Japan's New Prime Minister Faces the Voters

What a difference a few weeks and a change of leadership can make. Ever since Naoto Kan replaced Yukio Hatoyama as Japan's prime minister in early June the entire public conversation has changed. Whether this redounds to the advantage of Kan's Democratic Party of Japan (DPJ) remains to be seen.

Gone are the endless debates over relocation of the US Marine Corps Futenma air base on Okinawa which brought down Hatoyama. In its place is a growing national debate over the best way to repair the country's fiscal problems, including possibly doubling the national sales tax.

All of this against the backdrop of a critical election on July 11 for half of the members of the House of Counsellors, the upper house of Japan's bicameral parliament. Success in this election is considered critical if the DPJ is to be able to govern effectively.

Kan had scarcely been elected prime minister on June 4 before he said, "I believe rebuilding public finances is a prerequisite to economic growth" positioning fiscal reform, including changes in the tax structure, to be the keystone of his administration and, per force, his party's election platform.

As part of that challenge, he openly suggested raising the sales tax (called a consumption tax here) from 5 percent to 10 percent. The now opposition Liberal Democratic Party (LDP) introduced the first consumption tax at 3 percent in 1989 to help fund social security for an aging population. It raised it to 5 per cent in 1997 and had talked about boosting it another five percentage points.

Kan, who had served as finance minister before becoming premier, seems to have had taxes on his mind when he moved up, heightened by the well-known fiscal troubles in Greece. Certainly, there is reason for concern; roughly half of Japan's current national budget is financed through borrowing.

Not every commentator, however, sees the wisdom of making a tax hike the centerpiece of an election platform. "We don't get it," opined The Oriental Economist newsletter. "It is hard to remember in any country when a party campaigned on raising taxes, let alone won on that pledge."

The change in leadership from the unpopular Hatoyama gave the DPJ a considerable immediate bounce in the public opinion polls. Some 62 percent of the public polled just after change approved of the new government. That dropped to about 50 percent shortly after Kan began talking up taxes.

Still, 50 percent is not a bad number going into an election just one week away. Certainly it is better than the sub-20 percent of the Hatoyama government or the similarly low numbers for the LDP immediately before the general election to the lower house last August (newer polls just before the voting may show a further drop).

The election July 11 is for one half of the upper house, whose members are elected to six year-terms. The governing party controls the house with votes of two smaller parties, and would dearly love to obtain a majority on its own. That seemed almost a sure thing in the early days of the government before it was worn down by Okinawa and leadership issues.

But predicting the outcome is the election is like trying to figure out two-dimensional chess. One dimension is the framework of the election, with about half of the members elected from proportional lists and the remainder from districts ranging from one member up to five for Tokyo.

The second dimension is the simple plethora of contending parties. The two main parties, of course, have big blocks of voting members, but there are about 10 smaller parties also contending, ranging from the venerable Komeito, once in coalition with the LDP but now neutral, the socialists, communists and a number of splinters from the LDP.

If Kan's party wins as many as 60 out of the 121 contested seats, it would be considered a triumph, making Naoto Kan the new electoral wizard. If the party only wins 50 seats or fewer, it would be a disaster leading to the possibility of another change in the leadership. Kan himself has set a modest goal of simply holding the 54 seats his party has now.

Kan might not resign to take responsibility for a particularly poor showing, but an election for the party leadership is scheduled for September, and he might have to fight off a challenger. Indeed, former shadow premier Ichiro Ozawa, whom Kan more or less sidelined after gaining the leadership, is waiting in the wings.

Unlike the upper houses in other parliamentary democracies, such as Canada or Britain, Japan's version is essentially co-equal with the "more powerful" lower house. Save for very few exceptions, a law that is defeated in the upper house, stays defeated. That, of course, is why maintaining control is essential for the government's stability.

A divided Diet bedeviled the previous administration and was a prime reason why former Prime Minister Yasuo Fukuda resigned in frustration. The lower house can override a defeat in the other body with a two-thirds majority vote, which Fukuda employed several times. But the DJP, for all its massive majority, does not have the requisite two-thirds votes by itself.

Perhaps the saving grace for the current government is there should be plenty of minor parties in ally with, either on a vote-by-vote basis or by forming new coalitions and alignments. For a party with just four or five Diet members, a cabinet post for its leader can be a powerful inducement.