Aso's bid

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Sep 5th 2008
From the Economist Intelligence Unit ViewsWire

Taro Aso is favourite to take over as prime minister in Japan


Is Taro Aso the man to rescue Japan's ruling Liberal Democratic Party (LDP), and cure the country's political drift, following prime minister Yasuo Fukuda's resignation? With Mr Aso's emergence as the front-runner to become the next LDP leader, and thus prime minister, this question has dominated the political pages since Mr Fukuda's surprise announcement on September 1st. The Economist Intelligence Unit believes that the answer is ultimately "no", although Mr Aso does offer the party its best chance of improving its desperate standing before the next general election. Nonetheless, there is a high risk that, if elected as LDP president on September 22nd, he will fare little better than his predecessor.

Mr Aso's hopes rest on his potential to emulate Junichiro Koizumi, a prime minister who oversaw the LDP's thumping lower-house election win in 2005 before retiring the following year and watching the party stumble from one crisis to the next, as a political maverick. With a rasping voice, a well-known love of manga comics and a notorious tendency to outspokenness, Mr Aso is popular with voters, including the young. He is not, strictly speaking, very much like Mr Koizumi at all, representing a conservative wing of the party and lacking a similar vision of policy reform. In fact he is a blue-blooded member of the LDP establishment, but his appeal lies in the perception that he is at the same time an outsider. At any rate, he is currently the only LDP figure with anything like the national standing required to lead the party into the next lower-house election, which must be held by September next year but which is looking increasingly likely to be called before the end of 2008.

Mr Aso is less popular with his party, where his right-wing nationalism, abrasiveness and narrow intrinsic support base all limit his appeal. He leads only a small faction of his own within the LDP, and would be a far-from-unanimous choice for prime minister were the party not so short of alternatives. Yet it seems likely that even factions that privately disapprove of him will rally behind the LDP secretary-general, and former foreign minister, if they believe that he offers the best chances of minimising party losses at the next election. Indeed, his rapid emergence as the leading candidate to become prime minister suggests that he is already beginning to seal the tacit endorsement of party power-brokers. Mr Aso's chances are helped by the fact that he performed respectably in the last party leadership election in 2007, despite losing to Mr Fukuda, and that he has assiduously courted the LDP's prefectural chapters, which cast over one-quarter of the votes in the leadership election. Mr Aso's plans to boost public spending may widen his appeal to the LDP's rural chapters, which have seen their funding and political influence eroded in recent years.

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Not quite a shoo-in
Despite all this, Mr Aso's anointment is not yet a done deal. Last year's party leadership contest is a case in point. Then, Mr Aso was initially the leading candidate to take over from Shinzo Abe as prime minister, but his campaign faltered quickly when it became clear that the party planned to close ranks around Mr Fukuda. Other politicians remain in the frame for the party presidency (which, by virtue of the LDP's status as the senior party in the ruling coalition, also confers the post of prime minister on its holder). The formal confirmation of candidacies--including that of Mr Aso--has yet to occur. But speculation is rampant as to who may run against him. Top of the list is a woman, Yuriko Koike, a former defence and environment minister. Ms Koike is telegenic and has close links to Mr Koizumi, which could boost her appeal to the party's reformist elements as well those opposed to Mr Aso at any cost.

Ms Koike is unlikely to go as far as winning the LDP leadership election, however. Although she has the support of Hidenao Nakagawa, an advocate of structural reform and a key player in the LDP's largest faction, the Machimura faction, she would seem to lack enough heavyweight party clout. Ms Koike may fail to secure the unanimous backing even of the Machimura faction, to which she belongs. The faction is divided over whom to support, but there is a strengthening lobby among its members to endorse Mr Aso in preference to her. She may still get the votes of many of the so-called "Koizumi children", a tag that refers to more than 80 first-term lawmakers who won seats on the back of Mr Koizumi's popularity in 2005. Also, if Mr Aso stumbles badly or sees his approval ratings plunge as far as those of Mr Fukuda (or of Mr Fukuda's hapless predecessor, Mr Abe), Ms Koike may find more backers. But such a scenario is more likely after Mr Aso has been prime minister for some time and has struggled, presumably in vain, with the same parliamentary gridlock that brought down the unfortunate Mr Fukuda. That said, the current political turmoil means that the picture may change very quickly, even in the next week or so.

