Another Election in Tokyo

Snap elections are a staple of parliamentary democracy, and every now and then, ruling politicians decide that an election is needed to ensure that they continue to have a popular mandate if they change course. Prime Minister Abe has just announced he will dissolve the Diet on November 21, and hold a snap election in December to gain the Japanese public’s endorsement of his leadership of Japan’s economic recovery. Prompted by worse than expected economic results for the third quarter of this year, Abe has decided to postpone a second tax hike that would have raised the consumption tax to 10 percent, and instead focus on stimulating Japan’s economy.

Over the past two years, the Abe Cabinet has championed an economic policy designed specifically to stimulate economic growth. Yet Japan’s economy is struggling. After an initial quarter of growth, two consecutive quarters of negative growth have brought the country again to the verge of recession - the third time in the past four years. The Abe Cabinet’s efforts to stimulate growth were undermined by a simultaneous effort to curb Japan’s debt, now estimated at 240 percent of GDP. Japan’s long term fiscal health was the focus of a revision of the Consumption Tax Act of 2012, adopted while the Mr. Abe’s Liberal Democratic Party (LDP) was in opposition but with their explicit support. This year, the Abe Cabinet began with the first of two tax hikes, raising it from 5 to 8 percent, and this fall, Mr. Abe was expected to approve a second increase from 8 to 10 percent. Today, stepping back from that second tax hike, Abe argued instead to postpone the tax and seek the public’s approval for his broader economic growth strategy. Yet Abe cannot avoid raising Japan’s taxes altogether, he can only postpone a difficult choice.

The LDP has been hurt before by popular fury over the consumption tax. Twice in the past the LDP has been punished for its decisions to raise this unpopular tax. A notable setback at the polls confronted former Prime Minister Nakasone in the upper house election of 1987, and former Prime Minister Ryutaro Hashimoto was greeted with a resounding “No, thank you,” on election day in 1998. Both elections were in the Upper House, however, and thus neither fundamentally challenged the ruling party’s ability to govern. Instead, both prime ministers – popular at the time – stepped down, and allowed someone else to take their place as party leader. Today, Abe announced that if his ruling coalition of the LDP and Komeito did not regain a majority in the Diet, he would step down.

At critical moments in the past, however, Abe’s predecessors have sought – and received – popular support for reforming Japan. The most recent example of that calculated risk was in the 2005 Lower House election when Junichiro Koizumi threw down the gauntlet against members of his own party who threatened his program of postal savings reform. Koizumi’s appeal to the Japanese public offered them a chance to weigh in on his vision for Japan’s future, and he artfully presented it as a choice between his vision and that of the Japanese bureaucrats. Today, Mr. Abe is asking the Japanese voter to approve of his decision to postpone the consumption tax, a policy that many in the Ministry of Finance have advocated for years. Abe’s announcement today emphasized his broader recipe for restoring Japan’s economic vitality – Abenomics, the defining priority of his cabinet. He too, like Koizumi before him, is presenting this election as a referendum on Japan’s future, and on his leadership of economic recovery.

Two factors could complicate Prime Minister Abe’s plan to appeal to the Japanese people for support for his economic policy vision. The first is that this will be an election driven by the consumption tax, but Mr. Abe is not saying that he will eliminate the 2 percent   hike mandated by the 2012 law. He is simply saying he wants to postpone it. For many economists, delaying the consumption tax hike is “sensible.” But the political question is whether or not he needs to dissolve the Diet to do it. This referendum will be about postponing a difficult decision rather than about offering an alternative option. In addition, as Abe pointed out today, the decision to raise Japan’s taxes was endorsed by his party while they were out of government, and his Cabinet implemented the tax hike after they had returned to power. Thus, this is not a policy that belongs to someone else, and in light of today’s economic numbers, Japan’s voters may feel that Abe and his party helped cause this dilemma rather than seeing him as part of the solution. Much will depend on how Japan’s voters view the current state of the economy and who is responsible for it. It will also depend on how Japan’s voters view the LDP’s ambitions.

Second, it is not clear that the ruling coalition will be in a better position to govern after election day  in December. Today, Mr. Abe’s party has a considerable majority in the Diet. The LDP alone has 294 seats, and with its coalition party, the Komeito, can muster a two-thirds super majority in the Lower House, making it easy to govern. A new election risks losing that advantage. So why not simply go back to the Diet with a new amendment to the existing legislation that postpones the tax hike? Here is where the rationale for an election seems less about economic policy and more about the LDP’s political future. An election that brings the LDP back with the same or even more seats in the Lower House will mean that Mr. Abe’s party will extend their time in office for another four years. Tactically, the current weakness of Japan’s opposition parties could allow the LDP to capitalize on the moment to prolong their time as ruling party of Japan. Even if Japanese voters see the LDP as responsible for the current state of Japan’s economy, the opposition parties will be hard pressed to persuade them to vote their way instead.

Calling an election now will put a broad array of other policy initiatives on hold for the remainder of 2014. Abe has been seen abroad as a decisive and energetic leader. His support rating has dipped of late to 55 percent, according to the Yomiuri Shimbun’s latest poll. Yet his popularity seems to be holding at levels that would make leaders in many democracies around the globe green with envy.

Popular sentiment in any democracy is rarely in favor of higher taxes, and in Japan, the latest polls show that over 80 percent of Japanese do not want another consumption tax increase. Who can blame them? The challenge for the ruling coalition, however, will be in presenting this election as a referendum on more than the consumption tax. The LDP and Komeito will need to go back to their constituencies and persuade the voters that this election, in fact, matters to their futures as much as it does to those in Tokyo who govern them.