So much has been written already about the Democratic Party's spectacular win in August 30 Lower House election and the agenda of the new Hatoyama government that took power on Sept 16 that it is difficult to add anything new. Hence take this story as just a collection of main points peppered with a few personal opinions. I try to look at the big shift in Japan as not "just politics" but a study in Japanese people's thinking that applies to doing business here as well. After all, politicians are trying to "sell" something to Japanese people, same as we do in our jobs.
This article is written for Finnish members in mind. Guess most Japanese members follow politics from the local media.
When you think WHY it happened and WHAT are the OVERALL EFFECTS think these three points stand out:
1) It was not a vote FOR DPJ but a vote AGAINST LDP
Like a long time customer tired of bad service and poor quality, the Japanese people decided: "Enough is enough". And once they decided to go that way, there was nothing that could hold back the big backlash.
Their "gaman" certainly lasted a long time: it briefly happened once in 1993, now came back with vengeance 16 years later. People sure have a long memory here. It looked certain to take place in 2005, but an incredible salesman, almost a magician, called Koizumi managed to turn customers' anger into support for himself - and the product he was selling. Since then unpopular salesmen Abe, Fukuda and finally Aso used up customer's patience and nobody at the head office (party) could prevent the market loss any more.
2) Expectations of DPJ are NOT THAT HIGH
Reflecting point one, many voters at exit polls said that even if they voted for DPJ, they did not expect the party (the new product) to be able to fix all problems facing Japan (ie. the customer). This will help Hatoyama & Co to move in careful speed and reasonable direction, rather than change all that is wrong quickly at one time. In fact, neither Hatoyama's product nor his salesman performance was that perfect either. Yet there was never any doubt of the result. He is much too honest and idealistic to be a great political leader, but this time such approach was just the right recipe. What's more, he is humble enough to well understand the magnitude of the challenge. Even his speech accepting the victory was totally lacking any feeling of celebration, it was more like serious acceptance of the new job and all expectations bestowed from millions of buyers with it.
3) Is this the change to genuine TWO PARTY DEMOCRATIC SYSTEM? Don't bet on it!
Some like to think this was the long awaited change from "one party democracy" practiced for past 50 years to Anglo-Saxon system where two main parties fight for power at regular intervals like contract periods. Well, it could be that, but only next 4 years will show if this is true. Like in business, this depends on customers (voters) and LDP and other parties (competitors), contract or no contract. LDP, now in opposition, is a wily old fox, who will do anything in marketing manuals to throw dirt in DPJ's wheels. Moreover, in the end, it turned out those wheels are now dependent on support from two small party allies, who look like very unreliable part suppliers. Even more, the new government is dependent on smooth co-operation with Japan' big bureaucracy who for past 50 years have only ever co-operated with LDP. Call them the independent logistic system that is needed to deliver the promised goods. Finally, after 4 years' contract, it could well be that the newly won customer (voters) will go back to the old supplier (LDP) in equally violent swing the other way. So, it's the old "keep customer satisfied" even if you have been awarded a contract.
Going into more detail, what are the CUSTOMER EXPECTATIONS?
As in business, they are wide and varied and difficult to put in any order of importance. Just like purchasing managers, technical people and financial people at customers, who all have different expectations that should be filled same time. In order of urgency people seem to now expect that the new government will
1) Fix the impending swine flu
During the last few weeks it turned out that - as many times before - there was a big gap between what the LDP government had said the situation was (in this case, Japan preparedness) and what the reality is. In short, Japan lacks badly in vaccination stocks and hospital beds if millions get seriously sick and need treatment as the worst predictions say. Typically for Japan, no vaccinations have been imported in preference of domestic supplies which have now proved woefully small. As reserve measure, LDP thought Japan can always buy extra suppliers from foreign markers, but with the demand surging all over the world this might prove difficult. At least the prices will be high. DPJ has now "inherited" this mess and must do the best it can and calm down people's worries.
2) Fix all social welfare worries
Unemployment has increased to unforeseen numbers without proper welfare system, income differences grow without sufficient support for the poor, future funding of national pension and healthcare system is still not fixed, so no wonder people are worried for their future. And when they worry, they save what they can and not spend, a big problem for the economy. Fixing all this and paying big child allowances, too, were some of the promises DPJ made in its campaign manifesto, so in theory, customer expectations run now high. In practice, however, as said, voters don't expect all these things to change immediately.
