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New Government in Japan and India

By: Dr.Dipak Basu
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(The author is a Professor in International Economics in Nagasaki University, Japan)

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Voters in Japan have given Hatoyama, the leader of the Democratic Party a rare opportunity to break with the tradition to follow the Liberal Democratic Party that has ruled Japan for the last 54 years. What does it mean for Japan and the rest of the world depends on the implications of major policy changes from the new government. However, the question is, does the new government have any new policy at all.

The economy of Japan is in dire state with the jobless rate rose to a record 5.7 percent in July 2009, factory output growth slowed and household spending dropped the most in five months with the fear of more and more unemployment in very near future. That leaves Japan ore dependent on exports that it has ever been.

However, Japan is different from the Western countries, particularly USA or Britain. Japanese capitalism has adapted a number of features from the more socialist Western European countries, with compulsory and affordable medical insurance for all, old age pension and child-care with nominal costs for all, life time permanent employment, free education up to the university level for all and the Japanese social system that encourages collective communal approach. From the childhood children learn how to help each other and cooperate not compete with each other. All sports in the schools are based on competition only among the teams not among the individuals. That team spirits they learn from an early age is there also in the economic life of the nation, where decisions are make on the basis of consultations among the employees and employer. American ideas of "hiring and firing" and "ruthless competition" are alien to the Japanese psychology.

This collectivism of the Japanese society has helped Japan to cope with a prolonged depression of the economy that has started since about 1993-94 and still continuing.
The major cause of that depression is the rise of China. China next door to Japan provides a very low cost of labour force and a very low exchange rate of Chinese currency Yuan. Because of that, Japanese companies find it very profitable to manufacture everything in China to reduce the cost of production significantly and bring those products to Japan or export to the rest of the world rather than producing these in Japan itself. The result is a massive transfer of jobs from Japan to China. This is the major cause of unemployment in Japan, where small scale manufacturing companies producing household goods of daily use have practically disappear, as the price of the goods produced in China is one-tenth of the price of the similar products made in Japan. However, recently electrical and electronic equipments or components of automobiles and other heavy engineering products are also coming from China, produced there by Japanese companies. The result is more and more unemployment.
This is the crucial problem for Japan, for which the Liberal Democratic Party failed to provide an answer and the people rejected them expecting that the Democratic party can solve the problem of chronic unemployment, when companies after companies, those who used to supply components to the large Japanese multinational companies, are disappearing leaving the Japanese workers high and dry.

The Democratic Party of Japan (DPJ) was formed on 27 April 1998 as a result of mergers of four previously independent parties that were opposed to the ruling Liberal Democratic Party (Jiminto)-the previous Democratic Party of Japan, the Good Governance Party (Minseito), the New Fraternity Party (Shinto-Yuuai), and the Democratic Reform Party (Minshu-Kaikaku-Rengo). The economic and social policies of these parties were either liberal or social-democratic. However, since then a large number of disaffected politicians from the LDP have joined the Democratic Party making it a reflection of the LDP. For example Makiko Tanaka, daughter of former Prime Minister of Japan Kakuei Tanaka, a leading figure of the LDP, is far from liberal or social democratic.

The Democratic Party claims to be anti-establishment, but that claim is doubtful . The Democratic Party argues that the bureaucracy of the Japanese government is too domineering, inefficient, and as a result, the Japanese state is stagnant without any new ideas. The Democratic Party wants to "create a new, flexible, affluent society which values people"s individuality and vitality"(from the election manifesto). However, that may be only the rhetoric.

The Democratic Party at the same time argues that a free market economic system is favourable for Japanese people"s welfare. They just like the American or British conservatives think that, the role of the government is limited to building the necessary system for self-reliant and independent individuals. Following the philosophy of Mrs. Margaret Thatcher of Britain, The Democratic Party seeks to introduce a local organizational structures including to let citizens themselves provide former government services, which in real terms means, as we have seen in Britain, cutting down social services which used to be provided by the government to the minimum, causing increasing hardship and deprivation of the poor. These reduction of social services may reduce the cost of the government, which is over burdened by debts and deficits in the budget for the last 15 years, but it will not increase the welfare of the Japanese people.

Yukio Hatoyama, the prime minister designate, is no revolutionary but a very pillar of the Japanese establishment. He is the son of former Foreign Minister Iichiro Hatoyama from the LDP( liberal Democratic Party) that has ruled Japan for decades. His mother, Yasuko Hatoyama, is a daughter of Shojiro Ishibashi, the founder of Bridgestone Tyre Corporation. His younger brother, Kunio Hatoyama, served as Minister of Internal Affairs and Communications under the LDP Prime Minister Taro Aso until June 12, 2009. His paternal great-grandfather, Kazuo Hatoyama, was speaker of the House of Representatives of the Diet of Japan from 1896 to 1897 during the Meiji era. His paternal grandfather Ichiro Hatoyama, another LDP leader, was a Prime Minister of Japan during the 1950s. His father, also from the LDP, was the foreign minister of Japan during the mid 1970s. Thus, Hatoyama"s past and present close relatives are all leading figures of the LDP that ruled Japan for the last 54 years. As a result, one should not expect any revolutionary out of him but a very stiff conservative politician with just a different face.

