Abe's useless snap election sparks big changes he did not count on
They say one week is a long time in Japanese politics as anything can lurk already behind tomorrow, but the tumult that took place last two weeks is something we haven't seen for some time. Just think about it: first Prime Minister closes Parliament for extra election on its opening day without any sensible reason except his own benefit. Then the main opposition party's newly elected chairman declares his party dead instead of preparing it for the election fight. He recommends all MPfs to save themselves by joining another party. That other party, a totally new one and without clear agenda still last week, gains wide support in polls just based on its attractive leader. And all this play comes while the country is threatened by missiles and nuclear bombs by a menacing dictator near-by, a scare egged on voters by the Prime Minister himself and his unpredictable, noisy friend across the Pacific.
All this rush, scare and adulation for one woman! Yuriko Koike is the most talked about politician in the country and her newly named Kibo no To or "Party of Hope", still taking shape, already commands the second highest public support in several polls, double more than any other except the long ruling LDP. She is cool and determined, attractive and photogenic, a master of sound bytes who knows how to appeal to TV-viewers – and a shrewd populist who can beat Abe-san in his own game. Political weekly Shukan Bunshun put her expected Parliament seats last week already over 100, an incredible jump from zero and the first estimates at around 30.
Koike's learning years as "Koizumi child" under the auspicies of Japan's most skillful political operator this century come out in her performance again and again. Her speech at campaign launch reminded me also of Obama, even Trump with repeats of "change" and "reset Japan" and how the country must rise from today's social and cultural low to "Japan First" again. Deftly, the live-TV event was arranged at short notice just hours before Abe's dissolution speech at the Diet.
Like Koizumi's famous "vote for me to destroy LDP", there's not much that differentiate "Hope" from LDP except except Koike's two claims to beat Abe in his own populist game: abolish nuclear power by 2030 – hardly any running today and most reactors reaching their age limit by then anyway! - and again postpone the VAT tax rise now due in 2019. Abe didn't have guts to postpone it for third time, just promised to use most of the new revenue for badly needed child care, so why not outdo that and claim it's not needed at all? It should work for Koike now as it did for Abe already two times. "We will instead tax big companies for the huge amounts of cash they keep unused", she said. "Call it Yurinomics!" How striking – and not bad idea either!
In national policy, Koike-san supports Constitution change in line with Abe, much more than some parts of LDP. She says her party will be "reformist and conservative", a strange combination of words, but guess most voters think it means she is determined to really get through all those reforms that Abe keeps talking about but never realizes. At least, we can imagine Koike-san will be stronger in shaking up the geriatrics in corporate boards to empower women, better fix the child care problem and overrule the few senile smokers in Parliament on Japan Tobacco grants to enforce smoking ban in public places. Beyond that I'm not so sure of any difference; after all she comes from the very same LDP faction as Abe and rightist Nippon Kaigi, too.
That DPJ's self-destruction turned into a mass suicide on new party leader's order was bigger surprise than the success of Koike-san's long expected party launch. Can't think of any similar case in modern political history. The backgound is clear though: DPJ always was an artificial collection of two different people, labor unionists and ex-social democrats sitting together with city liberals who were all on line with LDP except that they did not like its pandering of farmers nor came from its political dynasties. The party's three years of catastrophic rule 2009-11 after lofty promises for "new Japan" and better life for all, was never
forgiven by voters and unable to come up with anything new, its support has been on continuous slide down ever since. The uncomfortable matrimony came to end once conservative Maehara won the leadership and saw that his side of the party has more in common with Koikefs party than with their own colleagues. "Hope" emerged just suitably as an acceptable alternative for them to land on; earlier they would have had to jump straight to LDP, the arch enemy. That would have been too embarrasing.
As Koike would not accept DPJ's "lefties" against the Constitution change, Edano-san, the loser in last month's leader vote, stood up to organize a new home for them under his tutelage. He seems to gather good support on internet as his group is now the only center-left alternative for those who don't want to go all the way to Communists. Yet, I don't expect his group of scrabs can keep too many of the old DPJ seats or hold much influence on national policies after election. Then again, there's two weeks to go still and, as said, that's a long time in Japan's politics.
All in all, October 22 is another useless election but it kicked in motion quite a shake-up in Japan's politics. Koike's quick move and high popularity must be a shock for Abe-san and whole LDP, but as a deft leader he has already declared that maintaining simple majority – equal to losing 16% of LDP seats! - would still be a "win" for the party. After all, Party of Hope and its newly joined ex-Democrats also support his pet target to change Constitution. Together with the always reliable ally Komeito, they should make the necessary 2/3 majority. It's another thing what each party would actually like to change.