3) Fix the domestic economy and help Japan from "global storm"
As in most other countries, hands are up in Japan to "fix" the economy (the root cause). All understand the recession is "global" and not home grown. So people expect the government to first alleviate the symptoms (give aspirin and bandage), only then find a way to get patient well again. Of course, in practice the global turnaround has already started and Aso's three additional budgets reaching to same size relative to economy as any other OECD country, have helped to stop the 1.Q. free fall during 2.Q. .Yet more is expected from DPJ and Hatoyama, who have promised to change the emphasis to consumers instead of big business and massive construction projects favoured by LDP.
Problem is both PM and the party know there is hardly any more money in the till. So, instead they are looking for redirecting big parts of the unspent old budget money into something that seems more valuable according DPJ manifesto and "less wasteful". Of course, with the big bureaucratic spending traditions in Japan through out the past it is not difficult to point out many wasteful places in LDP plans and DPJ has started by cancelling big dam projects and a "manga museum". Instead money is being channelled to people's pockets through new ways. But what will be really achieved is another matter. At the end, Japan cannot get fully back on its feet until global demand picks up again.
4) Change foreign policy?
Some comments from abroad seem to expect Japan will make clear changes into its foreign policy, like aligning it more with China and other Asian neighbours and less with USA as until now - and that this was one of the reasons for the voters` big support to DPJ. Both views are far from correct. First of all, Japanese people, as always, are not in the least interested in foreign policy or foreign country relations - expect for easy tourist travel to all countries and smooth import of safe food and cheap energy. Secondly, while Japan should put more emphasis to its relations with its Asian neighbours than before, this does not mean that all its interests are same as those of the neighbours. Big parts of economical interests surely are and that is an area where much more progress should be made between ALL countries in Asia, not only between Japan and others.
As for US relations, it is true that Japan has not been treated on "equal basis" by the Americans but then again, who has? The feeling is nothing new here: it is more than 20 years ago when Shintaro Ishihara, today Tokyo Governor, wrote the book "Japan That Can Say No". Then, it received bad critic from both Americans and Asians, it was "nationalistic", even "militaristic" when Ishihara said Japan should build its own fighter planes, even own nuclear weapon, instead of rely on USA for everything. It is a sign how little things have changed that even small noise from Hatoyama during the campaign for more "equal relationship" is taken out of proportion today. What DPJ really is after is to discuss the costs that Japan pays to have the numerous US bases is here, even has to pay relocate some back to US soil. Don't expect anything much out of this apart from some adjustments into the social burden that much too many US bases in small Okinawa islands cause to the local people there.
Like every company, DPJ, too, have set its OWN STRATEGIC TARGETS that are nor exactly same as "meet customer expectations". Here's a few central ones.
1) Challenge bureaucracy and cut wasteful spending
In every country, effective government system is based on smooth co-operation between political leaders who represents the voice of the the people and bureaucrats who implement the policies and give expert advice in seeking solutions to problems. The problem in Japan has been that it is the bureaucrats that lead and the politicians that follow, not the other way around. While this might have been actually beneficial for the country during the time of steady economic growth 1955-89, most agree it's high time the system should be normalized and the bureaucrats put into their place. The challenge is how to make the powerful bureaucrats agree to this.
The key to control the bureaucrats is to grab the initiative and control the money flows in the budget. Politicians need to secure control of the policy, law and budget making processes from the beginning, not wait for the ministries to make their own ideas - each size of a small country - and then declare to government that they cannot be changed. In order to change the process from the old model - not uncommon in many companies these days - the CEO (Primoe Minister) shook up the organization profoundly (changed the government model).
Earlier - for past 123 years ! - the chief representants of various ministries ("kansliapaallikot") got together BEFORE government meetings to review the forthcoming agenda and vow that only those proposals that ALL ministries UNANIMOUSLY agreed to, would be accepted - or reviewed at all - in the government meeting. So the new council is a Big Change in Japan politics.
In order to eliminate active manipulation of government affairs even from the party side, the DPJ model does not have a Strategic Plicy Council like LDP did duplicating the policy review process. As well known, in fact, PM was only a puppet in the LDP model, allowed to move only to the extent the strings were pulled from the party backrooms.
