Japan: Fukuda on the Razor’s Edge

“I think the Diet is on the verge of collapse” — Chief Cabinet Secretary Nobuttaka Machimura

The streets of Tokyo and other cities in Japan are strangely uncrowded these days. Many motorists are hoarding gasoline or making only necessary trips in anticipation that a gasoline tax will be eliminated next week. Gas station owners are bracing for a huge influx of customers on April 1.

But it will seem like a cruel April Fools’ joke for Japanese consumers, since the tax is likely to be reimposed by the end of April. Negotiations between the government and the opposition Democratic Party of Japan (DJP) broke down Tuesday, which means that a “temporary” gasoline surcharge that has been in place for more than 30 years expires on March 31, which is the end of the fiscal year in Japan. The tax amounts to 25 yen per liter. Its removal will bring the price of gas down to about 130 yen per liter, or about the price it was a year ago.

A 10-year extension of the gasoline tax passed the House of Representatives, the lower house of Japan’s bicameral parliament, in late February but has languished in the upper house, now controlled by the opposition. If the opposition takes no action by the end of April, the lower house can pass it again using its two-thirds majority.

Prime Minister Yasuo Fukuda’s political problems, stemming from a divided national Diet, are piling up. First there was the temporary demise of the navy’s refueling operation in the Indian Ocean, then the imbroglio over the appointment of a new Bank of Japan governor and now the gasoline tax.

In recent weeks the questions have shifted from when will Fukuda have to call a general election to how long he can hold on to power. Speculation is growing whether Fukuda may not last long enough to host the Group of 8 meeting in Hokkaido in July.

It is true that the problem of the divided parliament would bedevil any leader, but Fukuda has played his hand poorly, especially this past month. Exhibit A is the pending vacancy at the Bank of Japan.

He waited until 10 days before the incumbent’s term expired before nominating Toshiro Muto to succeed Toshihiko Fukui. When that nomination was voted down in the upper house, Fukuda simply put forth another candidate, Koji Tanami, a former administrative vice minister at the finance ministry..

For better or worse the opposition DJP has drawn a line in the sand – no senior bureaucrats from the Ministry of Finance! So what does Fukuda do but put forth another former finance ministry official, a virtual clone of the previous nomination. Just as predictably, the lower house voted that nomination down too.

So Fukuda is now in a real bind as he seeks to fill the now-vacant post. Having seen two previous candidates humiliated, it is unlikely that anyone with the stature needed for the post would agree to be nominated unless assured in advance that Fukuda has cleared it with the opposition leadership. And is Fukuda capable of entering into this kind of genuine cooperation and consultation?

The temporary vacancy at the head of the bank since March 20 has caused relatively little practical dislocation of the markets so far, as both deputy governors were confirmed, and one, Masaaki Shirakawa, is serving as acting governor. But it is supremely embarrassing. The words “debacle,” “farce” and “national disgrace” are heard coming from the business community.

At a time when US Federal Reserve Chairman Ben Bernanke is in the news almost every day orchestrating rescues for major American banks, when international cooperation to prevent further collapse of the global financial system is needed more than ever, it is excruciatingly embarrassing in Japan to see this important post waiting vacant.

Even members of Fukuda’s own party are speaking in apocalyptic terms. “I think the Diet is on the verge of collapse,” lamented Chief Cabinet Secretary Nobuttaka Machimura at a press conference. Fukuda himself has said he is at a loss what to. The upper house’s obstinacy over the Bank of Japan appointment is “incomprehensible,” he said.

Yet behind all of the political maneuvering are real issues that seriously divide Japanese politics. The refueling issue of course, speaks directly to Japan’s role in the US alliance. As for the Bank of Japan people have been criticizing the practice of parachuting senior bureaucrats into government institutes for years. The Japanese even have a word for it - amakudari or “descent from heaven”.

Even the gasoline tax relates to long-time criticism that the governing Liberal Democratic Party uses public funding to build needless roads and bullet train lines to maintain support in the countryside. The “temporary tax surcharge” is used exclusively for road construction. The opposition favors using the gasoline tax revenues to help pay for other social services.

Some of the biggest criticisms of these practices have been advanced by “reformers” inside the LDP itself, although Fukuda has never been considered one of them. It seems as if it is taking an opposition party with some real leverage to bring them to the forefront.

In the face of these difficulties the Fukuda government’s approval ratings continue to slide. They are now in the low 30s. In addition to the problems associated with the divided Diet, the premier has other headaches, including the accidental ramming of a fishing boat by a destroyer. That incident and some other mishaps just cost the job of the chief of naval operations Admiral Eiji Yoshikawa.

Waiting in the wings, should Fukuda continue to falter, is former foreign minister Taro Aso, who lost out to Fukuda in the leadership contest that followed the resignation of former Prime Minister Shinzo Abe last fall. He shared Abe’s hawkish outlook and obsession with nationalistic themes, such as revising the pacifistic constitution, ideas that do not seem to interest Fukuda.

But Aso has been expanding his outlook of late. He declined to serve as a minister in Fukuda’s cabinet and has been busy these past few months touring Japan and studying issues of more concern to the general public, such as the pension system.

However, in any leadership contest he will be stymied by the fact that he heads the smallest faction in the Liberal Democratic Party, and there are others in the party who are beginning to measure the curtains in the prime minister’s office.