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Japan After the Change of Power Печать E-mail
11.05.2012 г.
D. Streltsov


The project book starts with the article by Elgena Molodyakova concerned with the historical and socio-political background of the victory of the Democratic Party of Japan in the 30 August 2009 elections. The results of the elections to the House of Representatives were stunning indeed. Firstly, it was for the first time that an opposition party came to power having won a majority of seats in the key lower house. Secondly, it was for the first time that any single party obtained so many seats there. Thirdly, the defeat of the LDP, which has kept a little more than one third of its previous mandates (119 out of 300), was a real downfall for liberal-democrats. Several party heavyweights, ex-ministers and even a former Prime Minister found themselves “overboard.” Even more disturbing for the LDP was the fact that its experienced and mature politicians, who seemed to have “taken root” on the ground, gave way to newcomers, the Democrats, including women.

The results of the 2009 elections showed the validity of the 1994 electoral system, under which elections are held in single-member constituencies and by party lists. The reform of the electoral system helped to create an effective opposition, which ended the LDP’s long-term monopoly on power. As the newspaper Asahi put it, the elections created “a powerful wave of popular expectations that has opened a new chapter in the political history of the nation, heralding the change of power.”

Testifying to the serious change is, above all, the scale of the victory of the Democrats and the defeat of their main opponents. When the Liberal Democrats did not receive a majority in the House of Representatives for the first time in 1993, they remained the largest party in the country and soon returned to power. The current position of the LDP can be viewed as the culmination of profound shifts in political life, which had been in the making for decades. At the moment, “the voters have gone for the DPJ.”

The DPJ has a short history for a political party. Established in 1996, it acquired its present form after some realignment and consolidation in 2003. One can regard the DPJ as an analogue of the Democratic Party in the United States, and its strengthening promotes creation of a two-party system, similar to that in the U.S. The opposition between the Liberal Democrats and the Democrats  lacks such  fundamental  importance as their leaders, who  exchange harsh statements now and again, would  have us believe. In short,  the are  more  things that unite  the two parties than things that divide them. Almost all senior DPJ leaders, with the exception of Naoto Kan, come from the LDP. All have the same political and social background, a similar outlook and views.

Despite the fact that the DPJ had many strengths—such as a large number of young, energetic members, telegenic on the screens and in the stands, a relatively “clean” image, and a not so obvious connection with the lobbying groups—its status in the political spectrum remained rather uncertain for a long time. Until the last elections to the House of Representatives, most of its deputies looked like “younger brothers” of the Liberal Democrats despite the asseverations by the DP leadership that the party represented the interests of “urban dwellers, taxpayers, and consumers.” In many ways, the DPJ is still a conglomerate of disparate groups, and it has yet to clearly define its political face.

The Democrats did not hope to obtain the necessary majority in the House of Representatives all by themselves; therefore, they focused on the consolidation of opposition forces. Its partners in the pre-election alliance included the Social Democratic Party of Japan (SDPJ) and a small New People’s Party (NPP), created by “dissidents” from the LDP. The elections’ returns allowed the Democrats to form a one-party cabinet. But the new government became a coalition, as this gave the DPJ a majority also in the Chamber of Councilors. The Democrats needed the support of junior partners, whose leaders were given ministerial positions in Y. Hatoyama’s cabinet, to ensure a smooth passage of bills in both houses of Parliament.

Longevity and stability of a party largely depends on the political will of its leading nucleus, its ability to maintain the unity of ranks and on the aspiration for implementing the planned program of action, of course. In the beginning, it seemed that the Democrats succeeded in this.

By voting for the Democrats in the House of Representatives’ elections, the electorate allowed them to come to power and granted them a lot of credibility. The Democrats promised that they would be able to improve radically the policymaking process and change the relationship between politicians and bureaucrats. A big and complicated job of work was in the offing. The Democrats proposed to the nation a promising and very specific political and economic program, many elements of which were assessed by their opponents as populist and even demagogic. To implement the promised economic and social measures required multi-trillion sources of budgetary funds. In these circumstances, the question arose: Can the Democratic Party realize its potential to rule the country in the broad sense of the word. According to an Yomiuri analyst, in the context of high hopes of the population for a change of the political style of the Liberal Democrats, “the new cabinet had to be sufficiently prudent to preserve the fundamental policy that was quite successful in the past and could serve as a pattern for the future.”

Eight months later, however, the DPJ had to replace its top management in response to the falling voter confidence rating below the psychologically acceptable level of 20%. Many promises have failed: the U.S. military base Futenma remained in Okinawa; high-speed roads did not become free, the payments for children will be less than promised and will begin later, as well as the gradual introduction of free education in upper secondary schools even though the law to this effect has already been approved by both Houses of Parliament. The Democrats promise not to raise the consumption tax, although not only representatives of the opposition and the business community but also a number of influential members of their own party are calling for this. Some progress, however, is expected from the campaign to cut “unnecessary spending” in the state budget.

The unprecedented election victory gave way to an unprecedented fall in popularity—both in terms of percentage and speed. Analysts noted that the government was working in a nervous shortage of time, augmented by the lack of leadership qualities in it, conflicts between ministers, and their tendency to make sharp and not always deliberate statements. Therefore, the resignation of Prime Minister Hatoyama did not come as a surprise. That the cabinet was doomed was predictably clear from early May. The way out of this situation was the simultaneous resignation of Yukio Hatoyama as chairman of the DPJ and the Prime Minister and of Ozawa Ichiro as the party’s general secretary. Both men had been found to be involved in scandals in which they were accused of violating the laws on political donations. Their personal guilt was never proved, but their former assistants and secretaries received prison sentences, although suspended ones.

The resignation of Prime Minister Hatoyama allowed the Democratic Party another opportunity to somewhat improve its rating. Indeed, the withdrawal of the Hatoyama-Ozawa duet from the political scene, was a good political move as both were largely responsible for the decline of the Democrats’ prestige. The cabinet formed by Naoto Kan received support of 60% of the population.

When the DPJ was still in the making, individual analysts expressed the opinion that such a union was unviable due to the heterogeneity of its composition, which might trigger some centrifugal mechanism in the future. These forecasts did not materialize, as the events of the first decade of the 21st century indicated. First, the DPJ has made a reputation as a real force in the present-day political process. Next, it became the ruling party and formed a government, with its chairman being elected Prime Minister, as the leader of the majority party in Parliament. Next, if it can lead the country as successfully and for as long as did its predecessor, the LDP, then one will have reasons to speak of the emergence of a stable, efficient, and real two-party system, a “2009 System,” by analogy with the “1955 System” based on the rule of the Liberal Democrats.

In the opinion of Irina Tsvetova, the transfer of power in Japan to the Democratic Party (DPJ) as a result of the defeat in the 30 August 2009 Parliamentary elections of the ruling Liberal Democratic Party (LDP), raises an obvious question: is one to expect much change in Japanese domestic and foreign policy?

Until recently, Japanese voters found it difficult to make a choice in favor of the DPJ. In the past few years, however, especially after it won a majority in the Chamber of Councilors of the Diet in 2007, the DPJ started strong criticism of governmental policy, of the LDP’s methods, and of the behavior of its politicians. This has made it possible to talk about a real opposition between the two largest parties in the Parliamentary arena that is comprehensible to voters.

