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Election 2013: Promise and Perils of an LDP Landslide

Tags: LDP , Abenomics , Election , Fiscal Policy , Economy

Yakushiji, Katsuyuki

July 11, 2013

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Experts are predicting a big win for the ruling LDP when Japanese voters head to the polls July 21 for the triennial House of Councillors election—the first under a new law permitting online campaigning through websites and social networking services. The outcome should put an end to legislative gridlock and give a boost to the prime minister’s plans for economic revitalization and fiscal rehabilitation. But can a triumphant Abe stay focused on Abenomics? Senior Associate Katsuyuki Yakushiji sizes up the political situation going into, and coming out of, the upper house election.

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Japan’s political parties are in full campaign mode, as candidates have begun stumping for the July 21 House of Councillors election. Impassioned speeches can be heard on street corners, but with all signs pointing to an easy victory by the ruling Liberal Democratic Party, the voters seem less fired up than the politicians.

Turnout is expected to be low, as it was for the just-held June 23 Tokyo Metropolitan Assembly election. The national parties threw themselves into the Tokyo campaign, calling the race a bellwether for the coming upper house poll. Yet 1.1 million fewer voters cast ballots in this year’s election than the last one, as turnout slumped 11 points to 42%.

The LDP Unchallenged

The biggest reason for the recent voter apathy is the lack of any viable alternative to the LDP.

The Democratic Party of Japan was dealt a crushing blow in the December 2012 general election; after three year of DPJ rule, voters rejected the party emphatically, leaving it with just 57 of the 230 lower house seats it held going into the election. The fractured party is still licking its wounds.

The once-buoyant Japan Restoration Party has also fallen on hard times. The JRP picked up an impressive 54 seats in its first House of Representatives election, borne aloft by the popularity of Osaka Mayor Toru Hashimoto. Hoping to build on its momentum, the party lined up 34 candidates to run for the Tokyo Metropolitan Assembly in June. But things turned sour in late May, when Hashimoto began commenting on the Imperial Army’s use of “comfort women” during World War II and even advising the US military in Okinawa to make better use of the local sex industry. The party’s approval rating plummeted, and only 2 of its 34 candidates were elected to the assembly.

The rest of the opposition consists of smaller parties, such as the Japanese Communist Party and Your Party, that have little impact on the larger political landscape.

Understanding Upper House Elections

The electoral system for the House of Councillors takes some explaining. The upper house has a total of 242 members, each elected for a six-year term. Elections are held every three years to fill half the chamber’s seats. Of the 121 seats up for grabs in each election, 73 belong to prefectural constituencies, while 48 are filled by nationwide proportional representation.

The 73 prefectural-constituency seats are apportioned among Japan’s 47 prefectures according to population. The formula currently gives one seat each to 31 prefectures, two seats each to 10 prefectures, three seats apiece to 3 prefectures, four seats each to Osaka and Kanagawa, and five seats to Tokyo. Each voter chooses one candidate (regardless of the number of prefectural seats) by writing in the politician’s name.

An LDP election poster.
An LDP election poster.
The process is a bit more complex in the proportional-representation vote. Here voters write in either the name of their preferred party or the name of a candidate from a list prepared by the parties. The number of votes cast for each party and its candidates are tallied, and seats are allocated to the parties in proportion to that tally, using the d’Hondt method. In assigning seats, the parties must give priority to candidates receiving the most votes.

In the prefectural-constituency vote, large parties with highly developed organizations have the advantage, owing to the preponderance of single-seat constituencies. The LDP is expected to do particularly well here, taking close to 50 of the 73 seats up for election. Small parties generally have a better chance of picking up seats in the proportional-representation vote, and for this reason a large number of parties are vying for the 48 seats in the nationwide constituency. Yet even here the LDP is favored to win close to half the seats.

Given the LDP’s insurmountable advantage over the opposition, attention has shifted from who will win the upper house to the margin of victory.

The LDP’s victory in the December general election gave it a majority in the House of Representatives and the power to designate Shinzo Abe, its leader, as prime minister. But the opposition still holds a majority of seats in the House of Councillors and is therefore able to block most legislation. Initially, the goal of the LDP was to put an end to this legislative deadlock by breaking the opposition’s hold on the House of Councillors with the help of the New Komeito, its longtime coalition partner. The polls now suggest that the LDP may take control of the upper house unaided. The results could affect the kind of agenda the Abe cabinet decides to pursue over the next three years.

