Asia Times: EDITORIAL: Lining up the ducks



	June 02, 1999	atimes.com

Japan Economy

EDITORIAL: Lining up the ducks

With all the economic troubles besetting Japan, one tends to forget the country's view of itself: a bunch of rocky islands in the West Pacific with no natural resources to speak of and its supply lines insecure, surrounded by actual and potential enemies.

Thus, when Prime Minister Keizo Obuchi said a couple of days back that the most important issue on the parliament's current agenda had been successfully dealt with, he was referring not to economic legislation but to the passage of enabling laws to implement new U.S.-Japan security guidelines. Security remains the paramount and touchstone issue for Japan and tends to reveal political factional alignments, within both the ruling Liberal Democratic Party (LDP) and the body politic as a whole, more clearly than do any economic matters.

In the debate and voting on the security guidelines, Obuchi managed to make the most of such factional divisions and further strengthened his own position as party leader and prime minister. he is proving a more savvy and cunning politician than almost anyone expected when he began his term last July.

Within parliament overall, he made the most of the fact that the main opposition party, Minshuto (Democratic Party) is badly split, when it comes to security matters, into conservative members and liberal, pacifist-leaning members. Obuchi neutralized the party's voting strength. Simultaneously, he persuaded New Komeito, the party based on the secular Buddhist organization Soka Gakkai, to support him on the security guidelines - lest it be seen as jeopardizing national security in face of the palpable North Korean threat and the unspoken Chinese threat.

New Komeito now appears ready to make a coalition agreement with the LDP/LP (Liberal Party) coalition that was formed late last year. With such Komeito support comes the benefit not only of a larger majority in the lower house but also of an upper house majority, which is key in speedy passage of legislation in the parliament as a whole.

Such success in coalition politicking around the security guidelines appears - as a further benefit to Obuchi - to have taken the wind out of the sails of LDP factional leaders Koichi Kato and Taku Yamasaki, who had been planning to put up a determined fight to replace Obuchi as party president in September intra-party elections. All seems set now for Obuchi to be reconfirmed in office by mid-to-late August and for him to be able to push through further economic legislation without undue delay. That, in turn, would put him in a good position to call general elections once the economy is seen to be on a certain recovery path.

The paramount question, of course, is: What new economic legislation?

By June 11, a week before the end of the current parliamentary session, the government is to announce what so far has been described as measures to enhance industrial competitiveness and alleviate the unemployment problems associated with corporate restructuring. Such measures could then be dealt with in an extraordinary session of parliament to be convened in September. Analysts in Tokyo believe the total value of the new measures could be in the Y10 trillion range, over $80 billion at the current exchange rate.

The total value is important. By September, the impact of current deficit spending on the economy will begin to peter out and - barring the unforeseen possibility that self-sustaining recovery will by then have taken hold - a new swift kick, of the force calculated to drive it forward, will be necessary.

Our worry is that the kick will be of the wrong sort, one that could simply amount to another large wastage of taxpayer money.

The government's talk is all about competitivenesss and restructuring. But how, exactly, does new deficit spending bring that about? Those are not primarily public responsibilities. Rather they are issues to be dealt with on a company-by-company basis within the private sector. Some tax measures to smooth companies' ability to carry forward losses from writing off assets representing overcapacities would be of use. But such other measures as are now apparently contemplated by MITI (that once all powerful body now largely sidelined by the economic crisis), including industrial policy guidance on new investments and related tax incentives, would simply amount to a repeat of failed policies of the past.

Of even greater concern is the fact that the construction industry alone, via its lobby in the LDP, has called for Y10 trillion to help its own fortunes. Making anywhere near such an allocation to that industry - which perhaps more than any other must bear responsibility for Japan's current misery - would be nothing short of idiocy.

Obuchi may have thought the defense issues just successfully dealt with the most challenging of the current political season. We won't fault him for thinking that. But the challenges awaiting him as he carries through his political maneuvers and hangs on in office are of a different nature and the way he handles them will show much more clearly what sort of stuff he's really made of.

To enhance Japan's industrial competitivenesss now requires, more than anything else, two things: to be willing to let go of, and forego support to, moribund industries; and to radically deregulate domestic businesses. That takes less money than it takes political guts. We shall watch closely. New money thrown at construction companies will be the surest sign that such political guts are lacking.

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