Japan's reform initiatives.

• Author: Hoadley, Steve
• Position: Under minority government of Ryutaro Hashimoto

After an interregnum of three years the Liberal Democratic Party (LDP) regained the leadership of government in January 1996. However, with their party weakened by defections to two new centrist parties, LDP leaders were obliged to govern in coalition with their erstwhile archrivals in the Social Democratic Party (formerly called the Japan Socialist Party). It was a government of paralysis at a time when the economy slumped, unemployment and debt mounted, bribery scandals multiplied, disputes with overseas neighbours festered, and public disillusionment with government deepened.

In October 1996 the LDP leader and Prime Minister, Ryutaro Hashimoto, dissolved the lower house of the Diet and took his party to a general election on a platform of reform. The campaign was lacklustre and the polling turnout was the lowest in recent history (60 per cent). The electorate denied the LDP a clear majority (see Table 1).

Table 1: Lower House Diet Seats Won in October 1996 (total 500) MINORITY GOVERNMENT: Liberal Democrat Party (Jiminto) 239 SUPPORTING THE LDP: Social Democratic Party (Shakaito) 15 New Party Sakigaki (Shin-to Sakigaki) 2 IN OPPOSITION: New Frontier Party (Shinshinto) 156 Democrats (Minshuto) 52 Communist Party (Kyosanto) 26 Others and independents 10

However, the opposition parties fared even worse. As leader of the largest party, Hashimoto was able to secure agreements from the Social Democrats and the New Party Sakigaki to support him in the Diet for the time being. Now Japan is governed again by the LDP, not in a coalition but as a minority government with conditional support.

Unpromising instrument

A minority government is ordinarily an unpromising instrument for reform, particularly when the backlog of problems is as bulky as it is in Japan. Yet a reform momentum has started to build. Six factors seem to be propelling it:

* Foreign pressure (gaiatsu) continues, focused particularly by the United States on non-tariff and structural barriers to market access, most recently on services such as insurance.

* Private enterprises with international connections are seeking a more liberal business climate in their home base in which they can negotiate corporate alliances abroad and import specialised know-how from overseas sector-leaders. The peak associations Nikkeiren (employers) and Keidanren (economic organisations) are increasingly seeking reforms to stimulate the business environment.

* The government's two Diet `allies' and the opposition parties (New Frontier Party, Communist Party) as well all agree that reforms are necessary.

* The LDP old guard who could normally stall reform, and who did so in the early 1980s and again in the early 1990s, are discredited by defections, bribery scandals and manifest failure to deal with the economic slump since the `bubble economy' burst in 1991. Their influence is diluted by the election of younger, reform-minded Diet members to their caucus.

* Prime Minister Hashimoto appears committed to pushing ahead. He has considerable experience in key portfolios and demonstrated skill as a political operator. He is mindful of the fact that if his reputation is to rest on anything more substantial than resisting US demands for auto parts market access, and if the credibility of his re-election rhetoric and rising popularity are to be sustained, he must deliver. If he does, he will rank with Yoshida and Nakasone as one of Japan's memorable political leaders.

* Finally, the informed public as represented by social policy interest group leaders, economist-commentators, academic and media analysts, and other opinion leaders all prescribe prompt reform even as they dispute where it should begin and who should pay for it.

Promising convergence

The convergence of these political forces promises to propel reforms forward briskly, by Japan's standards at least. However, equally powerful forces resist reform. Some of these include the following.

* Senior members of the LDP who have garnered election campaign funds and other favours through semi-legal connections with well-endowed enterprises and quasi-financial institutions are in no hurry to challenge the arrangements that have served them well. They work in specialised groups (zoku) through LDP and Diet committees, often in close consultation with sympathetic bureaucrats and private sector interests in their specialities.

* Labour and farmer union peak associations such...