Buyers' Remorse in Japan

With only two months past since Taro Aso overwhelmingly won an election to lead the Liberal Democratic Party, already many in Japan are experiencing something akin to buyers’ remorse. The Aso cabinet’s public approval rating, not all that high to begin with, has fallen 25 percentage points in just eight weeks to a low of around 22 percent.

The LDP bigwigs assumed that Aso’s supposed popularity made him the best choice to lead the party in a snap general election. Now that any election has been delayed, probably until spring at the earliest, many must be asking themselves privately, why did we pick this chump?

So far there are only the usual rumblings of discontent among the party rank-and-file, although former prime minister Yoshio Mori, one of Aso’s most influential backers in the election held last September, was moved to ask in a speech to a party meeting: “Why only a little more than two months we need to defend the party president”?

Well, one reason is that Aso hasn’t learned to curb his tongue. He has been taken to task several times for slips of the lip, including his descriptions of elderly pensioners as wanting to just eat and sleep. He has since markedly kept his public comments short and scripted, which only disappoints that segment of the voter who liked Aso because he spoke his mind.

More to the point, at a time when the public is crying for clarity and purpose, the Aso cabinet’s response to the growing economic crisis has been muddled and inconsistent. The government’s plan for a ¥2 trillion cash handout to stimulate the economy has been dogged with unresolved questions. Should it go to everyone, or just to everyone but the wealthy?

The cabinet has decided to postpone the submission of a second supplementary budget for fiscal 2008 until early next year. The extra budget is designed to finance an additional economic stimulus package worth about US$278 billion. In the interim, Aso resorts to jawboning, imploring that corporations regularize their temporary hires rather than sacking them after the New Year.

But even members of Aso’s own cabinet are expressing doubts about the wisdom of cash handouts and other stimulus measures. Minister for the Economy Yasano Kaoru, a prominent budget hawk who ran against Aso for the party leadership, states flatly that the idea to hand out ¥2 trillion to households won’t do the job. It is simply time to tighten belts, he says.

Belt-tightening is not what the Aso government has in mind, though. This week the cabinet made clear that the government will return to tried-and-true pork-barrel spending to help juice the economy, the budget and the national debt be damned. “The era of budget austerity is over,” said Asahi Shimbun.

In other words, the door now is firmly shut on former Prime Minister Junichiro Koizumi’s efforts to “reform” the party by reducing the party’s strong dependence on public works spending, or at the very least it is now held in abeyance. The government will increase public spending and issue new government bonds to finance another big splurge in public works spending.

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The decision was criticized by some as simply adding to the combined long-term debts of both the central and local government, which now exceed 150 percent of the nation’s gross domestic product, the highest such ratio in the developed world.

Also going by the board is the plan put forth earlier this year by another former Prime Minister, Yasuo Fukuda, to direct some of the proceeds from the special gas tax to local governments as tax allocation grants which they were free to spend on things besides roads. The proposal was a compromise designed to end a bitter Diet clash with the opposition over gasoline tax surcharges and wasteful spending on roads.

The Aso government has said it may distribute ¥1 trillion from general funds to be used by local governments as they see fit. This is seen as mainly a ploy to cover up the fact that the LDP has caved to the construction lobby.

The abandonment of Koizumi style “reforms” has naturally disappointed the former prime minister’s acolytes in the ranks of the LDP, leading to some speculation that they might leave the party to form a new one. They’re too small to weaken the LDP’s huge majority, but such a bolt might bring the LDP below the two-thirds majority needed to override opposition in the upper house.

Shrewdly recognizing the fissures in the LDP, Opposition Leader Ichiro Ozawa, floated the idea of forming a grand all-party “National Government” coalition to manage the financial crisis until a general election is held. Nobody expects this to transpire, but it could exacerbate tensions in the ruling party.

When it seemed that a general election was imminent, the Democratic Party of Japan (DJP) was inclined to be cooperative. Now that the election has been put off, it has resumed its old stance of opposition for opposition sake, using its control of the upper house to do this.

The DJP lawmakers in that body are refusing to vote on two government bills, the law to extend Japan’s refueling mission in the Indian Ocean and another to bolster the financial system. For good measure it is threatening Aso with a censure motion. After 60 days the bills are considered defeated, allowing the LDP in the lower house to pass them again them using its supermajority.

For the moment, the LDP seems to be stuck with the decision it made in September to elevate Aso to the party leadership. To change premiers once again, for the fourth time since the last general election in 2005, might look like it was becoming a bad habit.

Moreover, despite a field of some 300 members of the lower house, the LDP’s bench is looking rather weak. It is hard to believe that any of the five members who ran against Aso in the party election would fare any better than he is doing –or anyone else.