Obamafying Japan, The Democratic Party of Japan (Part 2)

Overview: Early lower house election results indicate that the Democratic Party of Japan (DPJ) has defeated the long-ruling Liberal Democratic Party (LDP) in a landslide victory. Prime Minister Taro Aso and the LDP had grown unpopular due to their response to Japan's economic woes. Though a new ruling party may not transform Japan's economy overnight, it is a step towards reform and brings many new (and much younger) faces to government in Japan.

Election Results

• The Nikkei reports that early results indicate the DPJ winning 308 of the Lower House's 480 seats. A minimum of 241 seats is required to capture a simple majority. The DPJ has won even more seats than the popular Junichiro Koizumi and his "band of reformists" won for the LDP in 2005.
• NHK estimates that voter turnout was around 69% and was the highest turnout since the current electoral system was introduced in 1996.
• DPJ President Yukio Hatoyama will be elected the country's new prime minister in a special Diet session in mid-September.
• This will be the first time since 1955 that the LDP is not the controlling party in parliament.
• DPJ President Yukio Hatoyama announced in a press conference that the DPJ will begin discussions with the Social Democratic Party and the People's New Party to form a coalition government.
  
• Prime Minister Taro Aso indicated that he will step down as party head. Additionally, LDP's Secretary General, Hiroyuko Hosoda informed Prime Minister Taro Aso that he plans to step down.
• On a Tokyo Broadcasting System (TBS) televised interview, Hatoyama stated that the DPJ would quickly compile an extra budget to restructure the current government's last stimulus package.
• The Nikkei reports that Hatoyama said the DPJ government would soon organize a grand policymaking body called the National Strategy Office which will outline Japan's national budget and set the nation's foreign and security policies.
• Kyodo News projections show the following LDP heavyweights have lost their seats: Ex-Finance Minister Shoichi Nakagawa, current Finance Minister Kaoru Yosano, Ex-Defense Fumio Kyuma, another ex-Defense Minister Yuriko Koike, and Consumer Affairs Minister Seiko Noda.
• Bloomberg reports that former Prime Minister Toshiki Kaifu lost his seat in the Aichi prefecture against a candidate half his age. Kaifu is the first former prime minister to be voted out since Tanzan Ishibashi in 1963.
• Ex-Prime Minister's son, Shinjiro Koizumi, is expected to provide the LDP a win in the Kanagawa No. 11 constituency.
• Eriko Fukuda a 28-year-old member of the DPJ, is projected to win the Nagasaki No. 2 constituency from former Defense Minister Fumio Kyuma. Fukuda is known for filing a lawsuit against the government for people that contracted hepatitis C from tainted blood products. She herself contracted hepatitis C as a child from a blood transfusion.
• NHK reports that Akihiro Ota, head of the New Komeito party and a partner of the ruling coalition, lost his seat in the Tokyo No. 12 electoral district.
• Kyodo News reports that 23 people were arrested on suspicion of election law violations.

What Will a DPJ Win Mean for the Economy?

• Heizo Takenaka, former Finance Minister under Koizumi, notes, "Japan's politics and its economy are just not sustainable in their current forms...something has to give, be it the ruling party, the yen, the bond market, the stock market or a combination thereof."
  
• Naomi Hasegawa, Senior Fixed Income Strategist, Mitsubishi Debt Research Division: The DPJ promises to shun U.S. dollar bonds if elected.
• Sentaku Magazine: "The DPJ's announced economic policy may be summarized as one of 'reckless spending.' It calls for, among other things, making all expressways free of tolls, giving every child 26,000 yen a month until he or she finishes the nine years of compulsory education and providing compensation for farmers who have to sell their products below cost. It is estimated that these policies would cost an estimated 20.5 trillion yen in fiscal 2012."
• The LDP proposed to outspend the DPJ, but the DPJ seemed more likely to rebalance economic growth towards domestic demand. JGB issuance was likely to increase with fiscal expansion regardless of which party won.
  
• Though the DPJ promises it won't hike the consumption tax for another four years, it is highly likely it will need to do it earlier because tax revenues may not keep up with increased government expenditure.

What Will a DPJ Win Mean for Domestic and Foreign Politics?

• DPJ wants to turn the bureaucrat-driven government into a more cabinet-driven one.
• Gerald Curtis, FT Columnist: "The DPJ talks about replacing bureaucrats with politicians in key ministerial positions but says virtually nothing about what policies these newly empowered politicians would implement.".
• Japan may become slightly more pacifist and less pliant to the U.S..
• American Enterprise Institute fellows Dan Blumental and Gary Schmitt believe, "Tokyo's foreign policy is unlikely to change drastically," but caution that "the fact that Japan will now have truly competitive political parties means that Japanese policy makers will be more attuned to public opinion.".

p/s photo: Fiona Xie