The DPJ based its electoral promises, outlined in a formal manifesto, on addressing its program of action to a wide range of topical political issues, to the political course and practice of the LDP. The main purpose of the manifesto was to explain to voters the difference between the DPJ and the LDP.

On September 16, 2009, DPJ leader Yukio Hatoyama, who was elected Prime Minister by Parliamentary vote, formed a coalition government in which the allied parties were granted one ministerial post each.

While answering journalists’ question on how DPJ policy would differ from that of the LDP, the future Prime Minister Y. Hatoyama said the following shortly before the elections to the House of Representatives: “We cannot say that the whole policy of the ruling and opposition parties must necessarily differ. I think that the most essential difference from the LDP consists in our proposal to reject the centralized bureaucratic management, and to build a state of ‘municipal sovereignty’.”

It is this interpretation of the new government’s mission that was fixed in “The Fundamental Course” of the Hatoyama Cabinet, which expressed the determination “to build a new state,” and to base its policy on the two main pillars of “realizing a genuine popular sovereignty, a sovereignty with strong municipal power,” and of “abolishing the policy based on personal benefits and the political system contingent on bureaucracy.”

Committed to manage the country in a new manner in order to implement its party’s numerous promises, the Hatoyama Cabinet had to rush to demonstrate some successful results before the 2010 summer elections to the House of Councilors, so as to secure more Parliamentary support for its course. However, the presentation of the cabinet’s program of action to Parliament was delayed.

It was not before late January, 2010, that Hatoyama informed the Parliament about his cabinet’s first steps and plans for further action. The Government did begin to practically implement certain principles articulated in the manifesto and related to overcoming dependence on the bureaucracy and transition to political leadership. This work was hampered, however, by the lack of legal justification, as most of the necessary draft legislation was still being discussed and adjusted within the cabinet, and even the introduction of many of them to Parliament were put off till the following years.

While presenting the new government’s economic policy to Parliament, Hatoyama stressed primarily the importance of “free-market economic activity.” At the same time, he acknowledged that it was groundless to “authorize the market to deal with everything, to let survive only the fittest, and to rely upon economic rationalism at the expense of the people.” The Prime Minister called for “a turn toward the economy for the people.”

The government’s budget for 2010 was the largest state budget ever. A large excess of expenditures over revenues called for new state borrowing which, the Prime Minister promised, would not go beyond 44 trillion yen. “We have turned the budget toward ‘protecting the people’,” Hatoyama said. “While reducing the budget for public works by 18.3%, we increased by 9.8% the spending on social security. We have succeeded in creating a budget that increases by 5.2% the outlays on education and science.”

Social security is an important object of concern for the Hatoyama cabinet because the DPJ came to power having assumed serious commitments, especially related to the pension system. In this area, the government has opted for a policy of small but tangible steps for the people, putting the implementation of the larger promises off until a more distant time.

While essentially continuing the foreign policy of previous governments, the Hatoyama cabinet and personally the Prime Minister defined the main emphases in Japanese diplomacy more clearly, reaffirming Japan’s commitment to the close alliance with the United States as the axis of Japanese diplomacy and, simultaneously, expressing the hope for independence and a more prominent role of Japan in this alliance. Furthermore, the government emphasized and recognized the importance of Japan’s efforts in promoting the concept of an East Asian Community. Japan’s commitment to increase its role in international politics, especially in building a world without nuclear weapons and in dealing with global humanitarian issues was declared with added assertiveness. By and large, the Hatoyama Cabinet’s foreign policy appeared more realistic than its predecessor’s. What was important for Russia was that the new government understood the importance of developing comprehensive Japanese-Russian relations, despite its unwillingness to show
a realistic approach to the “territorial question.”

Generally speaking, the initial period of the Hatoyama Cabinet’s activities was characterized by his persistent desire to emphasize the novelty of its course, by setting it off against the policies of the Liberal-Democratic governments, and by demonstrating its resolve to implement its electoral promises. The period has also seen the implementation of some concrete steps in addressing some of the government’s objectives. At the same time, the realization of most of them required further discussion within the DPJ and the government, and by society at large.

In spring and summer 2010, the Hatoyama Cabinet came under broad public criticism not only on the part of the ousted Liberal Democrats, who formed the opposition, but also on the part of the forces that had supported and welcomed the transfer of power to the DPJ. The media regularly accused the government of its indecisiveness and unwillingness to implement its electoral promises, of its departure from and even abandonment of the plans already approved. The most acute social criticism befell the cabinet and its leader personally for passivity in implementing its specific commitment to bring about the withdrawal of the Futenma U.S. military base from Okinawa. Addressing the nation on television on May 23, Mr. Hatoyama formally apologized to the people for failing to realize that promise. Then, on June 2, 2010, Y. Hatoyama announced his resignation from the post of Prime Minister.

These developments indicated that the Japanese public did not experience any “new wave” in the policies conducted by the Hatoyama Cabinet.

As noted by Dmitry Streltsov, among the many problems facing the Democratic Party after it came to power, a special significance could be given to the task of creating an adequate and effective mechanism of political decision-making. The DPJ’s most important political slogan is the thesis of “political leadership” (Seiji shudo), implying the primacy of politics in strategic decision-making in public administration.

In a broad sense, the solution of this problem involves a revision of the basic principles of relations between the administrative and political authorities, the methods of interaction between politicians and bureaucrats.

The DPJ sees the main reason for deficiencies in decision-making in that the bureaucrats, not politicians, played traditionally the central part in the preparation of decisions; in fact, the bureaucrats were involved in the coordination of decision-making even at the highest political level. The bureaucrats were assigned the role of intermediaries in the process of harmonizing political interests of Parliamentary factions and individual units within the party administration.

The main efforts to reform the decision-making mechanism, it was proposed, were to be directed to the strengthening of the institutional foundations of political power of the parties of the ruling bloc. According to I. Ozawa, H. Kan, K. Okada, and other ideologists of the reform, the Japanese model of political power architecture was to be based on the British (or Westminster) experience, where political units of government are not opposed to the bureaucracy but directly manage it through political organs of government. Characteristic of this model of government is the dominant role of the cabinet, which is to become a “political control tower” to be staffed with the leading members of the ruling party.

The DPJ’s program documents laid down the following goals for reforming the public administration system:

consolidation of the cabinet as an organ of political governance;
strengthening the role of professional politicians in decision-making at the national level;
institutional strengthening of the powers of the Prime Minister.

After winning the 2009 election, the DPJ disbanded its Council for Political Affairs, which was considered part of an obsolete system. Simultaneously, the government dissolved the Council of Administrative Deputy Ministers. Discussion of important government decisions “in essence” was to take place directly at cabinet meetings, which were “off limits” to professional bureaucrats. To enhance political control over bureaucracy, the so-called “political councils” consisting of ministers, deputy ministers, and political advisers were set up in the ministries and departments.

