Media Global Economy 2021.11.26
Shake off the idea that a change of government is paramount
The article was originally posted on RONZA on November 9th, 2021
“There can be inexplicable victories, but there are no inexplicable defeats.” This aphorism, often said of kendo, may best express the results of the House of Representatives (lower house) election on October 31.
The Liberal Democratic Party (LDP) won against the odds. The Moritomo Gakuen scandal, the cherry blossom scandal, and the government’s inadequate response to the COVID-19 pandemic were among the major negative factors facing the administration of Fumio Kishida, which has succeeded the Abe and Suga administrations. Moreover, the LDP had won a landslide victory in the three previous general elections since 2012. For these reasons, it was generally predicted that the LDP would lose a substantial number of seats in the latest election. Kishida, also the president of the LDP, must have thought that maintaining 233 seats would be a fair result even if his party lost more than 40 seats from 276 seats before the election. Early reports of election returns suggested that the LDP may fail to secure a majority. It turned out that the LDP lost only 15 seats and won 261 seats in total, thus maintaining an absolute stable majority.
The Constitutional Democratic Party of Japan (CDP), on the other hand, suffered an unexpected setback. Most pre-election predictions were that the CDP – which had forged electoral cooperation with the Japanese Communist Party (JCP) and fielded unified candidates in some 70% of the single-seat constituencies – would substantially increase its number of seats. The result, however, was a major defeat for the CDP with a loss of 13 seats. CDP Leader Yukio Edano was forced to resign as party head.
Pre-election predictions were totally off the mark. It was as if a team few expected to win had defeated a strong team. For the LDP, it must have been a “selfless victory” or an “unintended victory.” These terms are often used when a weak team clinches an unaccountable victory in a national high school baseball championship.
It was not that favorable winds blew for the victorious LDP. Nor was it that the voters appreciated the LDP’s steering of the government, policy performance, or policy proposals. The LDP won before it knew it. And the victory was not overwhelming. LDP heavyweights such as Nobuteru Ishihara and Takeshi Noda failed to get elected. The incumbent LDP secretary-general lost his seat in his single-seat constituency although he secured a seat under the proportional representation system. LDP candidates who won in single-seat constituencies often did so by a narrow margin. On the whole, the LDP managed to secure a narrow victory. The winning percentage was below 50% in the electoral districts where Prime Minister Kishida stumped. Senior LDP officials must have been reminded that “there can be inexplicable victories.”
One major factor behind the inexplicable victory was a sharp drop in the number of COVID-19 cases, which puzzled even experts as to its cause. If the cases had plunged this much before the LDP presidential election, Former Prime Minister Yoshihide Suga might not have had to give up on running the race. If government policy was instrumental in reducing infections, the credit should go to the Suga administration, whom Prime Minister Kishida deposed in effect. For the LDP, the worst cause for concern, i.e., the failure to adequately respond to the COVID-19 pandemic, has dissipated. For the CDP, the biggest issue with which to assail the LDP has just disappeared. Prime Minister Kishida was lucky.
Another major factor was electoral cooperation between the CDP and the JCP. Edano and other CDP leaders surmised that adding the vote-gathering capacities of both parties would make it possible to win over LDP candidates. They used the logic of addition. However, the joining forces of two parties that differ on philosophy and policy over such important issues as diplomacy and security turned many voters off. First of all, many votes from the Japanese Trade Union Confederation, a support organization of the CDP and a long-time adversary of the JCP, did not go to the unified candidates of the two parties. In other regions where conservative ideas dominate, there was strong aversion to the JCP. A negative campaign was staged against the two opposition parties. It branded them as the “Constitutional Communist Party.” Their electoral cooperation resulted in drawing the power of subtraction. An analogy can be drawn with corporate mergers, which can bring about positive or negative outcomes.
By contrast, the Democratic Party for the People, which kept a distance from the JCP, increased its number of seats. The CDP’s setback was not an “inexplicable defeat.” The party lost for a good reason: electoral cooperation with the JCP. Seen from a LDP perspective, it was like an own goal for the CDP. It was the cause of “inexplicable victory” for the LDP.
Another reason why it was not an “inexplicable defeat” for the CDP was its inappropriate agenda setting for the election. The steep drop in COVID-19 cases made it difficult for the CDP to grill the LDP government for its mishandling of the pandemic. Meanwhile, the economy was deteriorating. Public attention turned to economic recovery rather than scandals. Thus economic policy became a major issue or, as I saw it, the top issue.
Desiring to criticize Abenomics by the Abe and Suga administrations, the CDP argued that this approach had widened economic disparities and called for redistribution-oriented policy and a lower consumption tax rate.
At the outset of the LDP presidential election he won, Prime Minister Kishida placed an emphasis on income redistribution. In light of the positions of the CDP, however, he adjusted his argument and began to stress that both growth and distribution mattered.
More specifically, Prime Minister Kishida at first called for increasing taxes on financial income, siting the “100 million yen barrier.” He explained that for people with an income of 100 million yen or more, financial income tends to outweigh employment income and business income because the tax rate on financial income is only 20%, resulting in a lower effective tax rate for wealthy people. Seeing a subsequent drop in stock prices, he withdrew this suggestion before the general election.
This proved advantageous for the LDP. The CDP criticized the LDP, saying that this move was a defection and proof that it placed little emphasis on income redistribution. But this criticism had little effect on election results. It must be that most Japanese put growth, which will bring a larger economic pie, before redistribution.
