Economics Politics & government

[2640] Welcome back, LDP

I do not understand the intricacies of Japanese politics. I simply do not follow it closely. But I do know that Japan can play a significant role in Asia, if it finally decides to take up that role, which it has not under the uncertain leadership of the Democratic Party of Japan.

The DPJ wanted a closer relationship with Asia and less of the US. Contrary to what it hoped to achieve, a DPJ-led Japan has not successfully engage China and Japan now needs to forge a strong relationship with the United States in time when China is rising and growing more assertive against its neighbors. DPJ’s economic management itself has not been stellar but I think there it is unfair to blame to DPJ for that.

Unhappy with China, I welcome the reelection of the more conservative Liberal Democratic Party and a Japan with a backbone. That is so because it is almost certain that the LDP will strengthen its relationship with the US. With a stronger relationship with the US and a strong US presence in East Asia (and Southeast Asia), hopefully China will think twice in asserting its weight around the region. China has been an irresponsible giant so far, escalating crisis when a mature power would have handled it with care instead. For instance, is it really necessary to send a plane over the Senkaku islands?

A more hawkish (not too much I hope) Japan will tell China that it cannot bully its way through the region any longer. Rather than a hawk-dove strategy, now China faces a hawk-hawk scenario, which is more complicated and may force China to rethink its assertive, bullying regional policy into something more cooperative and amiable.

A hawkish Japan does have its own problem but at the moment, I do want a Japan that is willing to stand up in the region. China needs to learn that its bully tactics does have consequences and an LDP Japan can push back and say, no, play nice.

One big issue with LDP is its economic policy of Japan. First is the government interference in monetary policy. The Bank of Japan is losing its independence with the government trying to force the central bank to target for higher inflation rate. While I do think Japan needs a bit of more inflation, I am unsure how the interference will pan out. Lack of independence can be a recipe for too much inflation. There is some nuance in the interference in the sense that LDP government wants a stricter (but higher inflation) rule for the BOJ to follow but it does create a precedent of interference nonetheless.

On the same track, the LDP government will embark on a massive stimulus program to revive the economy. I prefer monetary to fiscal stimulus. The preference presents me with a problem: BOJ itself is too conservative to my liking and that probably makes the executive infringement into monetary policy somewhat palatable. Nevertheless, with expansive and coordinated fiscal and monetary policies, I suppose you will get inflation.

Finally, while I welcome the return of the LDP, I do not think the election of DPJ was a mistake. The Japanese system needs a shake-up and the DPJ did just that, even if it did not fulfill its promise. Being in power for too long can be dangerous to a political culture because it implants the party into the state apparatus. For a healthy democracy to prevail, the state has to be ultimately separate from the party. In the case of Japan, there is an additional dimension: the civil service is too influential. From my readings, the DPJ did have some successes in reigning the influence of the Japanese civil service, and that is good.

By Hafiz Noor Shams

For more about me, please read this.

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