The Democratic Party of Japan’s (DPJ) landslide victory in the Lower House election a year ago ushered in euphoric predictions of bold new policies, and even a transformation of the Japanese political system. There were widespread hopes that the DPJ would end the run of short-lived leaders. Instead, Prime Minister Yukio Hatoyama’s tenure proved to be a slow-motion train wreck. Indeed, the DPJ quickly showed itself to be no more competent in governing Japan than its much-derided opponent, the Liberal Democratic Party (LDP).
After shedding its two albatrosses of Hatoyama and general secretary Ichiro Ozawa, and many of its earlier campaign pledges, the DPJ hoped for a respectable showing in the last Upper House election. Instead, the ruling DPJ suffered a stunning defeat, when voters had the opportunity to show whether they were confident in Prime Minister Naoto Kan’s just over 1-month-old administration. The party ended with only 106 seats, far short of the 122 needed for an outright majority. The gap is too large to be filled by creating a coalition, because the most likely potential partners also lost seats.
As a result, the DPJ coalition can no longer ensure approval of its legislative initiatives. A twisted parliament portends even greater legislative stalemate and political gridlock. Gerald Curtis, a professor at Columbia University in New York and a long-time expert on Japanese politics, said the election had returned Japan to the paralysis and gridlock of the past few years. “You cannot pass a budget now in this political environment. You’ll have weak and unstable government. While the world changes fast, the Japanese government will change very slowly”. Trying to put a good face on the results, Kan said he viewed the election as a “starting point” for his push for a more responsible government ... The policy implications of the election outcome do not suggest an aggressive approach to monetary, fiscal or structural policy over the next few months.
Indeed, the attention of the large parties will most likely be focused on internal matters, leaving less time for focus on the economy. Gridlock is bad for the economy and for investor sentiment if policy drift continues for a prolonged period. According to Alan Feldman, managing director at Morgan Stanley in Tokyo, there are so many pressing problems in the Japanese economy that the costs of gridlock could be very high. In particular, pressure on the Bank of Japan for more aggressive monetary policy will likely be minimal, at least until political disarray ends. Without strong political leadership little progress is likely on budget priorities. The same goes for tax decisions.
At Shaw Capital Management we give you the information and insight you need to make the right investment choices.
No comments:
Post a Comment