest that the Japanese voters appreciate Koizumi’s leadership and economic record over the relatively inexperienced Democratic Party of Japan (DPJ) (Whitten 2005). The financial markets seem to agree, as the Japanese Nikkei market remains resolute despite recent political uncertainty (Callick 2005).
Economic:
The reforms have profound economic consequences given decades of unprecedented ‘financial socialism’ funded the LDP’s political and public projects with private money that “won votes but spawned scandals and inflated government debt” (SMH 2005; see also CSM 2005; FPCJ 2005; McCurry 2005; Stewart 2005; Whitten 2005). The corrupt and unregulated nature of this system was already due to be tightened prior to Koizumi’s ascendency as Prime Minister in 2001 through the enforcement of private sector regulations under the Financial Services Agency in 2003 (Amyx 2005, 36). However, Koizumi is widely regarded as the major driving force behind taking reforms full circle by 2017. Assuming the privatisation bill is implemented, the Japanese government would be liable “to pay 533 billion yen a year in national and local taxes, according to its own internal estimates” (Amyx 2005, 40). Furthermore, Japan Post itself predicted it would contribute a further 200 billion yen to the Deposit Insurance Corporation, which would aid the “nonperforming loan problem in the banking system” (Amyx 2005, 40). Combined such financial inflows may have proved vital in averting, or at least alleviating, Japan’s chronic stagflation in the 1990’s (Agencies 2005; Stewart 2005) and the present level of public debt which is presently around 160% of Gross Domestic Product (Stewart 2005). Opening up nearly A$4 trillion of private savings to competition would also economically trickle throughout the region.
Regional:
While Koizumi had disappointed many with his appearance at the infamous Yasukuni shrine to those Japanese killed in wars since the 1800’s, on the 60th Anniversary of the Second World War in early August Koizumi spoke of the “great damages and pain to people in many countries, especially our Asian neighbours, through colonialisation and invasion” (McCurry 2005b). This symbolic gesture is believed to have moderately appeased the Chinese and South Koreans (Dore 2005) whilst simultaneously addressing domestic concerns over Japan-Asia relations that early polls suggest resonates with voters’ more than postal reform (Curtin 2005). Sceptics claim Koizumi was merely performing a political charade given the LDP’s secretary general and numerous other Ministers preferring to visit the shrine that same day (McCurry 2005b).
It remains to be seen how Japan’s relations with its Asian neighbours will change should the election cause a change in LDP leadership or, less likely, the installation of the DPJ in government. Given Koizumi’s unusual pro-Australian stance on joining the East Asian Summit (Forbes 2005), the election will be watched closely in Canberra. Koizumi is progressive in speaking of a “community that acts together and advances together” involving Australia, India and New Zealand (MOFA 2003) which is far from Malaysia and Singapore’s traditional view on Australia’s role in the region (Forbes 2005). Increasingly Japan is becoming less Asian and more Pacific both in its foreign policy and militaristically. Hence Koizumi has positioned the Japanese government alongside the US and Australia on the global issue of terrorism and the Kyoto protocol and regional issues such as the Korean Peninsula and East Timor (MOFA 2005).
Geopolitical:
As at 26 August, the LDP had around 600 Self-Defence Force (SDF) troops still present in Iraq in the southern city of Samawa after being deployed to supply water to the local communities. Koizumi’s decision to send the SDF to Iraq was an historical occasion, not only as it was the first deployment of SDF troops since the Second World War in a conflict zone, but as it symbolised the strong ties the US and Japan had forged during the LDP’s long rule. Indeed, Koizumi justified the deployment as it “fulfilled our responsibility as a member of the international community” (Japan Times 2004). The opposition leader, Katsuya Okada, is campaigning on the premise that should the DPJ win the coming election, it will withdraw its troops from their stations in Iraq as “they are remaining in Iraq only for the political consideration of the Japan-US relationship” (ABC 2005). Okada’s assertion may hold some credence as many critics have also highlighted “Tokyo’s concern over tension between China and Taiwan (as) a dramatic departure from Japan’s post-war foreign policy. The change in foreign policy focus from military pacifism to military assertion is being driven by Washington’s own security concerns” (Asia Times 2005). Not surprisingly therefore, the DPJ have also promised their electorate the renegotiation of the Futenma Air Base that occupies some 65% of the 40,500 US troops stationed in Japan (ABC 2005).
Japan faces, internally, profound change regardless of the outcome of the 11 September 2005 elections and Japan Post itself. However this event, given Japan has the second largest economy in the world and its historical role within the region, may have much wider implications. Before a vote has been cast we have seen Japan becoming more remorseful and considerate politically of its Asian neighbours, more committed to economic efficiency within its government and to a degree more questioning of US-Japan geopolitical relations.
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