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Friday, May 11, 2012

The challenge to Japan Inc.


Special to The Japan Times

HONG KONG — Ichiro Ozawa's acquittal on charges of infringing the political funds law leaves the man variously called the "Shadow Shogun," "The Fixer," "Bully" and "the Destroyer" — free to organize one last throw of the political dice to become kingmaker if not king of Japanese politics.

It will not be easy because there are probably many more people, especially within his own party, who hate Ozawa as those who think of him as the last hope for reforming Japanese politics and rescuing the country from its otherwise inevitable fall to Third World country status. (On Wednesday, lawyers acting as prosecutors appealed Ozawa's April 26 acquittal to the Tokyo High Court.)

For more than 20 years Ozawa has been the grit in the constantly changing kaleidoscope of Japanese politics, in which the bits clash and change places colorfully without anything really changing at all. Once the young high-flying secretary general of the then ruling Liberal Democratic Party, he helped to end the party's 40-year power monopoly. He then made and unmade four new parties.

The timing of Ozawa's vindication is exquisite. A think tank at Nippon Keidanren, Japan's most powerful business organization, has just forecast that Japan risks becoming a Third World country by 2050 if it does not urgently get a grip on its problems. Cynical critics see Japan rushing headlong toward economic suicide.

At the same time, vested interests of Japan Inc., a series of unholy alliances between entrenched business interests, bureaucrats and career politicians, are fighting rearguard actions in public and behind the scenes in defense of their traditional privileges. They should be careful lest they win pyrrhic victories that are costly for them and more so for Japan.

Ozawa is already unhappy with the plans of Prime Minister Yoshihiko Noda to double Japan's consumption tax to 10 percent by October 2015. Will he set out to smash yet another party and bring down the government over Noda's tax plans?

The public face of the fightback by vested interests is seen in Noda's determination to restart the country's nuclear power plants. The only operating reactor of Japan's 54 nuclear plants, which previously supplied 30 percent of the country's electricity, was taken offline on May 5 for maintenance.

Japan is importing energy to make up for the shortfall; natural gas imports are running 20 percent higher, helping to push Japan into a record trade deficit for the financial year ended March 30. When the sweltering humid heat of the summer hits in July, it is doubtful whether Japan can get sufficient imports in time. Some areas, such as the Kansai region around Osaka may face cuts of up to 20 percent if alternative energy supplies are not found.

Even with the early introduction of cool-biz attire — open-necked, short-sleeved shirts for suits and ties — this month and super cool biz — Hawaiian shirts — in June, it promises to be a long-suffering summer.

When the government declared that the nuclear plants in Oi "more or less" met safety standards, the public outcry should not have been surprising. "More or less" is hardly good enough for people still reeling from disaster, especially when not even a third of the action plan's 91 safety measures for Oi adopted after the Fukushima disaster have been put into effect.

Given Japan's long nuclear history of covering up accidents, failing to upgrade plants to meet the best international safety standards, and collusion between the bureaucrats supposedly responsible for safety and plant operators skimping on it, a responsible government would by now have a plan to create a national agency with responsibility for all nuclear plants that is safe from corruption and collusion.

Even if Japan never produces another watt of nuclear energy, existing plants have to be shut down and decommissioned safely. But there is no sign of a national plan, no sign that the government understands the people's fears.

Quietly, with virtually no media coverage, Noda and his Democratic Party of Japan, as well as leading figures of the opposition LDP and Komeito, have gotten together to reverse postal reform laws passed in 2006. Robert Feldman, head of research at Morgan Stanley, sums up the situation: "Postal reform: return to sender."

Rolling back postal reform is symbolic of the wide hostility to reform. But Japan badly needs reform if it is to survive, let alone flourish. The Keidanren think-tank report painted a scary picture for 2050 of a country with a population of 97 million, negative growth and government debts rising rapidly to 594.6 percent of GDP, five times as high as Greece — even if Noda gets his way and doubles the consumption tax by 2015.

Feldman and others claim that raising the taxes without reforms will exacerbate Japan's problems and set the economy on a suicide path. It will destroy confidence and may reduce tax revenues. In his latest economic report, Feldman can see no optimistic macroeconomic signs.

Ozawa at least understands the damage that a premature tax rise could do. Supporters also claim that Ozawa is the only one of the old-time politicians who realizes that Japan needs real reforms that will release the energies and talents of the Japanese people, and not merely reshuffle and consolidate the old power centers. But his abrasive personality has prevented him from achieving his ambitions. It will be no easier now. The corruption case was polarizing. He will need subtlety and humility that he probably does not possess to use his victory wisely, as opposed to shaking the old kaleidoscope again.

Others are waiting in the wings to challenge Japan Inc., notably Toru Hashimoto, the impatient, ambitious, telegenic 42-year-old lawyer and television personality who gave up being governor of Osaka prefecture to win a crushing victory as mayor of Osaka city. Populist Hashimoto has his finger on the local pulse in demanding that nuclear plants should not be restarted without proper safety measures, even though Osaka will be on the frontline of electricity shortages.

Hashimoto also sensed the local mood in starting his Osaka Ishin no Kai (Osaka Revolutionary New Party), calling for upgrading the Osaka region into a unified metropolitan government. There is a widespread feeling that Tokyo is sucking the life out of regional Japan.

But critics are suspicious of Hashimoto's self-righteous impatience, calling him "Fashimoto," a term that stuck after he steamrollered an ordinance demanding that teachers must stand and sing Japan's national anthem at school assemblies or be punished. A high school principal, a friend of Hashimoto, checked whether teachers' mouths opened in time to the words.

It's not a comfortable choice for Japan — the road to ruin following Japan Inc. or a shakeup by a revolutionary Hashimoto. That's why some Japanese hope against hope that Ozawa will use his chance well.

Kevin Rafferty is editor in chief of PlainWords Media and author of "Inside Japan's Power Houses," a study of Japan Inc. and internationalization.


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