The challenge is to make both sides co-operate smoothly, not confront each other. One warning example is an incident during Koizumi government that turned out badly: it was the bureaucrats that won the battle when hardheaded Foreign Minister Makiko Tanaka challenged one of her Ministry subordinates. In the end, it was the Minister who had to resign.
This time Hatoyama has appointed his old partner Naoto Kan in charge of leading the attack and the new Economic Strategy Council. He has experience from 1993 when he successfully challenged Health & Welfare Ministry in a scandal involving cover up of HIV tainted blood for transfusions. Moreover, he has appointed Tadakatsu Sano as his own political secretary. This veteran knows ins and outs of how bureaucracy works following his 20 years at top of METI.
2) Create better economy by putting emphasis on domestic consumption
This a lofty target that has been proposed ever since the famous Maekawa report 25 years ago, yet never achieved. Now DPJ says, it will support small companies and consumers in new ways that will help create employment, confidence in the future and help increase private consumption. It's not only bigger child allowances, free medicine to old people and renewed support to farmers. DPJ wish also regulate temporary job contracts, a widely spread business practices that now cover 1/3 of the work force, remove highway tolls, that have financed the road building, as well as introduce new government subsidies for SME companies. This is all in contrast to LDP whose main policy was to first work together with big business, big construction etc and then try to spread benefits to farmers, workers etc. Critics say the DPJ's lofty promises and new regulations are as expensive and wasteful as all the LDP "pork barrelling" that helped party buy local votes until there was no place left to pour new cement into, no rivers without dams and no bridges, tunnels, highways and railways to be built any more. In same way now, DPJ is now "buying votes" from young families and workers in big cities as well as from old farmers in countryside.
What is shocking the business society, including foreign companies, is that deregulation and freeing up competition is now a bad word, not promoted openly by any politician in Japan. In fact, it seems all the progress in this area that was achieved during Koizumi time to reduce unnecessary government involvement and to cut unnecessary costs, are now in risk of being rolled back.
3) New "different" foreign policy
This was one of Hatoyama's pet themes during the campaign yet, as explained, it did not create big interest among voters. Hence, despite all talk of "brotherhood" and "fraternity", don't expect any big changes immediately except generally better feeling at neighbours China and Korea who don't have to worry any more about new Yasukuni embarrassments etc. Hopefully this will help to promote further progress in the commercial relations in Asia, which are already well on their way, as well to solve some of the pending area disputes like Tokto islands and the economic border line in the sea between China and Japan. Some other concrete themes that remain topical, not least because of public promises made during the campaign, include whether or not continue refuelling US and other foreign war ships in the Indian Ocean, help defend foreign ships (not only Japanese) against Somalian pirates etc. Until now, DPJ has said Japan should not participate in nything that is not under strictly UN control or direct threat to Japan's own security. To make up for cancelling all outgoing now, Hatoyama can boost up civil help (read: donate more money) into building up Afghanistan, Africa, Asia etc.
Another big foreign policy topic is the environmental protection and the next global emission control agreement that was discussed September in USA (both UN and G-20 ) and supposed to be finalized in Copenhagen in December. Japan has taken a lead together with EU in making promises to cut its already relatively small emissions, but expect USA, China, India and other big polluters to join in. Despite some new hints last months, it looks like the two developing country giants are not willing to agree on concrete targets, so the question is should Japan, EU, USA etc do something even more like paying for their costs?
If these are "market expectations" and "company strategy" what are the most obvious RISKS? Seems they relate to DPJ`s own ambitions more than what voters are expecting - plus to some internal weaknesses.
1) Challenging the bureaucracy can go wrong
If the Hatoyama government confronts the bureaucrats too aggressively instead of seeking co-operation, this can make bureaucrats stick their heels in the ground and make the whole process freeze or get out of its track. This would make for a political paralysis and economic catastrophy. To prevent that Hatoyama is counting on a few key players in his team who have experience in dealing with the bureaucrats.