An important direction of work aimed at institutional strengthening of the cabinet and of the Prime Minister, as well as at enhancing the role of non-bureaucratic managers in public administration concerned measures taken by the DPJ to form new bodies of budget planning. Steps have been taken to create two such agencies: the National Policy Bureau (NPB; Kokka senryaku Keku) and the Government Revitalization Unit (GRU; Gyosei Sasshin Kaigi). The National Policy Bureau is supposed to assist the Government in conducting a comprehensive assessment of the overall concept of the state budget and in analyzing its macroeconomic proportions in terms of consistency with the strategic objectives of governmental policy. Furthermore, the NPB is supposed to be an instrument enabling the government to implement its strategy for economic development in the financial, industrial, agricultural, and environmental fields, and to coordinate agencies in accomplishing long-term public policy objectives to achieve a balanced budget, the sustainability of the national health system and pensions, etc. As for routine decisions related to the formation of the budget for the coming fiscal year, this function was to be assumed by the Government Revitalization Unit. The main objective of the GRU is to coordinate the process whereby state departments submit their budget requests to ensure they are consistent with long-term objectives of governmental policy.

After Hatoyama’s resignation, the new leadership of the DPJ, headed by N. Kan, decided to restore the Policy Affairs Research Council. The new model is expected to become a kind of debating platform where DPJ deputies would be able to discuss public policy issues and put forward new ideas and initiatives.

Actually, by summer 2010, no political course was initiated by the Government in any area of public administration. Therefore, we can conclude that the effectiveness of new institutional mechanisms to enhance the role of the Prime Minister depends significantly on the personal qualities of the head of the cabinet, and especially on his ability to take advantage of the enormous prerogatives that the new architecture of political power confers upon him.

The paper by Vasily Molodyakov is dedicated to the political career of Naoto Kan, who assumed the post of Prime Minister of Japan on June 8, 2010. The history of the Democratic Party of Japan is inseparable from the life and career of Naoto Kan, one of the founders of the DPJ. The choice of N. Kan as the head of the party and government was natural because, since the inception of Yukio Hatoyama’s Cabinet in September 2009, Kan was its “Number Two”—de jure, as the only deputy Prime Minister, and de facto, as the closest associate of Hatoyama since the foundation of the DPJ in 1998. However, Kan’s political biography differs markedly from those of the absolute majority of his predecessors in the top government positions. He was born in a distant province (Yamaguchi Prefecture) in the family of a manager at some glass-making company, who later rose to the position of factory manager. Kan likes to point out that he is a “self-made man” who grew up in a family that lived on one salary, and that he inherited neither capital nor connections.

A graduate of the famous but not too prestigious Tokyo University of Technology, Kan worked for some time in the patent business, but soon went into politics. His path was typical because it began well at grass roots level (at first, he participated in election campaigns of other candidates, then began to form his own political base), but difficult because he did not belong to any of the rigidly structured political parties. After he had had his baptism of fire in 1974 at the campaign headquarters of Fusae Ishikawa, the elder of the Japanese feminist movement, Kan decided to try his own luck. He failed twice in elections for the lower house (1976 and 1978), and then once in his bid for the upper house (1977), but in 1980 he did make it to the lower chamber on the Social Democratic Federation’s ticket, a party that existed until 1994. In 1987, at the age of 41, he was already a deputy secretary general of the SDF and chaired the key Political Committee and the Bureau of Youth Affairs.

On January 11, 1996, the 49-year-old Kan became minister of health and social welfare in the Hashimoto coalition cabinet. In this position, he gained national fame as a fighter against corruption and the dominance of bureaucrats, especially during the scandal over the import of donated blood infected with human immunodeficiency virus (HIV). Faced with an unprecedented wave of criticism against his department, Kan made it clear that he would not cover his offending subordinates. The minister made up for his lack of professional knowledge with the energy and intransigence vis-à-vis corruption, which won him popularity among fellow citizens and antipathy on the part of the bureaucrats. Although he was a member of the government less than one year, he did establish himself as a national political figure and a politician capable of rapid and innovative solutions.

On September 17, 1996, Kan and Yukio Hatoyama announced the creation of a new—Democratic—party. After the October 20 elections, they took a risk, refusing a “bird in the hand”—the role of junior partner in the ruling coalition, for the sake of prospective “two in the bush”—a chance to create a competent “second party” that might eventually replace the LDP in power and determine the face of the country in the new century. Kan became the main motive force behind the opposition to the LDP, first as a member of the Minyuren Parliamentary bloc, then as a leader of the updated DPJ. In 1998, Kan not only emerged as the leader of the largest opposition party but also as “the face” of the opposition as a whole. Public opinion polls would consistently give him the first place as “an ideal Prime Minister of Japan.” In fact, on July 30, the upper house of Parliament elected him head of government, but that decision was not effective since the LDP had no control of the key lower house.

Between 1999 and 2008, Kan, although still one of the leaders of the opposition, was no longer a “newsmaker.” The stabilization achieved by the Liberal Democrats under Koizumi, accompanied by the defeat of the DPJ in the election to the lower house in 2005, seemed to deprive the Democrats of chances to come to power, relegating them to the unenviable position of “eternal opposition.” The press regularly quoted Kan on domestic and foreign policy issues, but these pronouncements left the impression of “rending the air.” He repeatedly advocated reduction of U.S. military presence in Japan and improved relations with Beijing, he would speak for a harsher line against North Korea and the participation of Japanese forces of self-defense in the Iraq campaign—in a word, against Koizumi’s policy. The Democrats officially named him “the next Prime Minister”—nekusuto Sori daijin, without specifying, however, when this position might become available.

During the election campaign of summer 2009, the role of Kan, who served as one of the vice-chairmen of the DPJ, seemed to be unobtrusive. When the Hatoyama Cabinet was formed, Kan received the portfolios of vice-premier, minister of state for financial and tax policy and head of the office for national strategy. It is noteworthy that Kan and Finance Minister Hirohisa Fujii were the only cabinet members with the ministerial experience. Moreover, Kan and Yoshito Sengoku were the only key figures in the DPJ who were not coming from the LDP. On January 6, 2010, Kan replaced Fujii as the minister of finance, a position that acquired a special significance during the crisis. Following the resignation of Hatoyama on June 4, Kan was elected chairman of the DPJ and head of government, and four days later he was approved in this post by the Emperor. Kan had a good debut on the international scene when he participated in the Big Eight summit in Toronto in late June, but he failed to bring about his party’s victory or maintain the status quo in the elections to the upper house on July 11.

His political fate was decided on September 14, when he received a clear majority of votes, became his party’s president, and began reshuffling his cabinet.

Sergei Chugrov’s paper, “Changes in the National Consciousness in the Mirror of Public Opinion Polls,” examines how members of Japan’s political elite who came to power in August 2010 represent the interests of the population and how they take into account national interests in their representation of the masses. The author seeks to capture nuances of changing public opinion in Japan that have occurred after the Democratic Party of Japan came to power in 2009.

While introducing a new economic course on June 18, 2010, Prime Minister Naoto Kan confirmed his steadfast intention to carry out extensive reforms, stressing that his policy aims at “minimizing the misery of the population.” To what extent did the people believe the promises and what is the reaction of public opinion to them?

