Reshuffling the deck

tauringhuang.

Aug 1st 2008 | TOKYO
From Economist.com

Japan's prime minister, Yasuo Fukuda, names a new cabinet. Will anything change?

AFP
FOR months the approval rating of Japan’s prime minister, Yasuo Fukuda, has been stuck below 25%. He has come across as an elderly, ineffectual party boss with few fresh ideas and little energy. And he has suffered as a newly muscular opposition party obstructed his every move, from the anodyne to the important. Not even big international conferences, like the G8 meeting of rich countries last month in Hokkaido, could improve his standing.

To shake off the stasis—and to save his political skin—on Friday August 1st Mr Fukuda replaced 13 of 17 ministers. Almost all of the old lot had been inherited from his predecessor, Shinzo Abe, who abruptly resigned last September. The new team is packed with responsible veterans who favour cutting spending and increasing taxes to place Japan’s economy on a healthier long-term footing.

Mr Fukuda described the reshuffle as "the cabinet for realising peace of mind," and stressed that he would focus on policy matters. However the new government’s ability to act will be blocked by the opposition and the worsening global economy. This will end up rendering the cabinet’s purpose more to carry the Liberal Democratic Party (LDP) into a general election, which must be called by September 2009, than carrying out actual reform.

The new finance minister is Bunmei Ibuki, a tax expert. Joining him as economic and fiscal-policy minister is Kaoru Yosano. Both men favour raising the consumption tax from 5%—a deeply controversial issue. Japan’s government debt is hefty, which bodes badly for a society that is ageing rapidly while the population declines. At the same time, consumer spending is lacklustre and inflation is on the rise after a decade of flat or falling prices.

Japan’s politics is considered a “democracy within a democracy.” Though the LDP has ruled continuously since 1955 save for a ten-month hiatus in the early 1990s, it is through the party’s factions that power is shared. In the reshuffle, Mr Fukuda kept a number of faction leaders in prominent positions, suggesting that “politics as usual” will prevail and precious little will happen.

Moreover Mr Fukuda reached into the backbench of the LDP to resurrect Taro Aso, a charismatic former foreign minister who battled and lost to Mr Fukuda for the party leadership, and thus premiership, last autumn. Mr Aso takes the reins as LDP secretary-general, which gives the party the fresh public face that it needs. Mr Aso’s new post is widely seen as a stepping stone to the job of prime minister.

The new team, despite being filled with old political soldiers, is promising. But can it actually carry through on serious policy? Probably not. The political climate is hostile to structural reform. Half a decade ago, under then-prime minister, Junichiro Koizumi, changes were greeted as a breath of fresh air to rejuvenate the stagnant economy. Today the policies are blamed as the source of the current malaise. The momentum for reform ebbed once the economy began to improve; then reform seemed particularly inopportune once the economy soured again.

Furthermore, Mr Fukuda’s cabinet will have to operate in difficult times for the world economy. The slowdown in America and Europe has hammered Japanese exports of cars and consumer electronics. At the same time, soaring energy and food prices have pushed up inflation. So it is hard to see how the new government might successfully impose unpopular fiscal medicine.

The new government must also act just as the Democratic Party of Japan (DPJ) is feeling particularly powerful. The DPJ’s president, Ichiro Ozawa, blocked LDP legislation during the previous session of the Diet, Japan’s parliament, creating paralysis afresh. Having claimed the scalp of one LDP prime minister, Mr Abe, he is keen to add Mr Fukuda’s to his trophy wall.

Mr Fukuda can expect a bump in the polls but it will probably be short-lived. Japan’s problems—from government debt and an ageing society to an overbearing bureaucracy and businesses ill-prepared to compete globally—continue to fester. The political system’s ability to address them is as limited as ever.