JEI's Spin on the News

Election Results Set Off Political, Economic Scramble

Friday, July 17, 1998

The upper house election July 12 has ignited both political and economic developments. The defeat of the Liberal Democrat Party has led to the resignation of Prime Minister Ryutaro Hashimoto, up to now one of Japan's more durable politicians.

Jockeying to take his place as LDP leader began immediately. Given the LDP's continuing healthy majority in the lower house, the LDP chief becomes prime minister virtually automatically. (JEI will publish a lengthy JEI Report July 25 on the election.) This process of picking a new LDP chief so far as proven to be more precedent-breaking than the election or the resignation. After the results were known, candidates actually laid out specific contrasting policy proposals, some of them apparently new, for dealing with Japan's financial and economic crisis. Opposition leaders, of course, have their own ideas, which they spelled out during the campaign itself. Their good showing is likely to make them eager to push these ideas in the Diet.

These developments suggest that the bureaucrat's power to determine policy has slipped further. Politicians are now fighting over policy within their own party and across party lines. As a result, bureaucrats' brave words — such as those coming from a Ministry of Finance official who declared the election had not altered Tokyo's determination to pursue fiscal rectitude one iota — ring hollow. The politicians, reflecting voter sentiment want a tax cut, even though they disagree about its size and form. So does Washington. Japan will get a tax cut, probably not offset by anything other than increased red ink, and MOF will be left trying to make it look like it was its idea. The same kind of leadership by politicians is likely in policies regarding the bad loan problem.

"JEI's Spin on the News" are the opinions of one of more members of JEI's staff and do not necessarily represent the views of the organization.

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