2) Confronting USA too aggressively
While it is natural that Japan seeks to find its voice in decisions involving US bases, refuelling US navy etc, Hatoyama & Co must naturally keep in mind that any business relation is based on mutual confidence and continuity. If Japan starts too aggressively and one sidedly cancel what it has committed to do before, it will quickly lead to souring of the long time partnership. Japan must remember that, at the end, USA takes responsibility of big part of the country's security. Many in the US side think Japan is in fact having an easy ride, just paying money, not risking blood. If Japan wants to take more responsibility, it would be easy for Americans to say: "You are more than welcome to do more by yourself. Start from tomorrow." If it would lead into Japan changing course for a powerful military of its own it would quickly upset today's security balance in East Asia.
For USA, as things stand now in the world, it needs all friends it can get, no matter whether we talk of global economy, finance, foreign politics, security, military balance or what ever. As Japan has always been its ally No.1 in Asia, it expects very much from Japan and the two countries had better stick together now as before. So Washington will also avoid confronting Japan too aggressively despite the initial shock that its "pet dog" can bark.
To sooth nerves in Washington, Hatoyama chose USA as the first place to visit overseas and Obama the first man to meet. It also fit well into his "environmentally and neighbouring friendly" image to give a speech in UN and meet also other G-20 leaders including President Hu of China. Furthermore when Obama is a fellow Democrat and the new U.S. Ambassador in Japan comes from Stanford University where Hatoyama also did his Ph.D., there's some background to share when cards are laid on table in November Obama comes to Japan.
3) Inexperience
More than half of DPJ's 308 delegates in the Lower House are new there. They never have been in Parliament before, so they don't know how things work there, what is possible and what is not possible. Some old hands at LDP laugh openly that the DPJ leaders must be busy showing to the new delegates even where to wash hands! Same for the new ministers: most of them have no previous experience. They don't know how to work with their bureaucrat subordinates, how to proceed even routine administration, not to talk about important political decision on new laws and directions. Ever more than before with LDP, bureaucrats can run circles around these novices. Once again, old LDP hands say DPJ ministers will have difficulty to find their way from the Parliament building to their own Ministry.
Some guidance is needed to get things moving in the right track. For that, luckily there are routined stalwarts among the new ministers that command not only experience but even respect. Not only Kan (Vice PM), but also Fujii (finance minister), Okada (foreign minister) and Nagatsuma (health & welfare minister). Back at DPJ Headquarters, behind the minister line up, "shadow shogun" Ozawa, now elected Party Secretary, will continue to exercise his "sales power" on the customer field through his incredible connections around the country.
On other hand, there is already one potential scandal set among the new ministers named Kamei. He represent the small New Frontier Party but actually come from so old conservative end of LDP that he was kicked out of the party by Koizumi in 2005. Put in the charge of postal privatization control, the very thing he opposed and was kicked out for, is like putting wolf guarding the lambs. His first public comments on the matter and a few others have already been alarming to say the least. Afraid there is more shocks to come from this 72 year old "ojisan" who represent the worst of old LDP. What a shame that Hatoyama must accept such allies to cement his power!
4) Ozawa
Finally let's not forget the "Shadow Shogun" behind it all, Ichiro Ozawa. The former LDP party secretary who jumped out and organized the 1993 attack on his old party that failed within 11 months, is sworn not let things slip out of his hands again. He will do everything he can do to keep things in his rein behind the facade of Hatoyama & Co. Known for his hardheaded uncompromising stands as much as for his organizing skills, he is as dangerous ally as he is as opponent. His liability is that many people don't like his style but then again it is evident the other DPJ leaders cannot manage without him. 150 of the 308 DPJ delegates owe their seat to Ozawa's manoeuvres, so they have a deep gratitude and obligation towards him rather than the official party leader. In comparison, Hatoyama has only 45 candidates backing up him and other DPJ leaders have even less.
If all goes well, Ozawa will stay behind and help organize the next win for DPJ, namely Upper House election next year. If successful there, DPJ can consolidate its power and kick out the two small allies that it needs today. They make a unnecessary noisy, embarrassing ballast. If Ozawa will start appearing more in the front and people get the idea that it is Ozawa that runs the party, not Hatoyama who they thought they voted for, the DPJ support can quickly sink from the heights where it is today.
For Japan's own sake, let's hope Hatoyama & Co can stay popular and achieve what they have promised to do during next 4 years. Then, at the end of the contract period, let the better man win!
TV 07.10.2009
