Japanese Prime Minister Yoshihiko Noda has a chance to rescue Japan’s economy with a key free trade agreement. Failure to seize it could result in terminal decline.
Yoshihiko Noda has only been Japanese prime minister for two months. But despite his short tenure, he’s already facing his toughest challenge – and it has nothing to do with recovery from the March disasters.
Like his predecessors, Noda heads a Democratic Party of Japan (DPJ) that is internally divided, largely over past campaign promises and present realities. Despite his own call for party unity, Noda chose to tackle a highly sensitive political issue that ensures the continuation of DPJ infighting: Japan’s participation in the Trans-Pacific Partnership (TPP).
Noda faces a dilemma of choosing a policy that prioritizes Japan’s broader economic interests or domestic political dynamics. Noda’s ability to make a decision on this sensitive issue and get his party to follow, all whilst preventing the DPJ from splitting, will test his leadership. The challenge is enormous, but for the sake of Japan’s broader economic interests, it would behoove Noda to exercise firm leadership by taking a stand against vested interests no matter the cost.
The TPP began in 2006 as a Free Trade Agreement (FTA) amongst Singapore, Chile, New Zealand and Brunei. By 2010, it expanded to five more, including the United States. Today, others are interested in joining. Unlike an FTA or Economic Partnership Agreement (EPA), which allow for negotiated protection of some goods and services, the TPP’s aim is to eliminate all tariffs within ten years and create a free trade zone covering the entire Asia-Pacific region, a goal proposed at the 2006 APEC summit. At the upcoming APEC meeting in Honolulu, TPP members will decide on the broad outlines for a TPP agreement so as to advance towards creating detailed rules.
Noda wants to reach a conclusion on whether Japan should participate in the TPP before the APEC meeting. This question isn’t new – Noda’s predecessor initially placed trade liberalization on his agenda as a means to grow the economy. To this end, he indicated his interest in the TPP in October 2010, and wanted to reach a decision before the November 2010 APEC meeting. However, due to strong opposition from the agriculture sector and lawmakers that represent these interests, he deferred his decision until June 2011. Because of the March disasters, this decision was further postponed and faded from the policy agenda thereafter. Shortly after becoming premier, Noda revived the debate, stating his intention to reach a decision at an early date. To this end, he ordered the formation of a DPJ project team to debate the issue. However, this team is split, indicative of the sharp divisions in both the DPJ and the government.
Although Noda, as DPJ president, has indicated his support of the TPP, his party isn’t behind him. While he is supported by some influential members, such as Policy Research Committee Chairman Seiji Maehara and former Secretary General Katsuya Okada, he faces an enormous number who oppose. Former Minister of Agriculture, Forestry and Fisheries (MAFF) Masahiko Yamada leads this opposition, having collected close to 200 signatures from likeminded DPJ members. Significantly, Yamada is a close ally of DPJ strongman Ichiro Ozawa, former party leader who currently is under criminal investigation for violating campaign finance laws, and former premier Yukio Hatoyama. Because the fault lines pit party leadership against Ozawa and his allies, the TPP magnifies existing political divisions in the DPJ.
Although Noda has attempted to unify the DPJ by putting Ozawa’s allies in his cabinet, the TPP debate has instead invited fractures. Representing the interests of the farmers, MAFF Minister Michihiko Kano has strongly and publically expressed his opposition to Noda’s interest in the TPP. He has been supported by an unlikely ally, Defense Minister Yasuo Ichikawa. This is because Ichikawa enjoyed a 25-year career as a MAFF bureaucrat prior to entering politics. Representing business interests, both home and abroad, their public statements have been countered by Minister of Economy, Trade and Industry Yukio Edano, Finance Minister Jun Azumi, and Foreign Minister Koichiro Genba. Despite all individuals being members of the same cabinet, the divide shows no sign of narrowing. Instead, they have been publically advocating their positions and recruiting party allies, bringing DPJ divisions to the cabinet level.
All of this is possible because the electoral strategy of the DPJ, like the Liberal Democratic Party (LDP) before it, depended on farmers, giving the bodies that represent farmers an inordinate amount of influence over politicians. In all of its election manifestoes in the past decade, the DPJ advocated a policy of direct income subsidies to small-scale farmers at a time the LDP was pushing structural reforms that hurt farmers. Over time, these subsidies became more generous and expanded in scope. Farmers rewarded the DPJ by giving them a parliamentary majority in 2009. In turn, it was expected the DPJ would represent their interests at the national level.
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