So Naoto Kan is a goner.
That’s the word in traumatized Tokyo. Japan’s prime minister had a once-in-a-lifetime chance to get his mojo back in the five weeks since a record earthquake and tsunami. He failed, and pundits wonder if he will make it to his first anniversary in office in June. Kan would be the fifth to go in five years.
Investors harbor a well-honed cynicism about Japanese leaders. They come, stick around for 12 months and they’re gone before markets or foreign governments get to know them. Japan’s revolving-door politics constantly sends new finance and foreign ministers to global summits. So much for relationship-building.
Kan’s predecessor lasted only nine months. Now Kan, who cheered markets with talk of reducing Japan’s massive debt, seems to be on the way out. And the question isn’t who’s next, but does it even matter? Not without sweeping changes to the political system. Barring that, Japan’s economic future is as cloudy as the status of the radiation leaks in Fukushima.
The focus is on how the March 11 quake, tsunami and unfolding nuclear-reactor drama will affect gross domestic product this year. That makes sense when the world’s third-biggest economy is suddenly in turmoil. We also must ponder where aging, deflation-plagued Japan will be five, 10 or 20 years from now.
And that’s what worries me. Japan faces a daunting Catch 22. It needs a strong, independent prime minister willing to wrest power from the entrenched bureaucrats who really run the nation. When we actually get one, the entire political establishment thwarts reform and works to oust that leader.
Kan is one of the few prime ministers in decades who didn’t descend from political royalty. His maverick streak emerged in the 1990s. As health minister, he forced bureaucrats to release documents exposing their role in allowing as many as 5,000 Japanese to contract HIV through contaminated blood products. Whistle-blowers are a rare thing in Japanese politics.
Investors were excited 10 months ago when Kan unveiled plans to yank power away from bureaucrats. We foreign journalists were overjoyed that Kan’s government moved to open press conferences to scribes outside Japan’s press-club system, which is more about control than transparency.
These steps alone border on revolutionary and go a long way toward explaining why Kan efforts to bring about change are failing. Vested interests rallied to save the status quo.
One of the most corrupting forces in government is the rise of shadowy fiefdoms. The longer one stays in a job, the bigger their influence becomes and the more skewed their incentives are toward personal success and avoiding change. An added problem in Japan is the offensive practice of public servants getting cushy gigs in industries they once oversaw.
The hapless Tokyo Electric Power Co. runs the leaking Fukushima Dai-Ichi nuclear power plant. You might expect there to be strict rules about former government officials gaining lucrative employment at Tepco after retirement -- you know, just to ensure that nuclear plants are actually being watched with some semblance of objectivity.
Nope, the practice that encourages bureaucrats to look out for their future employers, not the average Japanese household, is alive and well. It’s called amakudari, which means “descent from heaven.” Decades of doctored safety reports and underestimated risks at Tepco were made possible by bureaucrats looking the other way. Far from heaven, it’s made life a nightmare for farmers, fishermen and millions living around Fukushima.
Kan’s unsteady leadership these last five weeks sealed his political fate. Yet so did his failure to see through change, just as Japan’s last independent-minded leader Junichiro Koizumi fell far short in his pledge to shake things up. Koizumi was around for an extraordinarily long time, from 2001 to 2006, and had only marginal success. Though they hail from different parties and ideologies, both ran up against the same wall: Japan Inc.
We can obsess over who will succeed Kan. Many bets are on Katsuya Okada, secretary general of the ruling Democratic Party of Japan. Chief Cabinet Secretary Yukio Edano is another favorite, as are Finance Minister Yoshihiko Noda and National Strategy Minister Koichiro Gemba. Long shots include Renho Murata, a former model turned fiscal firebrand serving as conservation minister. She would be Japan’s first female premier.
Unless Kan’s successor is willing to attack the status quo, to disturb Tokyo’s established political order, it won’t much matter.
Standard & Poor’s regained a bit of its own mojo this week by threatening to take away the AAA credit rating for the U.S. Japan should brace for greater skepticism of its balance sheet as politicians add to a public debt that’s 200 percent of GDP.
In January, S&P lowered Japan’s rating to AA-, the same level as China’s. Japan’s forthcoming borrowing binge to rebuild the quake-devastated northeast will do nothing to make it more competitive or vibrant, and its rating may pay the price. Leaders change; Japan’s dismal debt-to-GDP ratio doesn’t.
To change course, the nation’s 127 million people require a liberated and visionary leader. They just need to find one and let him or her stay in the job for a while.
(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)
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