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Tuesday, July 15, 2008

SENTAKU MAGAZINE

Keidanren hedging bets on LDP

The Japan Business Federation (Nippon Keidanren) is showing signs of changing its unflinching support for the ruling Liberal Democratic Party, as it seeks closer ties with the No. 1 opposition Democratic Party of Japan.

This does not mean the federation is giving up on the LDP, but such a shift could impact the Japanese political landscape, because Nippon Keidanren is the most powerful business lobby. Its chairman is often referred to as "the prime minister of the business world."

A reception held May 28 following the annual general meeting of Nippon Keidanren was not as colorful as usual, mainly because Prime Minister Yasuo Fukuda broke from the long tradition of paying tribute to the biggest sponsor of his party. Instead, he went to the fourth Tokyo International Conference on African Development, and did not even bother to send Chief Cabinet Secretary Nobutaka Machimura to the federation meeting as his proxy. This gave rise to suspicion among business leaders that the LDP has turned its back on them.

Nippon Keidanren has been courting the DPJ since the turn of the year, perhaps because it believes the chances are good that the leading opposition party will win the next general election. In January, Mitsuo Ohashi, chairman of Showa Denko Inc. and head of the federation's political action committee, was a guest at the DPJ national convention. He called on the party to do everything in its power to promote reform as the largest group in the Upper House.

In the following month, a meeting was arranged between Nippon Keidanren chairman Fujio Mitarai and DPJ leader Ichiro Ozawa under the auspices of Takashi Imai, former chairman of Nippon Steel Corp., and Hiroshi Okuda, ex-CEO of Toyota. Mitarai asked Ozawa to carry on reform while maintaining constructive dialogue with the government and the ruling coalition.

Tax reform was the principal subject of discussion when Toyota Chairman Fujio Cho met in June with Hirohisa Fujii, chairman of the DPJ's tax affairs council. Although the latter did not accede to the federation's call for raising the consumption tax rate, it was quite significant that Nippon Keidanren and the DPJ, which had not talked with each other for some time, have now sat down at the same table to discuss policy issues.

Regularly scheduled meetings between the leaders of Nippon Keidanren and the DPJ are resuming, while leading business figures have started holding talks with Ozawa. Moreover, another arena is now being prepared for business leaders to exchange views with Ozawa deputy Katsuya Okada.

Nippon Keidanren, for its part, has made a considerable shift in its policies. For example, Mitarai says he now advocates financing the basic part of the national pension plan solely with consumption-tax revenue and accepts the trading of greenhouse gas emission quotas, both of which were contained in the DPJ's "manifesto" when it won the resounding victory in the Upper House election last summer.

Such a shift in Nippon Keidanren's policies means a sharp increase in its political contributions to the DPJ, good news for a party suffering from dire fund shortages.

Why has Nippon Keidanren started leaning heavily toward the DPJ? One answer is the decline in the Fukuda government's approval ratings, which have fallen to around 20 percent — regarded by many as a "danger zone." Some of the federation's leading figures have publicly stated it would be good for the nation if there was a regime change.

In a resolution adopted unanimously at this year's general meeting, the federation pledged to support political parties on the basis of their policies and work with them constructively to realize reform in an expeditious manner. This stemmed from Mitarai's realistic approach to the current political situation in which the Lower House is dominated by the coalition of the LDP and Komeito while the Upper House is in the hands of the DPJ and other opposition parties.

This change of stance on the part of Nippon Keidanren should not be interpreted as a complete shift of its support away from the LDP. Mitarai and his colleagues still meet frequently with the top brass of the governing party, so it would be more appropriate to say that the balance of the federation's support for the two major political groups has shifted.

The Japan Association of Corporate Executives (Keizai Doyukai), a Nippon Keidanren rival, has also started working toward closer relations with the DPJ.

Last fall, rumors arose that Mitarai might have to step down early because he was not enjoying solid support from the ranks of Nippon Keidanren. He was also hurt by the ill health of Kunio Nakamura, chairman of Matsushita Electric Industrial Co., Ltd., to whom Mitarai is a mentor. Since Nakamura has regained his health, Mitarai may no longer feel isolated and Nakamura may well become a candidate to succeed Mitarai.

Toyota Chairman Cho has also been mentioned as a successor, but at 71 he categorically rules out the possibility.

How about Katsuaki Watanabe, president of Toyota Motor Corp.? He has avoided political activity so far and held no post in Nippon Keidanren or Keizai Doyukai — until this year. An unwritten rule says the highest post of the federation must be held by someone who has chaired one of its committees. This year Watanabe was named to head two important committees.

Cho's tenure as vice chairman of Nippon Keidanren will expire next year. If Watanabe agrees to take the position, he may well become a leading candidate to succeed Mitarai as the "prime minister of the business world."

This is an abridged translation of an article from the July issue of Sentaku, a monthly magazine covering Japanese political, social and economic topics.


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