DIRECTORATE-GENERAL FOR EXTERNAL POLICIES OF THE UNION DIRECTORATE B - POLICY DEPARTMENT - BACKGROUND NOTE ON THE POLITICAL AND ECONOMIC SITUATION OF JAPAN AND EU-JAPAN RELATIONS Abstract: The present note provides an overview of the political and economic situation of Japan at the beginning of Prime Minister Shinzo Abe's term of office. It also examines his probable policy choices on economic, fiscal and constitutional issues as well as in foreign policy. Any opinions expressed in this document are the sole responsibility of the author and do not necessarily represent the official position of the European Parliament. DGExPo/B/PolDep/Note/2006_ 176 05/10/2006 EN This note was requested by the European Parliament's Delegation for relations with Japan. This paper is published in the following languages: English Author: Stefan Schulz Copies can be obtained through: [email protected]] Brussels, European Parliament, 5 October 2006. 2 1. POLITICAL SITUATION 1.1. Basic data Population: 127,8 million Ethnic groups: Japanese 99%, others 1% (Korean 511,262, Chinese 244,241, Brazilian 182,232, Filipino 89,851, other 237,914) (year 2000) Religions: Shinto and Buddhist 84%, other 16% (including Christian 0.7%) 1.2. Political structure Japan is a constitutional monarchy with a parliamentary government. Executive The head of government is the Prime Minister, who is designated by the Diet (parliament) and appoints the cabinet (government). Traditionally, the leader of the majority party or coalition becomes Prime Minister; a change in party leadership thereby signalling a new PM and cabinet. Legislature The Diet consists of two chambers, the House of Representatives and the House of Councillors. The House of Councillors consists of 242 members and the House of Representatives of 480 members. Councillors are elected for six-year terms, with half of the House coming up for election every three years. Representatives are elected every four years, 300 to single-seat constituencies, with the remaining 180 being elected by proportional representation in 11 regional blocs. Both houses are directly elected by universal suffrage. The House of Representatives is constitutionally superior to the House of Councillors, having the power to overrule the "Upper House" in the selection of the Prime Minister, in passing the national budget and in approving international treaties. 1.3. Political Background Except for an 11-month interlude in 1993/94, post-war Japan has been governed continuously by the Liberal Democratic Party (LDP) or coalitions dominated by it. One consequence of this situation is that the rivalry of factions within the party largely replaces the usual competition between majority and opposition. Although no longer able to govern alone, the LDP continues to dominate the political landscape. It currently governs in a formal coalition with New Komeito (which is itself closely allied to a large lay-Buddhist organisation, Soka Gakkai). Although the coalition enjoys dominance in both houses of the Diet, the parties differ on many key policies, such as defence and fiscal reform. The LDP is also internally divided on policy, particularly on radical economic reform introduced by former PM Koizumi, much of which directly threatens the vested interests of the party’s old guard. The largest opposition party, the DPJ, has too few parliamentary seats to be able to challenge the LDP on its own. The party’s unity is also uncertain - it was formed from the original DPJ and the fragments of its predecessor as largest opposition party, Shinshinto (New Frontier Party), and embraces a correspondingly wide range of ideologies, both left- and right-wing. It currently 3 has ten or so internal groupings, agitating for issues as wide-ranging as preserving the “peace” constitution and promoting policies for urban voters. The party’s weakness has forced it to look for allies in other opposition parties in order to bolster its parliamentary support. The recruiting into government of the third-largest party, New Komeito, by the LDP has, however, depleted the opposition ranks. Composition of the Diet (number of women members in parentheses) Party House of Representatives House of Councillors as of 8 June 2006 as of 4 October 2006 LDP 292 (26) 111 (12) New Komeito 31 (4) 24 (5) Government Total 323 135 DPJ and 113 (10) 83 (11) 'Club of Independents' Japanese Communist Party 9 (2) 9 (3) Social Democratic Party 7 (2) 6 (1) People's New Party, 6 (-) 4 (1) New Party of Nippon and Group of Independents Independents 20 (1) 5 (2) Vacant seats 2 - Total 480 242 By-elections for the two vacant seats are to be held on 22 October 2006. The last general election for the lower house was in September 2005; the next election must be held by November 2009. The last election for the upper house was in July 2004; the next election for the will be held in mid-2007. 