Economic worries to play a key role in legislative vote

Japan goes to the polls on Sunday in legislative elections that could see the end of the ruling conservatives' almost unbroken hold on power since 1955 and the emergence of the Democratic Party of Japan – with a radical economic agenda.


On August 17 the Japanese government announced a small improvement in GDP – 0.9% in the second quarter.

Prime Minister Taro Aso, who is fighting for a new political mandate, was quick to attribute this meagre success to the financial stimulus packages put in place in October 2008 and April 2009.

Ten days later, unemployment figures were released. These proved to pour a sobering dose of cold water on Aso’s optimism. 5.7% of the working age population – 3.6 million people – is out of work. These are the worst unemployment figures in six years.

Japan holds legislative elections Sunday. If, as polls predict, Aso’s Liberal Democrat Party (LDP) loses its majority in the lower House of Representatives, many are prepared to blame the country’s catastrophic economic situation for the collapse of public confidence in the conservative LPD, which has dominated Japan's post-war political landscape.

The failure of liberal economics?

Despite the small rise in GDP in the second quarter, Japan is still experiencing its most difficult economic period since the Second World War.

Japanese public opinion has turned against the ultra-liberal economic policies of the LDP over the last 20 years, and particularly those of the Koizumi government of 2001-2006 which liberalised employment law, reduced social welfare and encouraged free market competition.

In 2008 more than one third of the Japanese workers were part-timers and temps, up from one fifth in 1990.

And it was these workers who were the first to suffer when industrial production went into freefall because of the global financial crisis.

Making politics "work for people's lives"

It is because of this dire economic climate that the main opposition party, the Democratic Party of Japan (DPJ), led by Yukio Hatoyama, may be in line for an historic victory (the LDP has been in almost uninterrupted power since 1955).

Behind the economic failures is discontent, and behind the discontent is a general feeling of anxiety and uncertainty.

The DPJ has been quick to tap into this anxiety, promising in their slogans to "make politics work for people's lives" in populist video broadcasts.

Beyond its slogans the DPJ is attacking the social inequality that has been exacerbated by the financial crisis.

"Our strategy is to start by improving household incomes, which in turn will help grow the economy," explains opposition frontrunner Yukio Hatamoya.

Policies include immediate increases in family benefits, making state secondary education entirely free, the abolition of motorway tolls (which are manifold and expensive in Japan) and to reduce fuel tax.

The DPJ's economic manifesto also provides for a minimum pension and a reduction in medical costs for the elderly, promises increases in minimum salaries for part-time workers and more job security, and extra unemployment benefits - especially for those whose payments have effectively ended.

How to finance such a project?

The DPJ's economic programme is estimated to cost a staggering 17 trillion yen (about 125 billion euros) a year.

Simply reducing wasteful spending will not be enough for a country which is the most heavily indebted in the world (around 200% of GDP in 2009).

Raising VAT (5%) could be one option, although the DPJ has promised to not even consider this option until at least 2013

The LDP argues that the DPJ's promises are "unrealistic" and virtually "socialist".

But its own promises - that the economy will be growing at 2% by 2010 and that household incomes will increase by a million yen (7,600 euros) in ten years -are not backed up by much concrete reasoning.

The LDP had been hoping that positive effects from four expensive financial stimulus packages would convince the Japanese public to keep them in power.

But with dire employment figures and despite the slight recent growth in the economy, the elections may have come too soon for the party and its policies.

Daily newsletterReceive essential international news every morning