POLITICS-JAPAN: Economic Crisis Causes Another Leader to Tumble

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Jul 13 1998 (IPS) - Prime Minister Ryutaro Hashimoto resigned on Monday after a stunning defeat by his ruling Liberal Democratic Party (LDP) in parliamentary elections, a public rebuke to the government’s inadequate response to the economic crisis.

“I take responsibility for the defeat which is based on the country’s poor economic situation,” a stone-faced Hashimoto said in announcing his resignation as head of the LDP, which guarantees his premiership.

The LDP won only 44 seats in Sunday’s upper house elections, far below the 61 seats the party held going into the election.

The results have shaken the foundation of Japan’s deep-rooted conservative political leanings but have left many Japanese voters who have been demanding reforms happy.

“I can proudly say I voted against the LDP. They must be taught a lesson and I think we have achieved this,” explains Ryo Takahashi, 46, a salesman for a cosmetic firm.

The yen as well as Japan’s share prices tumbled early Monday in reaction to the LDP defeat, but rebounded after Hashimoto resigned hours later.

Hashimoto’s resignation and the murky political situation that follows is yet another offshoot of the Asian economic crisis.

An analyst from an equities firm said the defeat was a direct result of LDP’s “dilly-dallying in its response to the economic crisis”. It was the public’s reaction to the government’s inadequacy in stopping the slide.

Authorities reported a high voter turnout of almost 60 percent, a development which worked against the LDP.

Some analysts have drawn parallels between Hashimoto’s resignation and that of former Indonesian strongman Suharto. They said the LDP defeat proved that Japan, while not in the same boat as other cash-strapped countries in the region, is not immune to similar upheavals.

“Japanese voters are reacting as their counterparts in other Asian countries have done. While the situation may not be as dramatic as in Indonesia or Thailand, where inefficient leaders were toppled after popular dissent, it is safe to say that what we see now is the result of the Asian economic crisis,” explained Professor Yoshiaki Kobayashi, who teaches politics at prestigious Keio University.

Japan is now in the midst of selecting a leader who will usher in important reforms that will support the public’s call for a fresh start.

“The people are rejecting the old system. The LDP has developed a system that is a bureaucrat-led government. But what is needed are policies that are more people-oriented like less taxes and budgets that support not only powerful business groups but are geared to improving welfare, transparency and equality,” explained Kobayashi.

“We need a credible leader to get Japan oyt of this mess,” another analyst said.

The LDP had canvassed votes on a stimulus package and the new “bridge bank” set up with public money that is geared to clear up bad loans saddling banks and the economy.

But Kobayashi says people are tired of seeing their taxes used once again to rehabilitate powerful business conglomerates, whose managers go unpunished for mismanagement.

Hashimoto has promised a new leader by the end of July. The decision is considered critical in the face of the latest election result.

The LDP remains strong in the powerful lower house, but if the new leader will be chosen from the old power-broker factions, it will have dire repurcussions and prove once again that reform in Japan is a difficult process, analysts say.

Forerunners are 71-year-old Seiroku Kajiyama, who has strong links to the right-wing Nakasone faction, and current Foreign Minister Keizo Obuchi, who is emerging as the most promising candidate for his popularity among all LDP factions.

Japanese dailies are calling for a general election, but analysts rule this out as the LDP is painfully aware of another possible defeat.

The next prime minister should dissolve the House of Representatives for a snap general election as soon as possible, said the Asahi Shinbun. It said LDP’s defeat was “big enough to lead to a change in the government”.

The Yomuiri attributed the major gains by two opposition parties — Democratic Party of Japan and the Japanese Communist Party — to the people’s desire for change.

It is not that people want a communist government or a coalition of divided factions at the helm. What is clear is they had rebuffed the LDP, it said.

The humiliating defeat, however, might force the LDP to offer permanent tax cuts and additional government spending measures to boost an economy mired in its worst post-war crisis, analysts say.

The LDP is expected to enter into coalition with other smaller parties. And as it tries to pull itself together and deal with the uneasy situation, Japan’s short term prospects may not look so good, analysts say.

Political instability will slow down government decision making, and may even put urgent economic reform on the back burner.

Leading Japanese businessmen are urging opposition parties to cooperate, pointing out that it is imperative to address the increasing unemployment and stabilize the financial system.

A prolonged recession is not only bad for Japan, it is equally disastrous for Asia which is dependent on the Japanese market for exports and investment funds.