This study is based on a series of opinion polls, most of all, on the survey conducted between January 21 and February 7, 2010, by the information department of the Office of the Cabinet of Ministers. The poll carried out by the NHK Broadcasting Culture Research Institute in April 2010 highlights a fundamental contradiction of Japanese mass consciousness. On the one hand, 94% of respondents said they wanted—“very much” or “somewhat”—to change the current policy. On the other hand, the survey found that the majority was in favor of stability. The victory of the opposition meant that Japan had made a radical step toward “ordinary democracy,” i.e., a state in which two major competing political forces take turns being in power. The results of this revolution in the thinking of the Japanese reveal themselves to some extent in the analysis of public opinion. An organic, non-conflict combination of a strong desire for change and the dominance of conservatism—such is the calling card of Japanese consciousness in the era of change. That is why the changes in public opinion that have occurred during the first year of the Democrats’ rule are so contradictory and not as dramatic as might be expected.

That the Japanese are not indifferent to politics was revealed in the survey conducted in April 2010, in which 84% of respondents said they were interested in politics “very much” or “to some extent.” Closer examination shows, however, that the main areas in which the Japanese are mostly interested are “strengthening the welfare of the elderly and the old,” “guaranteed food safety,” and “job security.” About 40% of respondents watch these issues very closely.

The paper shows that the annual survey of the Information Department of the Cabinet Office provides the most impressive data on the change in orientation of mass consciousness of the Japanese (most interesting for the purposes of this study is the comparison of the results obtained in a similar survey in 2009, when the country was ruled by the LDP, with those of January–February 2010, conducted under the Democrats).

In 2009, only 4.1% of respondents aged 20–29 years confessed to having a great love for their country, while in 2010, the figure rose to 5.4%. Slight as this increase might seem, it is symptomatic when considered against the general background, namely: the patriotism of young people is not a vanishing phenomenon. In 2009, the 70-year-olds included 41.2% of real patriots, while in 2010 their number rose by almost 5%, making their amount ten times bigger than that of the 20-year-old patriots! The proportion of those who gave preference to public interests over personal ones, dropped during the period by 4.4%. This indicates a certain shift in Japanese mass consciousness toward Western models. The biggest group of those confessing that they were thinking of being useful to society, included respondents who wished to actively contribute to environmental conservation.

Meanwhile, “peaceful situation” and “stability” are the most noteworthy values of the present times as today’s Japanese see them, according to the poll. Optimism as a characteristic of our time is referred to by 6.8% (2009) against 6.2% (2010); the gloomy mood is mentioned much more often—by 18.7% and 16.8% respectively. Despite the expectations of change due to the advent of the Democrats, optimism in society slightly diminished, but the number of pessimists dropped by almost 2% as well. In any case, surprising as it may seem, expectations for change did not evoke a wave of optimistic sentiment in Japanese society.

The elderly exhibited more concern about the difficulties of establishing contact with others. There is increased social discontent regarding difficulties in choosing the type of activity and regarding reduced opportunities for young people to become independent. More concern is being expressed about freedom of entrepreneurship and economic prospects, which is a natural reaction to the protracted recovery from the global economic crisis, a most serious challenge for the Japanese. In general, statistics show that no significant changes have occurred with regard to satisfaction with the state of society during the initial period of the DPJ’s rule. The share of those believing that the government policy reflects the views of the people is 3–5 times lower than the share of those who deny it. Nevertheless, it was after the DPJ’s coming to power that the number of the former increased from 16.8% to 22.8%, while the latter decreased from 80.7% to 73.1%.

If you add up the results of opinion polls, you will see that the state of national consciousness has not undergone any significant changes after the DPJ came to power. All major trends have remained the same.

The majority of the Japanese believe that society’s top priority should be not just economic prosperity but the desire to provide a decent life for the people, in other words, a psychologically comfortable existence in which frustrating factors and risks are minimized, there are no conditions for the emergence of social and cultural traumata, while world-power ambitions recede into the background. It is a society in which prosperity and social stability are provided by self-regulation and people treat each other with respect and attention, where environmental problems are minimized and core values are ethics, moderation (in the sense of condemning excessive luxury and greed), where personal security of each and every is guaranteed and commitment to spiritual values is welcome. The goals of building such a “Good Society” were formulated during the rule of the Liberal Democrats.

Judging by the polls, a “Good Society” is, first and foremost, a moral society. Western society, while generally meeting the immediate material needs of man, is often unable to ensure his safety, eliminate the fear of losing his job, and give him reliable social guarantees. Conversely, the Japanese version of a “Good Company” is primarily a society based on values shared by the majority of its members.

In the view of Konstantin Sarkisov, the landslide victory of the Democratic Party of Japan in the August 2009 general elections, and its defeat during the Upper House elections in July 2010, proved that Japan’s political system has finally accomplished a long-awaited shift from the mono-centric (the monopoly of the Liberal Democrats) to a polycentric model (where two or more parties compete for political power). For all that, the foreign policy of Japan remains mono-centric. The Democrats in power tried to change the policy of heavy dependence on the United States, and to shift the balance in the bilateral military alliance in favor of a more “independent” and “self-reliant” policy. Instead of the traditional concept of “strengthening the alliance,” they adhered to the “deepening.” Although it did look like the same idea at first glance, the Democrats hoped that the new wording would lay a new basic framework for the alliance.

These moves were partly defined by the emergence of the Obama administration. The Democrats anticipated that the aspirations for “change” in America might also apply to the Japan–U.S. alliance. But these dreams did not come true. Washington did not want any substantial “change” in the central problem—the presence of American bases in Japan, especially in Okinawa. Victorious in the 2009 general elections because of their promise to move the Marines’ Futenma base outside Okinawa, the Democrats tried to persuade the Obama administration to be more flexible on the issue. In return, they promised several cooperative actions in Afghanistan and in other spheres. They seemed to stick by another previous agreement—to pay six billion dollars for transferring the Camp Schwab Marine base from Okinawa to Guam.

Strictly speaking, some of the State Department high-ranking officials did understand that more balanced relations could be helpful. “I actually think that for the alliance to maintain its relevance and its influence over the course of the first part of this century, a degree of independence and of confidence is absolutely essential on the part of Japan,” said Kurt Campbell, the assistant secretary of state for East Asia. But Americans promised only to cooperate in reducing the “burden” of Okinawans and were adamant about keeping the Futenma Marines base on the island. “It’s an agreement between nations; it’s not an agreement between parties… For the United States to be operationally able to meet our commitments for the defense of Japan and the maintenance of peace and stability in the Far East, we need to maintain the capabilities of Futenma,” said Kevin Maher, the head of the Japan desk at the State Department. Washington’s unwillingness to change its position provoked the political crisis in Japan. Yukio Hatoyama, the Prime Minister of Japan, had to acknowledge his mismanagement of the issue and stepped down in early June 2010.

The mismatch in Obama–Hatoyama relations can be explained by the fact that Washington was very suspicious about the political discourse of the Democrats. The Obama administration was reading the political ideology of Hatoyama with a great deal of anxiety. In an article translated and published by the Christian Science Monitor on August 19, 2009, Hatoyama explained his political values using the idea of yuai (Jap. “fraternity”: one of the tree slogans of the French Revolution). In the article, Hatoyama passionately blamed market fundamentalism deriving from American policy of globalism.