There are other potential contenders apart from Ms Koike, although most of them are long shots. Kaoru Yosano, the state minister for economic and fiscal policy and a supporter of a controversial proposed raise in the consumption tax, is reported to have confirmed plans to run. Possible candidates also include Sadakazu Tanigaki, the land, infrastructure, transport and tourism minister and a former finance minister; Nobuteru Ishihara, the former LDP Policy Research Council chairman; and Seiko Noda, the state minister in charge of consumer affairs. None of these, however, has broad support yet either within or outside the LDP. There have even been calls for Mr Koizumi to come out of retirement, but he has resisted such pressure in the past. At the other end of the scale, there remains the chance that a relative unknown could come forward in the next week and generate at least enough interest to complicate the leadership race.

Getting there is the easy part
Assuming that Mr Aso does become prime minister, then what? His most important initial decision will be the timing of the general election. Many of Mr Aso's backers in the party, fearful of losing their seats, will be reluctant to see him call an early election, which may influence his decision. Yet the chances of an early snap election will increase with Mr Aso at the helm. By no means all of his supporters will favour a delay. Some undoubtedly recognise that his personal popularity could produce a bounce in the opinion polls that would benefit the LDP if the election were called immediately. A snap election could wrong-foot the opposition Democratic Party of Japan (DPJ), which may have expected the LDP to delay. It would also allow the new incumbent to establish an electoral mandate of his own and exploit his ratings while they lasted (especially since, on the past form of prime ministers other than Mr Koizumi, such ratings are unlikely to remain high for long). In addition, as neither Mr Abe nor Mr Fukuda was in office long enough to face a general election, the need for the LDP to ensure that its next leader receives electoral endorsement is becoming more urgent.

An early election is also more likely as a result of pressure on the LDP from its coalition partner, New Komeito, which is backed by Soka Gakkai, Japan's largest lay-Buddhist organisation. New Komeito has one eye on next summer's Tokyo metropolitan election, but the party lacks the resources to fight two large elections at once. Although New Komeito only has 31 lower-house seats, the LDP's mounting woes have strengthened the junior coalition member's bargaining position. In particular, the coalition's loss of control of the upper house last year has increased the LDP's reliance on New Komeito to pass legislation. With fears mounting that New Komeito may desert the coalition to go over to the DPJ, the LDP has all the more reason to accommodate its partner's demands. That said, New Komeito will probably be reluctant to join forces with the DPJ so long as the veteran Ichiro Ozawa, a feisty old-school political bruiser, heads the party. As Mr Ozawa looks set to be re-elected unopposed as the party’s leader on September 21st, rumours of a coalition split may still be premature.

Mr Aso's alternative to an early election is to sit tight, ride out the LDP's current turmoil and hope that the party's prospects have improved, if only slightly, by mid-2009. This would give Mr Aso more time to settle into the prime minister's role--positive if he does well, but negative if things go badly--and would give the shell-shocked party an opportunity to regroup. It would also allow more time for increased fiscal spending, which Mr Aso favours over aggressive fiscal reform, to boost the government's popularity. Still, the DPJ's control of the upper house, which it has used remorselessly to block the government's policies, means that there is a high risk of Mr Aso's administration achieving little, appearing weak and indecisive as a result, and falling yet further in the public's estimation. In the worst case, especially if New Komeito leaves the coalition, the LDP could suffer even heavier election losses than expected and be dumped out of office altogether.

This is not the Economist Intelligence Unit's core forecast, but the possibility of the LDP losing power for only the second time since its formation in 1955 underlines the broader problems that it faces. Our central forecast is that Mr Aso will win the prime minister's job and call an election in October or November 2008. We also forecast that in this election the government will lose its parliamentary "supermajority", but retain its simple majority. However, even under this relatively benign scenario, the LDP's subsequent prospects of running an effective government--and therefore keeping Mr Aso popular enough to avoid the fate of Messrs Fukuda and Abe--look bleak. With no upper-house election due until 2010, and with no guarantee that the LDP will be able to wrest the chamber back even at that time, there is the prospect of another five years or more of political paralysis. No wonder observers of Japan are already beginning to whisper that the country, which grappled with stagnation for much of the 1990s and early 2000s as a result of failed economic policies, now faces a new "lost decade" because of failed politics.