Japan's ship of state has sailed into the perfect storm.
The ruling Democratic Party of Japan's leadership battle set for Sept. 15 will only contribute to the miasma. Whether Prime Minister Naoto Kan hangs on or challenger Ichiro Ozawa ousts him, neither has demonstrated a talent for attacking the country's deep, abiding issues.
In fact, they epitomize a leadership failure that has seen five prime ministers come and go in the past four years. Neither candidate the charisma of predecessor Junichiro Koizumi, who held the job for five years. Maverick to the end, Mr. Koizumi waltzed off stage in 2006 just as the Japanese economy he did so much to liberalize and open to the global economy collided with the worst world business cycle in 80 years.
Japan's long-term problems are not unlike those of other major democracies. But their severity — for example, the rapidly aging population — and an uncanny ability to muddle through are peculiarly Japanese. As I quipped to an old friend on my last visit, Japan is a country where all the small things get done, and done expertly. Unanswered is whether traditional cultural values — discipline, persistence, team effort — have eroded so badly that they cannot see the society through the next set of revolutionary changes, as they have repeatedly over the past 150 years since the Meiji Restoration.
Indeed, post-World War II Japan invented the template for booming export-led economies. And when menaced by "voluntary" U.S. quotas, businessmen shifted into quality control (borrowed from American concepts) and upscale manufacturing — "outsourcing" to the rest of Asia. But competition intensified excruciatingly when Japan's "students" — Taiwan, South Korea and, ultimately, China — got into the act.
The always frugal Japanese could not or would not maximize domestic consumption, although living standards improved beyond the wildest dreams of an older, impoverished generation. Instead, the government resorted to internal borrowing for vast infrastructure projects and skyrocketing social welfare programs.
That, combined with hubris — the ill-fated purchases of the Rockefeller Center and Pebble Beach Golf Course come to mind — brought a burst economic bubble and prolonged stagnation. Internal debt mushroomed to more than twice the gross domestic product. Luckily, the borrowed yen are owed to the Japanese themselves or we would be confronting a Greece with chopsticks.
It's symptomatic that both Mr. Kan and Mr. Ozawa have reversed themselves on major issues. The prime minister, once a firebrand populist, now espouses fiscal discipline. Mr. Ozawa, a classic party boss never known to flirt long with substantive issues, preaches economic "stimulus" and blames his rival for advocating higher consumption taxes that led July's losses in elections for the upper house of the Diet. But Mr. Ozawa is vulnerable, too, with threats of prosecution of corruption charges hanging over him.
While the Obama administration does not have a dog in this fight, long-term U.S. strategy in East Asia is at issue. Washington's aspirations for East Asian peace and stability — dating back to the Korean War 60 years ago — make Japan the indispensable fulcrum for projecting American power.
Worries about Beijing's currency manipulation, export subsidies and vast dollar holdings have long since replaced U.S. concerns about Japan's trade surpluses and growing currency reserves, which now are just half of China's $2.3 billion hoard. The Obama administration exhibits, reluctantly, growing concern about rapidly expanding Chinese military and "soft power," which explains Secretary of State Hillary Rodham Clinton's surprising recent swipe at Beijing's extravagant territorial claims in the South China Sea.
But for the first time since left-wing agitation in Japan threatened the alliance in the late 1950s, new ambivalences have crept in, for Washington as well as Tokyo. For example, Washington recently quietly dropped the U.S.-Japanese defense umbrella for small islands claimed by both Japan and China.
For Tokyo, China has replaced the United States as its top trading partner. Unable to climb off the export-led train, Japanese companies use China as a trampoline to the U.S., Europe and other markets while coveting China's limitless domestic markets. Although Mr. Ozawa has recently courted Chinese business interests, both candidates profess loyalty to the alliance and a realignment of U.S. regional military bases, including Okinawa. And Tokyo has just acceded to Washington's entreaties for painful sanctions on Iran, a major oil supplier.
But other issues are more nuanced.
Although Tokyo has played along, there remains great concern about Washington's approach to North Korea. Pyongyang's refusal to come clean on its bizarre, decades-long kidnappings of Japanese nationals is a burning domestic issue. Despite Washington's professions of support, Tokyo felt the issue has not been given sufficient weight.
Tokyo has adopted a harder line toward the interminable "six-party talks" aimed at disarming Pyongyang's nukes, making common cause with South Korea's hard-line president, Lee Myung-bak, who is dealing with his own domestic unrest over the sinking of a South Korean warship by Pyongyang.
The narrowly contested leadership squabble is unlikely to resolve any of these issues. Neither a victory for the wily Mr. Ozawa nor a narrow win for the incumbent Mr. Kan will bring political stability.
An Ozawa defeat could lead to his bolting for a new political alignment — something he has done several times before. The result probably would not be the neat, ideology-based two-party division that many foreigners crave but the Japanese don't seem to cotton to. Furthermore, the Okinawa base squabble is a hair shirt for both capitals that needs immediate attention before local November elections there further inflame the issue. That, too, may not happen in this environment.
• Sol Sanders, a veteran foreign correspondent and analyst, writes weekly on the convergence of international politics, business and economics. He can be reached at email@example.com.
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