Within the opposition camp, the Japan Innovation Party (JIP) staged an election campaign by focusing on reform that leads to growth. By putting reform before anything else, the JIP tried to make a breakthrough. On a political left-to-right spectrum in terms of economic policy, the JIP was positioned on the right, the LDP in the center, and the CDP on the left.
The JIP’s campaign pledge was aligned with the sentiment of many voters, pushing the number of its seats from 11 to 41. Meanwhile, the LDP lost 15 seats, the CDP 13, and the JCP 2. A total of 30 seats were lost. This number matched the number of seats that the JIP gained. Thus, the public supported reform. This will provide impetus for economic structural reform.
A lower consumption tax rate did not appeal to the public. Voters were not enticed by the populist agenda that money should be doled out at the expense of lower tax revenues – an agenda that defied fiscal consolidation. In his paper contributed to a magazine, Vice Finance Minister Koji Yano branded policy proposals put forward by both ruling and opposition parties as pork barrel policies that take no heed of fiscal rehabilitation. This may have played a part. It is younger generations who will pay the price of the current fiscal profligacy. For such generations, no growth is no hope. Thus many of the younger voters, who were intrinsically more liberal, voted for the LDP rather than the CDP. Paradoxically, the Yano paper, which drew criticism from Senior LDP officials, effectively supported the LDP, which did not mention the consumption tax during the campaign.
On November 3, Jiji Press published interesting predictions for the upcoming House of Councillors (upper house) election next summer. The predictions were based on the results of proportional representation votes in the latest lower house election. In the 32 single-seat constituencies, which will hold the key to the election results, the two ruling parties, i.e., the LDP and Komeito, will win 30 seats according to the predictions. The opposition bloc will take only two constituencies: Iwate and Okinawa. The predictions also suggest that the ruling bloc will also win in the single-seat constituencies that opposition candidates took in the past two consecutive elections: Miyagi, Yamagata, Niigata, Nagano, and Oita.
In the last two upper house elections, the LDP won on the whole but lost in many of the single-seat constituencies in the Tohoku region, plus Niigata, a combined rice farming region in Japan. In the single-seat constituencies, the opposition bloc won 11 seats in 2016 and ten seats in 2019. Many of these constituencies were farming prefectures. This was attributed in large part to sluggish rice prices. In these farming prefectures, however, the LDP fared well in the October 31 election even though the rice policy was one of the major issues amid a significant drop in prices this year.
This can be interpreted to mean that the vote-gathering capacity of the Japan Agricultural Cooperatives (JA) is waning with the declining number of farm households. And yet, it is hard to believe that farmers’ votes have changed in just two years. If so, a more plausible explanation is that the electoral cooperation between the CDP and the JCP backfired in the conservative agricultural regions. For the upper house election next year, the CDP will have to thoroughly rethink its electoral cooperation with the JCP.
In addition, the CDP will provoke a backlash from the public again if it continues to call for income redistribution and a lower consumption tax. The CDP should wean itself from the idea that a change of government is the overriding imperative. This idea, as advocated by Ichiro Ozawa, calls for designing policy proposals to win elections. The CDP should reverse the logic. It should first picture what Japanese society should look like and then dig deep to design policies to that end. If the CDP lays out such policies to the voters, they will understand.
The CDP is in urgent need of fundamental reform. The failure of the government of the former Democratic Party of Japan (DPJ) constitutes a significant negative legacy for the CDP, the successor of the DPJ. As it stands now, a change of government is a pipe dream for the CDP, which is bound to follow in the footsteps of the now-defunct Japan Socialist Party (JSP), even if it changes its leader. The JSP floundered for a long time owing to the failure of the cabinet headed by JSP Chairman Tetsu Katayama in 1947 before eventually ceasing to exist. If the CDP does not like such a prospect, it should forget about all earlier developments and establish core policy pillars based on the new idea described earlier.
The LDP is not free from concern, either. It is hoped that the number of COVID-19 cases will remain small. But if it increases before the upper house election, an “inexplicable victory” like the one in the latest election will be unlikely. If the LDP fares well in the upcoming election, no national elections will take place in the next three years. Without major failures, the Kishida administration may remain stable for a long term.
Given its major success, the JIP will likely have greater implications for the coalition government between the LDP and Komeito. And yet, the JIP must be eager to build up its strength. Therefore, in the upper house election next summer, it is extremely unlikely that it will join the two coalition partners in fielding unified candidates in the constituencies of incumbent lawmakers from the coalition. The JIP might work with the LDP-Komeito coalition. Such cooperation, however, would remain at the policy level; it would not develop into electoral cooperation as seen between the LDP and Komeito.
At any rate, the coalition administration’s economic policy will place more emphasis on growth and reform rather than income redistribution in the face of more pressure from the JIP. The shrewd LDP may incorporate the JIP’s demands into its policy and present it to the public.
Abenomics is criticized as being neoliberalistic. Nevertheless, its third “arrow,” i.e., structural reform, made less progress than expected. As far as agricultural policy is concerned, all parties, from the LDP to the JCP, have defied reform and vied in terms of the level of protection – with the only exception of the JIP. With regard to agriculture, the JIP calls for the abolition of the rice acreage reduction program as well as for fundamental amendments to the Agricultural Cooperatives Act and the Agricultural Land Act. Such demand is in stark contrast with the ancien regime of Japan’s post-war agricultural policy, which has traditionally been advocated by the other parties. In other policy areas as well, how far will the government be able to destroy vested interests and forge ahead with reforms? Government performance will be put under public scrutiny in next summer’s upper house election.