POLITICS-JAPAN: Premier Takes Aim at Economic Gloom

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Jan 20 1999 (IPS) - Prime Minister Keizo Obuchi is trying to give Japan a much-needed pep talk after forming a coalition government this week, managing this time to get more than the usual yawn from a public tired of empty promises from their politicians.

But if his pledges, made at a speech before the Diet or Parliament Tuesday, drew some positive responses at home, they met a more cautious response from outsiders warning of even rockier times ahead for the recession-hobbled Japanese economy.

The past year has not been easy for Japan, or good for its ego. Its worst post-war recession has pushed unemployment to record levels of 4.4 percent, shrank economic growth and pushed corporate bankruptcies to an all-time high.

Japan has been the object of criticism by countries like the United States, who say it has not done enough to ease the effects of the Asian crisis. To lift its international profile, Japan has of late backed calls for reforms in the global financial architecture and sought the “internationalisation” of the yen.

Obuchi’s speech Tuesday signaled to many observers a determination to break what he called a mood of “excessive pessimism” about Japan, beginning with a pledge to see the economy return to modest, if positive, growth this year.

“I am confident that the nation’s economic growth will recover to the 0.5 percent level in real terms in fiscal 1999,” he said.

That statement is by no means new – but political analysts say Obuchi’s standing and credibility has been boosted somewhat by the coalition government entered into by his ruling Liberal Democratic Party (LDP) and the small opposition Liberal Party.

Obuchi in fact approached the Diet session “on a firmer political footing than before,” noted Yasumasa Shimizu of the Nikkei Shimbun, Japan’s leading financial daily.

At Obuchi’s urging, the LDP, which lost a number of sears in the July 1998 election for the Upper House, joined forces with the Liberals this month in order to boost the group’s hold in the legislature and speed up passage of bills.

While the coalition remains a shaky one, because many LDP politicians do not support it, the government has produced a glimmer of hope among businessmen and the public for ushering in much-wanted stability to Japan.

A succession of uneasy LDP coalitions during the past decade has slowed the passage of important reform and stalled economic recovery in Japan.

But the Liberals, headed by a powerful, conservative but reform- minded politician named Ichiro Ozawa and a group of like-minded lawmakers who broke away from the LDP years ago, is seen as a more workable coalition.

“The aim of the new administration is to strengthen the stability of Obuchi’s government and speed up economic and administrative reforms,” LDP party secretary Takeshi Noda said.

Ozawa, who called the LDP “an old people’s home” when he walked out in 1993, says he decided to collaborate with the LDP because he shared with Obuchi a sense of “national crisis”.

“This shared sense of crisis is what makes the new Cabinet a stronger one,” commented the ‘Yomiuri Shimbun’, Japan’s last daily, last week. The bulk of the Cabinet remains the same, however.

Optimists say Ozawa’s entry could lead to some change in the political uncertainty hounding the country for some time. Ozawa has called for less bureaucratic interference and more personal responsibility on the part of the politician, a position that has won him media approval.

His goals include changing Japan’s peace constitution and getting a more active role for Japan internationally.

Recent opinion polls indicate the new government has gained for Obuchi higher approval rates since its formation Thursday last week. An opinion poll published by the ‘Asahi Shimbun’ said support ratings hover at 32 percent for the new administration, up from 28 percent at the end of December.

Polls cited stability as the main reason for growing support for Obuchi, who was derided as a colourless figure when he took over the premiership from Ryutaro Hashimoto last year.

A key test of Obuchi’s leadership will be underway soon, as Japan tries to repair an economic downturn, flagging confidence in the economy, and a battered image overseas.

At home, experts expect the LDP, because of its tie-up with the Liberals, this time to manage to pass the new budget of 81.6 trillion yen (724 billion U.S. dollars) without the usual delays and haggling with opposition parties that control the Upper House.

Under the reforms proposed by Obuchi, there will be a tax cut and a review of protective regulations designed to energise domestic demand and stimulate the economy. Ozawa is also calling on the LDP to suspend a consumption tax.

Analysts are now watching to see whether the LDP is being held at ransom and may be forced to accept some of the Liberal proposals, lest it be abandoned in the coalition. The Diet is meeting until the end of March, which marks the end of Japan’s fiscal year.

But while officials try to pump more optimism into the public, it is not easy to ignore the signs of recession everywhere.

Economic Planning Agency director-general Taichi Sakaiya made this point this week that despite its current problems, Japan remains a formidable global player in business. His own agency, however, said in a monthly report that even with some signs of improvement, the economy remained in “very severe” condition.

Industrial output dipped by 5.5 percent in November, bank lending is shrinking at nearly 5 percent. The economy is expected to shrink for the third straight year in the next fiscal year, despite the government’s projections.

Perhaps most telling are opinion polls at the end of the year showing 76 percent of respondents saying they did not believe the government’s many stimulus plans would trigger an economic turnaround.