1.4. Recent developments Having secured his nomination within the LDP, PM Koizumi's Chief Cabinet Secretary, Shinzo Abe, was duly confirmed as the new Prime Minister by the Diet on 26 September 2006. At 52 Mr. Abe is the youngest prime minister since the Second World War. He is also one of the most inexperienced, which has led some in his party to question whether he has the political skills necessary to carry on where his popular predecessor left off. The ease of Mr. Abe's victory in spite of this apparent handicap was due largely to his public popularity. This factor used to be of little importance in the traditional back-room negotiations to select prime ministers. After Koizumi however, vote-gathering power now ranks alongside, or even above, factional affiliation, seniority and experience in key portfolios. The reason for this shift in perspective among the LDP's powerbrokers may lie in the hectic electoral schedule: After two by-elections in October and local polls in April next year, an Upper House election will have to be held by July, and a general election could be held as soon as late 2008. Some of the appointments announced by the new Prime Minister would appear to indicate a return to traditional party politics after Mr. Koizumi's somewhat iconoclastic style. Certainly the faction system, which Koizumi had hoped to overcome, is well represented among the new cabinet, and senior party appointments also seem to reflect a desire on Mr. Abe's part to 4 reinforce his support within the party by rewarding those factions that backed him for the party presidency. Other key appointments however, together with Mr. Abe's inaugural speech to the Diet on 29 September, show him as a leader with a bold vision for "a beautiful country - Japan", equally unafraid to follow through on his predecessor's economic reforms, taking on special interests, and to shift direction towards more pragmatic approaches in other areas, notably foreign policy. The main instrument for implementing his policies will be the Prime Minister's Office, for which he intends to abandon the traditional seconding of bureaucrats from other departments in favour of a personal selection of his advisers and staff, including from the private sector. 1.5. Economic Reform PM Abe is committed to completing the privatisation of the postal services launched by his predecessor, and plans to follow this up with further privatisation of public services. At the same time he intends to open up the country to foreign direct investment, aiming at doubling the amount of FDI in relation to GDP by 2010. In combination with the planned strengthening of local autonomy, this could provide a much-needed boost for Japan's regions, many of which where left behind by resuming growth in the economic hubs. Capitalising on recent and projected GDP growth, Mr. Abe hopes to encourage innovation and modernise Japan's employment structures with a view towards long-term sustainability. While 73-year old Koji Omi as Finance Minister is not known as a reformer, his task will lie more in addressing the fiscal dilemma the government faces. Economic reforms will probably be driven by other institutions and individuals: Yasuhisa Shiozaki, a radical reformer and close ally of Mr. Abe, will serve as Chief Cabinet Secretary, while Hiroko Ota, a protégée of outgoing reformist Economy Minister Takenaka, will head the policy-making Council on Economic and Fiscal Policy. 1.6. Constitutional and societal issues Mr Abe has long advocated rewriting the constitution explicitly to permit Japan to play a more prominent role abroad as well as explicitly to allow participation with other countries in "collective security" operations. His popularity is based in part on the promotion of these themes at a time when Japan's own security seems under greater threat than at any time since the end of the second world war. North Korea’s missile launches in 2000 and July this year played into Mr Abe's hands by persuading the Japanese public that Japan needs to enhance its ability to defend itself from potential threats from the North Korean regime. China's growing economic and military might has added to the feeling of insecurity. Doing away with the "Peace Constitution" will not be easy however, as the post-war generations identify strongly with the nation's new-found, pacifist identity and already opposed Mr. Koizumi's decision to send a contingent of the "Self-Defence Forces" (SDF) to support the US troops in Iraq. At the same time, the constitution's foreign origin, being imposed by the occupying US authorities at the time, rankles with most Japanese. This could provide an opening for Mr. Abe's "dignity" theme. 5 Beyond the single issue of normalising the SDF, Mr Abe's administration could indeed be one of the most right-wing since the Second World War.