So far, the economic policy statement that has emerged from the Democratic Party of Japan includes nothing revolutionary at all. It says that the party will, " encourage people to have children by increasing child support and lower education costs, paying for this by slashing outlays on roads, bridges and public works." For the last 15 years during the depression of the economy the Japan government has indeed financed a large number of roads which may not have any traffic in near future, repaired again and again almost new roads and built a lot of bridges from nowhere to nowhere, just to keep people employed. Construction sector being the major employer in Japan received a large part of the government subsidies and easy finance from the partly nationalized banks. If the Democratic Party will change the direction in near future, it will certainly create more unemployment, not less. In Japan, people tend to marry very late, and decides to have no more than one child because of the very high cost of living and when the future is uncertain due to rising unemployment. Without a proper solution of the economic crisis of Japan, it is not expected that Japanese people will marry earlier and have more children. Thus, so far, most of the policy statements of the Democratic Party are either empty or infeasible given the economic condition of Japan.

That leaves us with the foreign policy of Japan, in which major changes are not expected but a modification of priorities can have a very serious implication for India. The new Japanese government will go on improving its ties with China under the guidance of the "idea of fraternity" Yukio Hatoyama has advocated. Since the founding of DPJ, Yukio Hatoyama, Ichiro Ozawa and other DPJ principal leaders have visited China, contacted or engaged with Chinese leaderships, and contributed positively to the improvement of bilateral ties. Yukio Hatoyama took China as the designation of his first overseas trip as leader of the DPJ and has served as the vice-president of the League for Japan-China Friendship in Japan"s parliament.

Ichiro Hatoyama, grandfather of the Prime minister designate Yukio Hatoyama, as the Japanese prime minister, had worked hard to normalize relations with China back in 1954, but failed owing to the U.S. restraint policy during the cold war. Yuko"s father, Lichiro Hatoyama, then Japanese foreign minister, had tried to have a Japan-China Peace and Friendship Treaty in 1976 but his effort suffered setback due to pressures imposed by the former Soviet Russia.

Added to that there is Makiko Tanaka, whose father the former Prime Minister of Japan Kakuei Tanaka has initiated the diplomatic relationship between Japan and China in 1972. She is a known pro-Chinese and anti-Russian. Makiko Tanaka only a few years ago was the foreign minister of the previous LDP government of Junichiro Koizumi and is expected to play a major role in the foreign policy of Japan in near future.

Indo-Japan relationship, had the blessing of the two former prime ministers of Japan, both from the Liberal Democratic Party, Yoshiro Mori and Shinzo Abe. Abe even came to Calcutta to meet the son of legendary justice Radha Binod Pal, who had declared alone in the Tokyo Trial in 1949 that the Japan"s war time prime-minister Hideki Tojo and his commerce Minister Nobusuke Kishi, the grandfather of Shinzo Abe, were not guilty of any war-crime. India has benefited immensely, during the last few years, from massive amount of Japanese foreign investments, subsidies from the Japan"s foreign aid programme, and continuous financial support from the Asian Development Bank, whose presidents are always Japanese.

Barack Obama has already declared China as the strategic partner of USA. China is the most important trading partner for both USA and Japan. Russia, ignored by India since Jaswant Singh became the Foreign Minister of India, is deepening its strategic partnership with China, which is the most important customer for Russian weapons and very important trading partner of Russia. Thus, there can be a new trend for the U.S., Japan, Russia and China to seek the improvement and enhancement of their relations simultaneously. That would leave India high and dry.


Statements of the politicians before they take charge of their offices normally do not imply much. Before winning this election, Hotoyama has declared his political philosophy is based on "fraternity", one of the three espoused values of the French revolution.

He said, "Over recent years, Japan"s traditional public services have been eroded. The ties that bring people together have become weaker and the spirit of public service has also dimmed. Politics based on "fraternity" would restore strength to Japan"s depleted non-profit (public service) sector. It would expand the non-profit sector into new areas and provide assistance for the people who support these activities. In this way, we aim to build a society of coexistence in which people can rediscover the ties that bring them together, help each other, and find meaning and fulfillment in performing a useful social role."

Hotoyama mentions nothing about the damage China has caused to the economy of Japan by taking away most of the jobs from Japan. In concrete terms, the future economic policy of Hotoyama will depend upon, in his own words, "the restructuring of government finances and the rebuilding of our welfare systems." However, the details are missing.

Hotoyama is very clear about economic integration of Japan-China-Taiwan-Koreas by having a common Asian currency just like the Euro. In his own words, "we should be working towards a possible idea of the future common Asian currency. Establishing a common Asian currency will likely take more than 10 years." Previous attempt by Japan during the Asian financial crisis of 1998-99 by establishing an Asian Monetary Fund was blocked by the United States.

Whether, in the light of the new world order, when China became the financier of the United States, USA will encourage now greater integration of the East Asian economies or not, is the main issue. If it does, source of funds for India from both Japan and the Asian Development Bank will dry up as well.

With a new pro-Chinese government in Japan and in USA, India should try to think of a new alliance. With increasing tensions between USA and Russia, when USA is trying to move into the Russian sphere of influence in the countries of the former Soviet Union, India should try to revive the old friendship, what India had with the Soviet Union, by increasing both economic and strategic alliance with Russia.

Dr.Dipak Basu

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