“In the post-cold war period, Japan has been continually buffeted by the winds of market fundamentalism in a US-led movement that is more usually called globalization. Freedom is supposed to be the highest of all values, but in the fundamentalist pursuit of capitalism people are treated not as an end but as a means. Consequently, human dignity has been lost.

“The recent financial crisis and its aftermath have once again forced us to take note of this reality. How can we put an end to unrestrained market fundamentalism and financial capitalism that are void of morals or moderation in order to protect the finances and livelihoods of our citizens? That is the issue we are now facing.

“In these times, we must return to the idea of fraternity—as in the French slogan liberté, égalité, fraternité—as a force for moderating the danger inherent within freedom. It must be the compass that determines our political direction, a yardstick for deciding our policies. The idea of fraternity is also the spirit behind our idea of achieving ‘an era of independence and coexistence’ in today’s world.”

The attempts of the Democrats to pursue a more independent position in their strategic alliance with the U.S. did not succeed. The Japanese public didn’t agree to have good relations with China at the expense of the relations with the U.S. The rise of Chinese economy to become the world’s “number two” by ousting Japan from this position after 42 years, although anticipated, has had a shocking effect. It generated a feeling of a new kind of the “Chinese threat,” not only ideological or military. Alongside the huge Chinese economic penetration in Southeast Asia, it signaled the emergence of a mighty “China-centered world” as a reality, not a fantasy. For an “average” Japanese it was hardly acceptable to identify himself as “part” of that world. In this sense, to keep the close though unequal relations with the U.S. was the only alternative. To pursue an equidistant Japan–U.S.–China relationship or to become an independent center of power were not the real options. The latter required fundamental constitutional changes and an unbearable financial burden. Japanese public opinion would not have accepted it.

In “The Golden Triangle of the U.S.–China–Japan, 1972–1989,” a research undertaken at Harvard at the end of the last century, one of co-editors pointed out that “no other relationship can be more important to the Asia-Pacific region” assuming that this trilateral configuration may be a “golden” one. In his famous “The Choice: Global Domination or Global Leadership,” Zbigniew Brzezinski hoped, too, that American dominance would provide a constructive and instrumental relationship inside the Japan–U.S.–China triangle. “Global security will unavoidably be affected by how the international scene in the Far East actually evolves. That, in turn, will depend largely on the conduct of the two leading East Asian states, China and Japan, and on how America influences their behavior. A stable East Asia—ensured by a gradually institutionalized and carefully balanced U.S.-Chinese-Japanese strategic triangle—will provide a critical eastern anchor for dealing with wider Eurasian turmoil. In different ways, India, Russia, and the European Union may also contribute to the interplay of the above, but only peripherally.”

The prophetic notions of a “golden” triangle proved incorrect. The balance of powers inside the triangle changed, and China emerged as a self-sufficient economic giant with political and military ambitions challenging the interests of both America and Japan. The Japanese Democrats’ striving for an equilateral triangle also proved unsuccessful. It is impossible indeed to have the interests of three parties matched in a single geopolitical space. There is no “win-win” scheme to emerge. The “zero-sum game” logic prevailed. Japan did not trust the shift of American interests toward China and was very suspicious of it. The public opinion polls by the Japanese Ministry of Foreign Affairs in the U.S. showed a clear-cut shift toward China. At the same time, the U.S. is regarding China as a principal challenger to America’s vital interests. Japan doesn’t trust China and is very anxious about its leadership in East Asia. China, in turn, warns Japan and the U.S. not to extend the power of their military treaty beyond the current legal borders, which would encroach upon Chinese interests in the area.

Under these circumstances, Japanese diplomacy is tempted to stabilize the unbalanced relations inside the triangle by strengthening relations with other countries in the region. Most promising are South Korea and Russia. Assuming that Koreans may also be uncomfortable with the rise of Chinese dominance, the Democrats are trying to be more persistent in their policy vis-à-vis Seoul. The reputation of “leftists” helps the Democrats to remove obstacles in Japan–ROK relations. The colonial past is one of the most painful problems for both the Japanese and Koreans. In his public statement on August 10, 2010, just 100 years after the day of annexation of Korea by Japan, Prime Minister Naoto Kan apologized to the Korean people using unprecedentedly strong words. As for their Russian policy, the Democrats’ “leftist” nature and populist stance appear to be rather counterproductive as regards the possibilities of reaching a compromise on the territorial issue through a dialog.

The paper by Irina Nosova analyzes the approaches and attitudes of the Democratic Party toward the national strategy in Asia. The issue at hand is what the Democrats called the task of “returning Japan to Asia,” which received a practical expression in Prime Minister Hatoyama’s initiative to build an “East Asian Community” in the region, while making a temporary departure from Tokyo’s traditional pro-American diplomatic practice.

In analyzing the main components of these Japanese proposals, the author comes to a conclusion that a whole complex of objective and subjective factors contributed to the development of Tokyo’s Asian diplomacy. One of these factors attracting special attention concerns the Japanese perception of the globally changing political and economic environment as a result of the global financial crisis. Namely, a consensus seems to have been attained in Japan, both among the ruling elites and the social, political, and business circles in general, over the irreversibility of the process spurred by the global financial crisis, whereby new international political and economic leaders have begun to emerge in the fast-growing Asian Pacific region, and whereby a substantial part of activities have begun to be transferred there as well. These expectations called for certain adjustments in Japanese political and economic priorities, which were, one way or another, traditionally West oriented.

In this context, the change of administrations in Japan provided a good opportunity for a radical “reformatting” of the Japanese foreign policy profile, primarily in the Asian sector. By postulating the most vague concept of the East Asian Community (EAC) which, moreover, eludes all political questions that the Asians may find “inconvenient,” Japan gained a foothold among the leaders of the debate about the modalities of regional integration in the Asian-Pacific, which enabled it to intensify practical work on establishing a network of functional and flexible (in terms of their composition) partnerships “of interest”—in trade, investment, finance, environment, energy, development, education, combating the effects of emergencies and epidemics, etc. The structural plasticity of the community framework that Tokyo proposes is expected to facilitate the implementation of Japan’s comprehensive development strategy for medium and long terms—a strategy that, in the DPJ’s view, will transform the Asia-Pacific region to a new “extended home market” for Japanese products.

Corroborating the practical orientation of the EAC initiative and the DPJ’s “Asian reversal” as a whole is the start of what can be described as “fine-tuning” of the foreign policy aimed at restoring a reasonable balance vis-à-vis Japan’s relations with Asia and the United States; this fine-tuning had its start as Japan began to experience progress in achieving its primary objectives in the Asian sector and in consolidating the concept of EAC in the regional agenda. In fact, the new Prime Minister, N. Kan, has already announced the return of Japanese foreign policy to de-ideologized and laconic realism with the usual reliance on bloc mechanisms. At the same time, Tokyo’s Asian policy line is getting more and more complex due, among other things, to the formulation of specific approaches toward the PRC, on the one hand, and to the developing countries in South and South-East Asia, on the other. In particular, the emerging decline in the public excitement in Japan with regard to China as a promising economic partner, makes it possible to bring back to the bilateral agenda many “hot” topics, including military and political differences, the problems in the East China Sea, human rights and China’s industrial policy. In contrast, one can expect a further strengthening of Japan’s cooperation with South-East Asian countries, which may involve open competition with China (for example, projects in the Mekong River area, the dialogs to ensure safety in sea routes, the meetings on nuclear safety). Moreover, South-East Asian countries themselves are likely to intensify efforts to ensure that regional integration meets their own interests. Thus, the Japanese concept of EAC, forgotten as it seemed for a while, serves as a catalyst for the development of an ASEAN position with regard to regional integration.

