This past weekend, just two years after his predecessor led the Liberal Democratic Party to its greatest electoral triumph, Japanese Prime Minister Shinzo Abe led it to its worst electoral trouncing since the LDP's founding in 1955. Apparently convinced that little has changed, Abe is trying to hang on. Since the election was for the Diet's upper house but it is the lower house that names the prime minister, Abe has no legal obligation to resign. Nonetheless, he faces growing pressure to take responsibility for the defeat. Polls show that 56 percent of the Japanese public thinks he should step down. Some former LDP cabinet ministers and a former prime minister have publicly agreed. And many politicians in Abe's party who face elections before the end of 2009 fear defeat if he remains their standard-bearer. So even though Abe himself seems to be in denial, it is doubtful that he will be able to hold out for long.

It took Abe only ten months to move from a 70 percent approval rating to 27 percent on the eve of the election. He started off with a triumphal move toward reconciliation with China and South Korea but stumbled within weeks by inviting back into the LDP Diet members whom his predecessor, Junichiro Koizumi, had expelled in 2005 for opposing reforms. Abe's move seemed like a betrayal of Koizumi's legacy and the voters' own approval of it, and his ratings started tumbling.

Then Abe staked his tenure on a gigantic miscalculation: that the economy was in such good shape that he could ignore economic issues. But while Japan's GDP and corporate profits have grown and its unemployment rate has declined, the country's ordinary citizens still suffer from falling real wages, high levels of youth unemployment, increasingly expensive education, rising taxes, falling social security benefits, and near-zero returns on the savings accounts that the elderly use to buy daily necessities. Forty-two percent of the respondents in a recent newspaper poll said they were worse off than before Abe became prime minister; 54 percent said they were no better off.

Abe remained out of touch throughout this process, devoting himself to projects such as revising the constitution to help Japan's military to play a bigger role and making the education system more patriotic. Voters did not disagree with his stances on such issues, but nor did they see them as the highest priority.

Abe was so out of it that when he learned the government had lost the records for 50 million pension premium payments--making it uncertain whether people would get their proper social security payments--he hushed up the issue for months. Abe contends he was unfairly tarred by connection to a scandal that had begun before his watch. But voters felt it was his job to fix it and they were as angry about his initial lackluster response as they were about the original debacle.

Still, the LDP's recent decline is part of a phenomenon larger than Abe. Ever since the fall of the Berlin Wall and the popping of Japan's late-1980s bubble, Japan has suffered from political instability. Those developments rendered obsolete the old "1955 system" of a ruling LDP guided by economic policies that protected inefficient sectors and a less-than-credible opposition led by Socialists and Communists. Japan ran through ten prime ministers in 12 years, and the LDP itself split and temporarily fell from power. Today the LDP's support is a mile wide but an inch deep. The party governs with the help of a smaller party, the Komeito, which also took a walloping over the weekend. The Socialists and Communists have virtually disappeared and the new opposition party, the Democratic Party of Japan (DPJ), is the result of long series of party splits, births, deaths, and mergers.

Koizumi rode to power in 2001 on the slogan "no growth without economic reform." He restored some stability simply by staying in office for five years, and by renovating the LDP (and purging some recalcitrant opponents of reform) he seemed to arrest or even reverse the party's apparently inexorable decline. But whether he fundamentally changed the course of Japanese politics or caused only a brief pause in the move toward realignment remains unclear.

This is the context in which Abe's current troubles may have larger significance. Would his resignation throw Japan back into an era of short-lived, weak governments? Will the DPJ's control of the Diet's upper house lead this fractious party to take governance seriously, helping voters to see it as a true political alternative and not just a vehicle for a protest vote (as it was this time)? No one can be sure.

In the meantime, so long as Abe clings to office, Japan risks policy stalemate. Despite Abe's calls for cooperation, the DPJ will try to block legislation in order to force an early election for the lower house. Measures to address the budget deficit by raising the consumption tax will almost certainly be off the table for a while. In an effort to win back disaffected rural voters, Abe might slow further cuts in unproductive public works and is unlikely to push for any meaningful free-trade agreements that would require significant trade liberalization in the farm sector (such as the one currently under discussion with Australia).

In the long term, with or without Abe, Japan is steadily moving toward an increased security role in cooperation with the United States. Both parties have accepted this in broad terms but with an important difference. The Abe administration (and many foreign policy specialists, LDP members, and even some DPJ leaders) supports Japan's right to exercise "collective self-defense" along with the United States and other allies. The official DPJ position, however--held firmly by party leader Ichiro Ozawa--is that sending Japanese military forces abroad or taking military action beyond the immediate defense of Japan must be authorized by the United Nations.

This disagreement will come to the fore this fall, when the Diet takes up extension of the law that authorized the dispatch of Japanese naval forces to the Indian Ocean to provide logistical support to allied forces in Afghanistan. Ozawa has vowed to defeat extension, hoping this will force Abe to dissolve the lower house and call a general election.

The LDP's election defeat will also mean that sensitive issues such as those relating to U.S. military bases on Okinawa will be more difficult to manage, decisions about upgrades to major weapons systems will be harder to make, and coordination of policy toward North Korea will become even tougher. Finally, Abe's ability to push for revision of the constitution to codify Japan's use of military power is most likely moribund.

Still, the fact remains that Japan has already changed a great deal simply by taking steps toward a de facto reinterpretation of the existing constitution, and it could continue down that path if the country's political system does not grind to a halt. Thus, in the end, Abe's refusal to step down could ironically delay the achievement of the goal he prized so much.

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  • Richard Katz and Peter Ennis are co-editors of The Oriental Economist Report, a monthly newsletter on Japan, and the semiweekly TOE Alert. Katz is also the author of Japanese Phoenix: The Long Road to Economic Revival.
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