Japan’s Future in the Balance
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Japan’s Future in the Balance

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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. 

Comments
10
Andrew P
November 6, 2011 at 22:49

Agriculture is one area where the USA can do very well if the barriers are removed. US farmers have large economies of scale. Japan joining the TPP won’t hurt the US in other areas since the competition to our manufacturing sector couldn’t get any worse than it is now.

What Japan really needs is a way to reverse its demographic decline. I see only one answer – innovation. Japan needs to invent robots that can automate the drudgery of child care. If Japan can create such technology it would be a truly transformative development, not just for Japan, but for the US and the EU as well.

Yang zi
November 5, 2011 at 07:19

Japan should sell its weapons on international market, it should have a good market. What do you think?

Yang zi
November 4, 2011 at 20:18

Prof Gordon probably will tell you how good TPP is to isolate China out. How effective it is for Japan to maintain its aspiration to lead Asia.

In reality, without Japan, TPP doesn’t mean much except it really make US pay.

yang zi
November 4, 2011 at 03:57

TPP without China is a very good tool to counter China’s rise. but it acts as a suicide bomb for US, it will speed up the relative decline of US, in favor of other countries in TPP.

Japan enjoys trade surpluses, it has less incentive to join, the key driver to join is S. Korea competition. S. Korea makes similar thing and can take Japanese market share.

Japanese farmer will take a big hit, so does its service sector. the unemployment will rise, income inequality will widen. but its export industry will thrive. a 50/50 proposition IMO.

Shanghai Cooperation Organization (SCO) will include half of the human population after India and Pakistan are accepted as member. this central asia focused organization can develop into a free trade block. a modern day silk road if you will.

Patrick T
November 4, 2011 at 00:02

Very interesting article. I would enjoy to read more about what you think about these current activities during the course of the next few days. I will be very grateful to have more professional insight on Japan’s current/future situation regarding FTA’s and possible TPP entrance etc.

(I am student at Copenhagen Business School and I’m enrolled in a course where we analyze the drivers and outcomes of political and economic regionalisation within the context of increasing globalisation with a focus on the Far East in particular).

Regards.

Patrick T

Yang zi
November 3, 2011 at 16:37

It is 50/50 for Japan

Yang zi
November 3, 2011 at 16:35

It is a 50/50 for Japan.

Yang zi
November 3, 2011 at 16:34

S korea competition is the key driver for Japan to join. But it will destroy its agri and related service sector, it is a 50/50 IMO

For US TPP is a suicide mission, it will speed up it’s relative decline.

mareo2
November 3, 2011 at 09:04

I agree with the views of the author of the article. With a strong yen at 78 yen per dollar and no way of see it getting weaker in the short and mid-term, the TPP seems to me the like the last historic chance of revert or at very least stop the bleeding trend of hollowing-out the remaining factories and their jobs to countries with lower wages, tax and regulations. In theory, in Japan’s culture indivuals sacrifice their personal interests for the good of the majority of the group, in practice the entire group is being sunk by an overrepresented minority driven by inertia because it is afraid of change to a business model that can grow instead of keep shrinking.

Bernard K. Gordon
November 3, 2011 at 03:17

First-rate work. My compliments to Mr. Hornung.

In all likelihood PM Noda will make his announcement on 6 or 7 November. btw: he has the support not only of Maehara, but also the FonMin, Gemba, and those 3 are all graduates of the 4-year Matsushita School and all are young. Noda is the oldest at 54; the other two are in their late 40s.

Send your e-mail and I will follow up shortly with a relevant piece on Japan/TPP.

Regards,

Prof. BK Gordon

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