A close relationship demonstrated in the course of our analysis between Tokyo’s 2009–2010 “Asian reversal” and the principal national objectives of economic recovery after the global financial crisis, and of determining a strategy for political and economic development for medium and long terms suggests, according to this author, that Japan will continue its attempts to fit into the Asian processes and to control them in one form or another. This line will become more obvious as the country’s structural political and socio-economic problems keep on aggravating.

It remains to be seen how potential consequences of such fluctuations in Japanese foreign policy will affect Japan’s traditional balancing between practical interests and the limitations imposed by the military-political alliance with the U.S. Nevertheless, the DPJ’s year-long promotion of the East Asian Community allows researchers to extend the range of possible scenarios for Japan’s behavior in Asia, including the degree of its loyalty to its allies.

Vladimir Grinyuk’s article deals with the relations between Japan and the states of the Korea peninsula under the Hatoyama cabinet. Although the leadership of the Democratic Party of Japan asseverated its intention to pay special attention to cooperation with Asian countries, expectations that Y. Hatoyama’s government would end the impasse with North Korea and solve problems in its relations with South Korea did not materialize. Japan has no diplomatic relations with North Korea because of the problem of the Japanese citizens abducted by the North Korean secret services.

After the victory of the Democratic Party in the Parliamentary elections of August 30, 2009, the DPRK leadership was willing to accelerate the normalization of relations with Japan. For their part, Hatoyama and other representatives of the DPJ made statements that might be interpreted as conciliatory regarding the North Korean partners. However, even under the DPJ-led cabinet, official Tokyo has not changed its approach to North Korea. A draft law that the government submitted to Parliament on October 30, 2009, allowed the Japanese Maritime Self-Defense Forces to inspect ships carrying goods to and from the DPRK (the law to this effect was adopted by Parliament on May 28, 2010). After the incident with the sinking of a South Korean corvette, the Cheonan, on March 26, 2010, Tokyo backed Seoul’s accusations against North Korea. In early April 2010, the Japanese government extended for another year the economic sanctions imposed on Pyongyang earlier. This did not bring the prospect of establishing diplomatic relations between Japan and North Korea any closer.

The commitment of the Hatoyama government to South Korea is basically the same as the line of the LDP government offices. But the DPJ positions itself as a liberal party and this is evident in its approach to issues of Japan’s historical responsibility. After forming his cabinet, Hatoyama announced that he would not visit the Yasukuni Shrine and he asked cabinet members to follow suit. Furthermore, the Prime Minister declared his readiness to assess historical facts honestly. When Minister of Foreign Affairs Katsuya Okada put forward a proposal in October 2009 to bring together scholars from Japan, South Korea and China to prepare a common history textbook, the idea met with positive response in Seoul.

The 100th anniversary of the annexation of Korea by Japan, which was observed at the end of August 2010, imparted a special relevance to Japan’s relations with the DPRK and the ROK. Succeeding Hatoyama as Prime Minister of Japan in June 2010, H. Kan made a statement on August 10, 2010, regarding the annexation, acknowledging that the colonial rule that was imposed against the will of the Korean people deprived them of their own country and culture. He expressed sincere self-criticism and apology. But Prime Minister H. Kan’s statement referred only to South Korea, not even mentioning North Korea. Moreover, the August 10 document contains no analysis of the causes underlying the establishment or the practices of the Japanese colonial rule in Korea.

Such analysis was previously carried out by prominent Japanese writers, scholars and publishers, together with colleagues from South Korea, and formulated in a statement signed by 214 representatives of Japanese and South Korean intellectuals, which was issued on May 10, 2010, in Tokyo and Seoul. The main conclusion made by experts of the two countries boils down to the fact that the annexation of Korea was the result of prolonged aggression and repeated seizures of Korean territory by the Japanese military, as well as of the brutal suppression of resistance of the Korean people. Experts of both countries thoroughly studied the problem contained in Article 2 of the 1965 Treaty of Basic Relations between Japan and South Korea (which pronounces that the agreement on the annexation of Korea of 1910 “has already expired”). The authors of the statement deemed the interpretation given to the article by the Korean side to be accurate, namely that the agreement on the annexation of Korea was originally unlawful as it was imposed by force. Meanwhile, official Tokyo did not abandon the position it took at the normalization of Japanese–ROK relations in 1965, which said that “the agreement of 1910 on the annexation of Korea was reached by equal partners expressing their free will, and this act preserved its legitimacy till the moment the Republic of Korea was established.”

Nor has there been any convergence of views between Japan and the two Koreas with regard to the Tok-do (Takeshima). Koreans perceive the Japanese claims for the islands as a relapse of Tokyo’s earlier aggressive policy. The new guidelines on teaching in the secondary schools of the second (higher) level, issued by Japanese government on December 25, 2009, refer to the Takeshima Islands as Japanese territory.

On March 30, 2010, the Japanese Ministry of Education, Culture, Sports, Science and Technology approved five history textbooks for primary schools. The books designate the Takeshima Islands as belonging to Japan, while their occupation by South Korea is declared “illegal.” This provoked sharp criticism on the part of the Prime Minister of the Republic of Korea, Chung Un Chan, directed at official Tokyo.

There remains the question of compensation for Japan’s damage to Korea during the colonial rule. To illustrate: in December 2009, in response to a formal request by seven Korean women, filed with the Japanese Social Insurance Agency, for the payment of severance benefits to which they were entitled after the completion of work at a Japanese military factory in the colonial period, the Japanese authorities paid a trifling amount of 99 yen (about 33 rubles) as a surcharge to their state pensions after converting. The decision of the Japanese authorities was met with indignation in South Korea.

There arose two problems associated with the colonial past of Korea. At the end of January 2010, the Japanese government submitted to Parliament a bill to abolish tuition fees in the country’s second level secondary schools. Later, it was announced that the law would not apply to students of ten schools belonging to Soren, the General League of Korean Residents in Japan. This organization unites citizens of the DPRK residing in Japan who are descendants of Koreans brought to Japan during the colonial period. The idea of excluding children of the DPRK citizens from the free tuition program at the Japanese secondary schools belongs to the conservative members of the government. They believe that the allocation of public subsidies to educate children of North Korean citizens amounts to economic aid to Pyongyang. Such a discriminatory approach to Korean students caused protests in the DPRK as well as sharp criticism from lawyers and the academic community in Japan. Moreover, in March 2010, the UN Committee on the Elimination of Racial Discrimination inspected the situation with Korean schools in Japan and expressed concern because of the actions of Japanese politicians.

