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Friday, Jan. 8, 2010

Public hopes fade to fears over the DPJ's capabilities


The Hatoyama Cabinet's approval rating is falling rapidly. In the Lower House election last August, people in Japan rejected the Liberal Democratic Party's long years of reliance on vested interests in favor of the Democratic Party of Japan for a change of government.

From the outset, however, many people worried about the DPJ's policies, as postelection opinion polls typically showed that only a comparatively small number of people supported its policies.

As had been anticipated, a string of recent developments has given rise to questions about the DPJ's governance capability, spreading fears that the country's national power might decline if the current circumstances persist. Hence, questions arise as to the causes of this situation.

First, there is the instability of the DPJ administration's decision-making system for political management.

The DPJ had stressed, and tried to implement, the unification of the government and the ruling party in policy-related decision making. Yet partly because of Prime Minister Yukio Hatoyama's lack of leadership, party secretary general Ichiro Ozawa's leadership has been prominently dominant in managing such operations as the preparation of the national budget.

The government has been dragged about by its coalition partners, the Social Democratic Party and the People's New Party, in handling important policy matters, including the relocation of the U.S. Marine Corps Air Station at Futenma and the formulation of economic-stimulus measures.

The DPJ administration lacks flexibility and humility with regard to its election campaign manifesto. The government should aim for political optimization by constantly detecting the people's will, objectively analyzing social developments and broadly mobilizing national wisdom.

Of course, the country's decisions should eventually rest with politics. But this process requires vigorous and technical discussions and proposals involving administrative and private sectors, research institutions and nongovernmental organizations.

Currently, the DPJ administration does not seem to be utilizing the knowledge and experience of administrative officials or to be in constant communication with economic and academic circles.

Second, the DPJ administration's ability to formulate policy remains weak.

Worries about policy risks are growing in society, especially in the business world. With the gap between demand and supply approaching ¥35 trillion to ¥40 trillion, the additional economic stimulus measures were decided only as late as in December. Serious apprehensions are prevailing now about a possible double-dip recession. Unemployment is running at a level of 5 percent, even as enterprises groan under the pressure of surplus employees.

Many enterprises are planning to relocate overseas because of their concerns about the future, such as tax increases, slowness in working out growth policies and severe restrictions on carbon dioxide emissions. The rate of direct foreign investment in Japan was 4.1 percent of GDP in 2008, which was even lower than in China and South Korea, and some foreign enterprises have started moving out of Japan due to the worsening business environment.

The DPJ administration's screening work on budget requests — to try to eliminate wasteful administrative spending — was highly appreciated by the public. It is necessary to continue such efforts hereafter in the process of compiling the national budget. But the most appropriate policies must be carefully selected on the basis of need, effectiveness, equitability and side effects.

It is necessary to avoid giving unfair profits to some sectors by applying a vague yardstick. Policies that are effective for a certain aim but likely to cause adverse effects by disrupting the balance should be dealt with carefully.

For example, the child allowance alone is not enough for population recovery, and the policy of making expressways toll-free runs counter to environmental protection policies.

Third, there is no intelligent vision or viable strategy for raising Japan's national strength.

Shifting the priority of economic policies to households and attempting to expand domestic demand through income transfers is an idea, but that measure alone won't recover Japan's growth capabilities.

Japan's future depends on human resources. Therefore, it is necessary to cultivate a social environment well suited to enriching education, activating research activities and encouraging competition in creativity. If nothing is done about the current situation, the brain drain will progress further.

There is a lack of consideration for the need to develop conditions that encourage enterprises and individuals to work actively. The government should play a central role in consolidating the order and systems of society, revitalizing market functions and, in case of market imperfections, improving the market structure. The shelving of structural reforms has now brought about market stagnation.

Japan has an excellent culture and social infrastructure. The government should endeavor to maintain and elevate them.

Among advanced countries, Japan's financial structure is conspicuously poor. The process of budget compilation for fiscal 2010 has shown that tax revenues will further stagnate. The coalition government says it will not raise the consumption tax while it is in power. If so, could it reform the country's financial structure?

Fourth, no international strategy has been presented for addressing the age of globalization.

In the age of globalization, the nation's economy, technology, culture and tourism cannot progress without efforts to maintain good international relations. In the future, the global governance structure will lose considerable stability, with the power structure becoming multipolarized and the axis of political conflict more complicated. The world will have to address the problems of properly maintaining and managing international public assets such as the order of peace, the abolition of nuclear weapons, the expansion of free trade, the innovation of technology, the protection of the environment, the prevention of infectious diseases and the elimination of poverty. Japan should recognize, and work to realize, such values for the sake of Earth and humankind.

But the way Hatoyama has been running his foreign policy, for example, has invited U.S. distrust of Japan by prioritizing adherence to the party's manifesto and maintenance of the coalition Cabinet over external pledges regarding the military base issue in Okinawa, which has vital security significance. He also has lagged behind substantially in handling the question of free trade agreements with other Asian countries, with his idea of an East Asian Community going ahead.

At the 15th United Nations Climate Change Conference in Copenhagen, he failed to take the initiative despite his ambitious pledge of a 25 percent cut in greenhouse gas emissions.

Contributing to the provision of international public assets and gaining the trust of the international community requires a keen vision of the world, a sincere attitude in dealing with problems, constructive capabilities for making proposals and communication abilities to help reach agreements.

In view of current election prospects, the DPJ administration may last a while. However, a sound two-party system is essential for the vitalization of national politics. So, the LDP is urged to revitalize itself while the DPJ should improve its capability to formulate and implement policy. Under the current circumstances, Japanese society may stagnate despite the change in governing structure.

Shinji Fukukawa, formerly vice minister of the Ministry of International Trade and Industry and president of Dentsu Research Institute, is currently chairman of the Machine Industry Memorial Foundation.


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