Equally skillful tactician Koike will stick to her Tokyo job at this stage for safety's sake and take this election as just the first step on the way to her ultimate target: Prime Minister in 2020 when Abe can't lead LDP anymore. Whether her decision to "lead from behind" this time will cost her party votes will be seen when pallot boxes are counted in.
Undisturbed by all this political play, the economy and business keeps ramping up speed. Industry output rose more than expected and core inflation climbed already to 0,7% in August. BOJ's Tankan survey showed last week business confidence among big manufacturers is now at its highest since pre-crisis 2007. It's been on continuous rise already for 4 quarters and SME's are feeling pretty good now, too. Non-manufacturers (finance, service, retail etc) continue to maintain their high confidence as well. Job availability remains 30 year high and many companies are planning to invest into further automation as they see they can't secure enough staff for long. Some are closing shops or limiting hours in lack of staff. My neighboring Seven-Eleven is staffed by Chinese while Family Mart 300 meters away has one Iranian, one student and one elderly lady, clearly a newcomer to job market. The latter group is said to become more common as convenience stores in Tokyo are already 20% staffed by foreigners. Not only young mothers who need child care, but also older housewives with kids already grown up, want to return to working life if atttactive jobs are available.
My old economist friend Jesper Koll, always buyoant on Japan, wrote last week that "new middle class of confident consumers will rise in Japan next 3-5 years" as jobs have now started to shift from part-time to full-time after 20 years going the other direction. It's not only that incomes will rise as much as 50% when part-timers are paid better and become eligible for the generous bi-annual bonus, but the promise of firm employment and company pension will make people more confident spenders. With firm income they will also become accessible for credit card and to borrow big money from the bank to buy a home instead of renting, skimping and saving what ever you can for bad days ahead.
Some investors seem to believe this. After cashing out Japanese equities all through this year, foreign funds bought USD 19 billion worth Nikkei shares in just 10 days last month. Next equity Big Bang down the road is second step in Japan Post privatization: government expect to cash USD 11 billion for another 20% load of JP shares. It made about as much for the first shot two years ago. The sprawling giant with 24,000 branches for post delivery, banking and insurance has Japanese savings and assets worth USD 2,6 trillion under its guidance. The USD 4 billion loss it booked last year for overpriced overseas acquisition in Australia, its first since becoming a business, is peanuts for practice. There will be more to come.
In another show of Japan confidence, the consortium of Bain Capital, Apple, Dell and Korea's Hynix finally signed to pay USD 18 billion for 50% share of Toshiba memory chip unit even if they have to fish out the big money from their own pocket: the two government funds originaly planned to take on major share withdrew scared for loser Western Digital's pending litigation in California. The winners are confident they can beat it.
It's actually a US fund against another: Western CEO is a fund guy who got his job and sizeable pot of money by selling Sundisk, Toshiba's original partner, to Western for just USD 5 billion some years back. As true fund, Bain is neither planning to stay on for long, but has already announced it plans to take Toshiba Memory public in 2-3 years time. In another show of confidence to put its money on Japan, Bain finalized another USD 1,3 billion Japan deal for Asatsu, a Tokyo advertising company, on the side while working for the Toshiba deal.
In all this tumult comes a refreshing reminder of calm and culture in form of Nobel litetarure prize for Kazuo Ishiguro. It was a surprise and disapppointment again for all Haruki Murakami fans, but many say his style is very much the same. Born in Nagasaki, Ishiguro actually grew up British as family moved there when he was just 5 and writes in English, but all the same, his books are popular here and his win was celebrated as that of a local boy.
The next North Korean missile or nuclear bomb is expected on Oct 10 – a North Korean anniversary – or on Oct 18 to coincide with the opening of rare China Communist party conference. Mr.Xi is expected to ram there his own men to all key party posts and become an overpowering, everlasting ruler not seen since Mao. There's no love lost between Mr. Kim and Mr. Xi and embarrassing the haughty Big Brother at his important moment would be as much fun for Kim as sticking his finger up Mr. Trump's nose.
Foreign experts are projecting how many people will die in Tokyo if North nukes us in revenge if Trump nukes them first, but same experts tell us that in Washington all responsible key people understand there is no realistic "military solution" what ever their President tweets.
At least they say so.
Tokyo, October 10, 2017
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The columnist is a Japan veteran among Finnish business, our Chamber ex-president and today Member of the Board of Trustees.
After running a major Finnish industry company's Japan business for over 20 years, he is now Senior Associate in a strategic consulting company.