Japan: The Doors Revolve, But Where Is Superman?
One of the main reasons why I am bearish towards Japan is its chronically dysfunctional political system. Whoever replaces Yasuo Fukuda will be Japan’s 12th prime minister since 1990, and the sixth since 2000. This frequent change of leadership has been described as ‘revolving door prime ministers’, but unfortunately, ‘Superman’ is unlikely to emerge.
Although many commentators have written about Japan’s weaknesses in purely economic terms (e.g. deflation, weak domestic demand, high debt, etc…), they are ultimately missing the point, namely that these problems stem from a fundamental inability of the political system to create a strong leader with a solid mandate to reform the economy. One exception was Junichiro Koizumi (2001-06), but even he was more rhetoric than reality, and he was lucky in that his term coincided with a major boom in the global economy, which lifted Japan too.
So, what would it take to reform Japan? I identify the following points:
• Strong executive leadership.
• Longer prime ministerial terms.
• Full party backing for reform.
• Full public backing for reform.
Admittedly, the above four points can be said of all countries seeking economic reform, such as Brazil, Mexico, and Turkey. However, it is the first two points where Japan really falls short of others. For a variety of reasons, Japanese premiers wield far less power at home than US and French presidents, British prime ministers, German chancellors, and a host of other leaders. Furthermore, Japan holds intra-party leadership elections every time a prime minister resigns, upper house elections every three years, and general elections every four years. And because most incumbents usually have to resign at the earliest sign of trouble, most Japanese leaders have short tenures. This reduces the chances of strong leadership and far-sighted policies emerging.
I am hardly advocating a reformist dictatorship in Japan; I am merely suggesting that Japan would be better off if it had a ‘normal’ political system in line with other G-7 countries. It is probably no coincidence that the G-7’s other major underperformer, Italy, has a similarly chaotic political system.
Looking back into history, I note that Japan’s last two major shake-ups – in 1867, when the ruling Shogunate was overthrown, and in 1945, when US General Douglas MacArthur effectively took over the country after World War II – only happened amid extraordinary domestic and international circumstances. Yet Japan in 2008 is in no way facing such times, and those who champion dramatic change could be in for a long wait, even if Japanese voters expel the perpetually-ruling Liberal Democratic Party from power.