The Tasks Ahead for Noda and the DPJ

On September 21 the Democratic Party of Japan held its presidential election. Noda Yoshihiko, the current prime minister, handily won reelection to hang on to the top spot. The task before him now is to tackle a raft of domestic and foreign policy issues while keeping an eye on the calendar to choose the best time to hold the next general election.

In this column I look mainly at the domestic issues on Noda’s agenda, including the timing of his dissolution of the House of Representatives and the prospects for the government’s bill on bond issuance to cover deficit spending.

Factors Delaying the Next Election

The leaders of three parties—the DPJ and, from the opposition, the Liberal Democratic Party and New Kōmeitō—met on August 8. At this gathering they reached an agreement on a package of bills to reform Japan’s social security system and hike the consumption tax, with the proviso that after the bills’ passage, the question of Japan’s political leadership would be put to the people in an election “in the near future.” The bills passed in upper house voting on August 10, thus becoming law.

Noda is not eager to call the general election soon, though, for two reasons. The first reason is the dismal popular support ratings for his cabinet and for the DPJ. A Kyōdō opinion poll carried out on September 1–2 found public support for the Noda cabinet in the cellar at 26.3%. For the Democrats as a whole, meanwhile, the figure was an even lower 12.9%. The second reason is the fact that the apportionment of seats in the House of Representatives is currently in violation of the Constitution. Both the DPJ and LDP have made proposals to reform the electoral system, such as by adjusting the numbers of seats allotted to different regions in Japan, but discussions on these issues have stalled. Even if an electoral reform bill passes into law immediately after the next extraordinary Diet session is convened, the new district boundaries will need to be decided, a bill defining them will need to be put together, and the voters will need to be informed of the changes. Given all this, it seems unlikely that we will see an election before the year’s end.

This will not please the LDP, which has been demanding a swift dissolution of the lower house and which will continue to make this demand following its election of a new president on September 26.(*1) One key factor in this connection will be the deficit bond bill.

The general account budget for fiscal 2012 (April 2012–March 2013) amounts to ¥90.33 trillion. Of this amount, ¥38.34 trillion is currently projected to be financed by deficit-covering bonds. The Diet must pass a law to approve further bond issuance, but this is being held up due to foot-dragging by the LDP and other opposition parties. In response the Noda cabinet has begun implementing spending delays. If new bonds cannot be issued by the end of November, though, these delays will not be enough to prevent the national coffers from running dry.

The Liberal Democrats are certain to demand a snap election in return for their support for the bond bill. Last year they wielded a similar bill as a tool to undermine Prime Minister Kan Naoto, successfully forcing him to step down as one condition for receiving their votes.

An Inappropriate Political Weapon

But the deficit bond bill should not be used as a weapon on the political battlefield. The ruling and opposition parties must find a way to smoothly pass this bill for the good of Japan. Even if the LDP manages to wrest power away from the DPJ in the next election, chances are high that the Diet will remain divided, with its two houses under the control of opposing parties. If today’s opposition cannot find a way to break through the impasse on this spending bill, it will find itself in the same ineffective position when it is tomorrow’s ruling party.

For the time being, the ruling and opposition forces should solve this problem by working together to craft a supplementary budget. The opposition parties are withholding support for the special deficit bond bill because they oppose this fiscal year’s draft budget, financed in large part by deficit bond issues. Noda should therefore seek input from the opposition—in particular the LDP—on what portions of the draft budget are unacceptable. The next step will be to look at the parts of the budget not yet implemented, creating a supplementary spending plan and amending the annual budget in exchange for support for the deficit bond bill.

One fundamental factor underlying the emergence of this bill as a political problem is the warped nature of the budgetary compilation methods that Japan has grown accustomed to. Breaking through this logjam will require a Copernican shift in the nation’s approach to these budget discussions. Such a shift, though, would be a lasting solution to the woes afflicting this annual process. In my next column I will take a closer look at the prospects for this shift.

(Written in Japanese on September 21.)