The government failed to improve the legal status of citizens of the DPRK and the ROK who are permanent residents of Japan. In January 2010, Prime Minister Hatoyama and DPJ Secretary-General Ozawa announced their intention to put forward a bill to extend the right to participate in elections of local authorities to Koreans living in Japan. However, the plan sparked objections even inside the ruling party: fears were expressed that these Koreans might vote against Japanese interests, for example, regarding the issue of Tok-do (Takeshima). As a result, in March 2010, the Prime Minister announced that he would wait with the bill. This caused resentment on the part of Seoul. The South Korean government announced the postponement of the official visit of President Lee Myung Bak to Japan from April 10 to a more distant time.

For all that, the interaction between the economies of Japan and South Korea is developing normally. The number of South Korean tourists visiting Japan is on the rise as is the number of Japanese visitors to South Korea. Japan shows a booming interest in the entertainment industry—music, cinema, etc.—of the neighboring country. The obvious inconsistency of the Hatoyama government line vis-à-vis the DPRK and the ROK is due to the absence of a clear ideological orientation of the party. Significant shifts in the DPJ governmental policy in respect of the DPRK and the ROK appear unlikely.

The main topic of the article by Alexander Shlyndov and Nikolai Tebin is the situation in the security sphere after the change of power. After the DPJ’s victory in the August 2009 parliamentary elections in Japan and its coming to power, the situation regarding the implementation of all previously reached agreements between the U.S. and Japan on the redeployment of U.S. military bases in Japan has become rather uncertain due to differences in the approaches of the LDP and the DPJ to the nature of relations with the United States. Attempts by the DPJ to follow a course more independent from Washington caused tension in Japan–U.S. relations. Contributing to rising tension was the fact that, immediately after the formation of a new government, the elected Prime Minister Hatoyama initiated an investigation in connection with the relocation of the Futemma base. This step triggered a debate about a possible denunciation of all previous Japan–U.S. agreements signed by the LDP administrations and about developing new and equitable agreements from scratch.

The situation between Japan and the U.S. grew even more tense after Hatoyama’s speech at the celebrations of the 50th anniversary of the 1960 security treaty. The Japanese Prime Minister shocked the American delegation with his statement about the decline of the era of a unipolar world led by the United States and the need for Japan to build an equitable relationship with the U.S.

The brief rule of this DPJ Prime Minister showed that, tied up by pre-election commitments and faced with real politics, Hatoyama could not break out from the vicious circle and was forced to resign, leaving unresolved socio-economic, foreign policy and defense problems to his successor, H. Kan, another prominent figure in the DPJ.

In the emerging geo-economic, political and strategic environment and in the face of common tasks associated with finding and implementing adequate measures to neutralize the existing and emerging challenges and threats to their strategic interests in East Asia, Tokyo and Washington are doomed to mutual cooperation: without Japan, the U.S. cannot hold their positions in the world or in Asia-Pacific in the face of the rapid strengthening of China (which seeks to challenge American hegemony in the region and turn it into a zone of its exclusive interests). Protected by the American “nuclear umbrella” and relying on American military power, Japan can afford to keep its relatively moderate defense expenditures that way, using most resources for the development of its economy which was severely hit by the global financial crisis.

It should be emphasized that Tokyo attaches special significance to preserving the U.S. “nuclear umbrella” over Japan and seeks confirmation of nuclear safeguards by the United States in any joint undertaking. These safeguards are vital to Japan’s national security. Hence, regardless of their party affiliation, the Japanese ruling elites are unanimous as regards the development and improvement of the allied ties with the United States.

One can assume that the phase of working out mutually acceptable solutions to the problem of restructuring the system of American military bases in Japan can last indefinitely, even if it only concerns the redeployment of military bases in Japan. During this period, the bases are likely to continue functioning as a deterrent to the growing expansion of China, and a neutralizing force with regard to other current and future threats to the security of Japan.

In the view of Irina Lebedeva, the government led by the Democratic Party of Japan came to power in a very difficult economic situation. Although the Japanese economy began to recover from the depths of the recession triggered by the global financial and economic crisis in the first quarter of 2009 and, by the time the DPJ won the elections, the situation had improved in many ways, the trend toward recovery was still too fragile and prospects for the world economy were far from clear.

The first official document of the new government that expressed its view of the situation in the economy and of measures needed to improve that situation was entitled “Emergency Economic Countermeasures for Future Growth and Security,” published in December 2009. In our view, the program differed little—in spirit or in essence—from the anti-crisis measures implemented by the Taro Aso government, especially from the one adopted in April 2009 and dubbed “Policy Package to Address Economic Crisis.” The two documents have much in common in terms of vision of the country’s development and with regard to instruments used in implementing the current economic policy.

The main difference between the economic policies of the new government and the measures undertaken by previous cabinets consists in a substantially greater emphasis on stimulating demand. This is evidenced by a significant increase in the use of fiscal measures to stimulate consumer demand. While the Liberal Democrats were almost always (including the recent recession) directing their efforts primarily to promote supply, believing that the situation with demand is contingent on the situation in the real economy, the Democrats, by contrast, have focused attention on stimulating demand, assuming that its recovery can give impetus to economic development.

The government adhered to this line in preparing the budget for the 2010 financial year, which proceeded under the slogan “from concrete to people.”

The budget for 2010 FY reached the record-breaking $92 trillion and 300 billion, and its execution would obviously lead to an even greater strain on public finances. Thus, a 16.2% decrease in the issue of construction bonds will lead to a 47.6% increase in the issue of bonds to finance the budget deficit, and the total issuance of government bonds will reach a record 44.3 trillion yen. On the contrary, tax revenues are estimated to fall by 8.7 trillion yen down to 37.4 trillion yen, and will be almost by 19% smaller than in 2009. A modest increase is expected in non-tax revenues (by 15.5% to reach 10.6 trillion yen, of which 4 trillion and 775 billion yen will be transfers from special accounts of the Fiscal Investment and Loan Program, and 2 trillion and 850.7 billion yen will be transfers from special foreign currency accounts). In general, the dependence of the budget on the issue of government bonds will come to 48.0%, compared to 37.6% in the crisis year 2009.

Proceeding from the necessity to fulfill the promise in the DPJ election manifesto, the new government included in the 2010 FY budget such innovations as benefits for children, support for individual (family) farm households with a specific level of income, free tuition at state schools of higher level, the abolition of a temporary tax on gasoline, etc., all of which increases the budget’s expenditures by 3,100,000,000,000 yen.

There can be no doubt that these measures should facilitate citizens’ lives. The main question, however, is whether these measures and other initiatives of the ruling party (whose implementation will begin in 2011 FY) would stimulate consumer demand and spur Japanese economy?

In the author’s view, the impact of these measures will be quite insignificant in the coming years, because a number of problems in Japan will have a discouraging effect on people’s consumer behavior and can block the positive effect of governmental efforts. Chief among them is the huge size of pent-up demand, which is due to the insufficient development of the social security system and the restricted financial base of current consumer spending (owing to the rapidly aging population, growing unemployment, increased use of temporary forms of employment, and limited growth of real wages).

