Financial Times September 12th 2010
http://www.ft.com/intl/cms/s/0/f53ec77a-be99-11df-a755-00144feab49a.html#axzz1WV4KM3Sy
DARTH OZAWA TO THE RESCUE
The Democratic Party of Japan is about to make a momentous choice. Next week’s contest for the party leadership also decides who holds the office of prime minister. The contrast between the two candidates could not be starker.
In one corner stands a man who represents continuity with the failed policies of the Liberal Democratic Party. In the other corner his opponent promises big changes to Japan’s economic and diplomatic strategy and a challenge to its all-powerful bureaucracy.
The reformer is Ichiro Ozawa . Calling him a controversial figure is putting it mildly. Having left the LDP in the early 1990s then successfully plotted its defeat in last year’s election, he is loathed by his former colleagues. The nationalist right rages about his pro-China sympathies. The left of his own party fears and distrusts him. Bureaucrats denounce his populism. The media regards his contest with current Prime Minister Naoto Kan as the equivalent of Darth Vader’s face-off with Luke Skywalker.
Yet it is Ozawa, not Kan, that remains true to the vision of change that swept the DPJ to power last year. The key policy then was the proposal to introduce generous child benefits of Yen 26,000 ($309) per month – a French-style fertility incentive, designed to tackle Japan’s incredible shrinking demographics. It was the first attempt since Japan’s bubble economy burst to help consumption through bolstering incomes.
The brunt of Japan’s deflationary malaise has been born by the lower middle classes, particularly younger people. Moves by ex-Prime Minister Koizumi to deregulate the labour market were worthwhile, but the aggregate effect was more deflationary pressure on wages. Over the past ten years the number of households earning less than three million yen has grown by fifty percent. The slow decay of Japan’s social cohesion was highlighted by news of people claiming benefits for pensioners who had been dead for years – including one who was found mummified in the back room of the family home with newspapers from the 1970s.
The DPJ’s consumption-friendly policies were a proven electoral asset. Strange, then, that Prime Minister Kan chose to fight this summer’s Upper House election on a fiscal austerity platform. Suddenly child allowances were to be capped at half the proposed amount, the consumption tax doubled and corporate taxes cut. Unsurprisingly Kan’s proposal went down with the voters like a cup of cold rice gruel.
Why did he junk his party’s manifesto pledges for anti-household policies associated with the old ‘iron triangle’ of big business, the bureaucracy and the LDP? The kindest explanation is naivety – that he fell for the “Japan is the next Greece” story hook, line, and sinker. By contrast Ozawa’s idea of securitizing loans and other assets on the government’s bloated balance sheet sent shivers down the spines of bureaucrats and the bond markets – where sub-1% yields on 10 year paper were discounting perpetual stagnation..
Ozawa is neither a Yasukuni Shrine-worshipping rightist, nor a pacifist. He favours a pragmatic, independent foreign policy – which means, at the moment, more distance from the US and more proximity to China. He denies the need for US marines in Okinawa, but sees the value of hosting the Seventh Fleet. These are tricky areas, but if anyone can find a fix it is Ozawa.
Japanese politics has come to resemble karaoke night, with a succession of forgettable performers having a brief turn on stage before handing over the mike. Ozawa is different. Although only four years older than Kan, he seems to have been around forever. He was a cabinet minister and held the key party posts in his early forties, quite a feat in the gerontocratic world of Japanese politics. He also became the leading capo in the faction of Kakuei Tanaka, the brilliant but corrupt populist who dominated politics in the 1970s and 1980s. It is the association with Tanaka that gave Ozawa his organizational prowess, also the “something of the night” that makes him so controversial.
All right-thinking people are against “money politics,” yet Japanese politics runs on money – not because politicians amass grand fortunes themselves, but because exchanging favours is a practice that runs through society from top to bottom. Some of Japan’s greatest leaders, including Yasuhiro Nakasone and Nobel Prize winner Eisaku Sato, were investigated on multiple occasions. Ozawa who has been investigated but not charged with anything is merely the latest in a long and illustrious line.
According to the Japanese proverb, if water is too clean no fish can live in it. If Japan wants to carry on flopping around in empty water, then Naoto Kan is the man. If it wants to adjust to the realities of the post-crisis world, then the choice should be Darth Ozawa, dark side and all.