Next Steps for the Administration

How will the administration channel its energies after its expected electoral endorsement? Will the prime minister remain focused on his economic revitalization and fiscal rehabilitation program, as he has pledged to do during the election campaign?

Abe unveiled his ambitious economic program upon taking office last December, outlining “three arrows” for rebuilding the Japanese economy: a bold monetary policy, a flexible fiscal policy, and a growth strategy centered on private-sector investment.

The government wasted no time releasing its first arrow in the form of an aggressive program of quantitative easing, then let fly the second arrow, a massive supplementary budget to provide fiscal stimulus. The market welcomed these bold moves: Stock prices surged, the yen’s value fell. And the Abe cabinet’s public approval rating rose along with the nation’s hopes for a return to economic vitality.

Measures oriented to sustained growth—the “third arrow” of Abenomics—will not begin until after the upper house election. But the prime minister has indicated that the focus of these efforts will be structural and regulatory reforms centered on the healthcare industry and fuller workforce participation by women, together with Japan’s involvement in the Trans-Pacific Partnership trade agreement currently under negotiation.

Abe has also acknowledged the need to rehabilitate government finances. With long-term debt totaling some 1,000 trillion yen, or twice the gross domestic product, Japan’s debt-to-GDP ratio dwarfs that of Greece, Italy, and other countries at the center of the European sovereign debt crisis. To avert a similar crisis at home, Abe has set a timetable for eliminating the primary deficit and achieving a surplus. The hike in the national consumption tax, scheduled to kick in beginning next spring, is essential to achieving these goals.

But translating all this into action will be far from easy. The basic goal of regulatory and structural reform is to shift resources from industries mired in low productivity to more productive sectors, and such policies are bound to encounter resistance from uncompetitive sectors that depend on special government subsidies, breaks, and protections.

Two prime examples are agriculture and small businesses—powerful lobbies whose support enabled the LDP to maintain its iron grip on government for decades. Reforms that threaten the economic well being of those sectors, whether mandated by the TPP or undertaken at the government’s initiative, are sure to meet with opposition, both from industry groups and from Diet politicians who rely on those organizations to win reelection. At the same time, any attempt to control Japan’s spiraling social security costs by lowering benefits can be expected to trigger a backlash from the nation’s numerous elderly voters.

To minimize such cuts in spending, the Abe cabinet is relying on increases in corporate tax revenues resulting from sustained economic growth, as well as the scheduled increase in the consumption tax rate. The hope is that by applying these additional tax revenues to deficit reduction while limiting growth in spending, the government can meet its fiscal goals without the pain of cutting spending.

Putting this master plan into effect will require strong political leadership. But an LDP landslide in the House of Councillors election could give Abe the momentum he needs to pull it off.

Will Abe Prove His Own Worst Enemy?

One concern, though, is whether Abe will shift his focus from economic revitalization after the upper house election.

Abe is regarded as a rightwing member of his party and a hawk on security issues. During his successful 2012 bid for the LDP presidency, he often referred to such issues as amending the Constitution or reinterpreting it to sanction Japan’s participation in collective defense and visiting Yasukuni Shrine, dedicated to Japan’s war dead.

Since taking office, Abe has been at pains to avoid any major controversy on these issues prior to the House of Councillors election. But how long can he resist advancing his pet projects—and the pressure from the rightwing party forces that helped him win the party’s top post for a second time? With a landslide upper house victory under their belts, Abe and his rightwing supporters may decide the time is ripe to tackle their ideological agenda.

No immediate action on amending the Constitution seems likely, given the high legislative hurdles to revision. But will Abe take advantage of the LDP’s Diet strength to legalize collective self-defense? Drafting the necessary legislation and shepherding it through the Diet would drain much of the prime minister’s energy, and deliberations would take up precious time in the Diet. Consideration of budget issues and reform legislation to promote Abe’s economic program could end up taking a back seat.

The chances of resuscitating the economy and rebuilding government finances while simultaneously pulling off a controversial change in defense policy are slim at best. And the consequences of another abortive attempt to rebuild the economy could be devastating for Japan. If the government fails to put the nation on the road to sustainable growth and fiscal health over the next few years, the country faces the risk of an economic meltdown that could cast a shadow over people’s lives for many years to come.

Ultimately, Abe must exercise his own judgment in setting his cabinet’s top priority for the next three years. What will it be—security policy or economic revitalization? In my view, the choice is clear.

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