As regards promotion of entrepreneurship, while the government continues to support private enterprises (including a proposed reduction in the near future of the corporate tax for small businesses from 18% to 11%), some aspects of its activity could have a negative impact on the economic situation and suppress the rather sluggish operating incentives for business development. This includes, above all, the commitment to reduce, by 2020, greenhouse gas emissions by 25% (against the 1990 level), as well as the proposal to introduce stricter standards aimed to cut energy consumption by making appropriate amendments to the Energy Conservation Law. It is obvious that the implementation of these commitments will require that companies incur additional costs and, consequently, may further aggravate the problem of high production costs in some industries and sectors, thereby inducing them to look for investment opportunities abroad.

The government also bears some responsibility for a sharp rise in the cost of the yen against the dollar, which took Japanese exporters to the brink of collapse and had an inhibitory effect on recovery in the industry. According to the Myundella-Fleming model, the growth of government spending leads to a situation marked by free movement of capital and floating exchange rates, to higher interest rates and the strengthening of the national currency. Moreover, the release of a large mass of government bonds leads to the withdrawal of some capital from the securities market, and consequently, reduces the market share price. What is normally used in this situation is an easing of monetary policy; such a policy is ineffective, however, in the case of deflation brought about by recession. As is known, the current economic policy cannot be successful unless it is built into the strategy of socio-economic development, which gives the public an idea of what will be the main directions of development in the future. The DPJ-led government began to work on the strategy of socio-economic development from the very beginning, publishing an interim version of the document in December 2009 and producing its final version in June 2010.

The strategy defines the main parameters of Japanese economy until 2020, describing its main goal as the establishment of a “strong economy” based on a “healthy system of public finance” and a “strong social welfare system.” The average annual growth rate during this period will amount to about 2% in real terms and to about 3% in nominal terms. It is assumed that deflation would be over already in 2011–2012, followed by an annual 1% price increase in subsequent years.

Supporting economic growth on the demand side will be an expanding demand for medical services and care for the elderly and children, as well as the overall growth of consumption of goods and services, which will occur as a result of the functioning of a welfare system created to satisfy the needs of citizens and relieve anxieties about problems they may encounter in old age. Economic growth will also be encouraged by private investment in equipment manufacture, a significant expansion of which will be boosted by measures to be undertaken in the field of ecology and environmental conservation.

The document proposes that a transition be made from the economic growth model relying on the leading manufacturing industries to a more diversified and sustainable model based on the priority development of the seven strategic areas, such as energy saving, environmental protection; health care; economic cooperation with Asia; tourism and local economic development; R & D, information, and communications; employment and human resource development; and the financial system.

It follows that the authors of Japan’s development strategy envisage a radical change in the image their country has in the world—from the producer of quality manufactured goods and builder of industrial branches around the world to a country that will, firstly, serve as a model of high-quality environmental protection and energy conservation and, secondly, will propose an effective model for solving the problem of aging population and related social issues, which is becoming relevant for a growing number of states. Only time will tell how successful and consistent will be the implementation the new government’s strategy.

The book is concluded by the paper of Elena Leontyeva dealing with the situation in Japanese economy during the financial crisis of 2008–2010. Japan has suffered from a deeper recession than other advanced economies, having lost much of the global demand for manufactured goods, its traditional exports. Driven
by external demand, mostly from East Asian emerging economies, however,
it is heading for recovery and to the pre-crisis level faster than most economies except the U.S. Yet, its domestic demand, capital formation, and employment show no signs of recovery, what with corporations directing their resources to the fast-growing Asian region, focusing on manufacturing and marketing operations abroad.

Meanwhile, Japan is suffering from a strong yen. Paradoxically, the currency of a country with weak economic growth has become a haven of safety in a troubled world. A stronger yen can accelerate the country’s deflation, which has become a common challenge for industrialized countries, and can adversely affect exporters and fuel capital outflow.

Furthermore, Japanese manufacturers are losing edge in global manufacturing  as they contend with tougher competition from Chinese and South Korean rivals. The Japanese business community is fully aware of this threat, especially since Japan fell to the 27th place among the 58 economies in the Swiss business school IMD’s competitiveness ranking for 2010. In addition to high labor costs, Japanese companies bear a high level of taxes and social welfare costs on an international scale.

To return to a full-fledged recovery, Japan has to balance between external and domestic demand. However, public investment is difficult to increase due to massive fiscal deficit and rapidly growing governmental debt, which will reach 227% of GDP by the end of the 2010 FY. Japan is the most heavily indebted industrialized nation in the world. Public debt has ballooned along with stimulus measures taken by governments in 2007–2009 and aimed at supporting household income and spending, and at aiding financial sector with conserving jobs. The government financed its stimulus packaged with government bonds, borrowings and financing bills and passed the debt to future generations. As the Japanese population ages, the government will face swelling social security expenses, especially pension and medical costs.

Public debt is held by private financial institutions. The levels of long-term interest rates are benchmarks for long-term lending rates. Japan faces the risk of investors deserting government bonds, which may seriously hamper the recovery of private-sector capital formation.

A major challenge to Japan is the development of new technologies and new products and the creation of new markets. This is a highly competitive field in the global economy. Japan needs a new vision, a growth strategy for the 21st century.

The economic crisis has triggered a profound shock in the country’s political system that ended the nearly half-century era of the Liberal Democratic Party’s dominance in Japanese politics. The Democratic Party of Japan came to power and formed a three-party coalition government. The DPJ President Yukio Hatoyama won an all-time high in the support for his party and faced high expectations for the leadership of DPJ. Hatoyama promised to make a major shift from a bureaucrat-led government to a government led by politicians.

The Democrats’ platform was full of populist rhetoric, centered on initiatives like cash allowances for child-rearing families, lower gasoline taxes and abolition of expressway tolls. The Hatoyama Cabinet established the Government Revitalization Unit in order to reform the overall national administration, including the budget and system of national administration, and also to review the division of roles among the national government, local public authorities, and private companies. However, these far-reaching goals were never achieved. The Unit tried to cut wasteful spending across the entire fiscal system, but failed to achieve the demanding targets declared by the Hatoyama Cabinet.

Moreover, Hatoyama challenged the Japan–U.S. security alliance and failed the talks with the Obama Administration on the relocation of the U.S. Marine Corps Air Station Futenma in Okinawa Prefecture. Members of the DPJ-led ruling coalition opposed the policy of relocating the Futenma Air Station and challenged the planned privatization of the state-owned Japan Post Holdings Co. The coalition broke up.

Finally, the DPJ Secretary-General Ichiro Ozawa, who was widely regarded as the most powerful figure within the DPJ, had serious legal problems with his political fund-raising. Yukio Hatoyama’s already low poll-ratings fell further, and he stepped down as Prime Minister. The Democratic Party of Japan chose Finance Minister Naoto Kan to be Hatoyama’s successor and to serve his remaining term as the Party’s President until the party election on September 14.

Mr. Kan was re-elected as DPG’s leader and retained his post as Prime Minister. He formed a new Cabinet. He faces a new challenge in uniting the DPJ under his administration. He approved a large-scale intervention by the Bank of Japan in lowering the yen exchange rate. Many challenges, short-term and long-range alike, lie ahead of him.
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