Domestic Politics

Local Elections

Campaigning for next months local elections began in late March. Voting in the campaigns to elect Prefectural Governors, City Mayors and Local Assembly members ? known as the Super April elections because of the unusually large number of positions at stake- will be held on April 13 and 27. Forty-six candidates are contesting the eleven Prefectural races. Only eighteen are backed by national parties represented in the diet, substantially down on previous campaigns, and several of those who were backed by parties last time have decided to run as independents. Analysts say that this reflects the distrust that many people have for political parties at the national level. Though local issues are expected to predominate (especially public works spending which a reported 70% of people oppose) the faltering economy and the Koizumi government's support for the war against Iraq are also expected to emerge as topics.

In Tokyo the outspoken governor Ishihara Shintaro (70) is seeking his second term. In the smallest field ever to contest the capital's governorship he will be opposed by Higuchi Keiko (70), a Professor at Tokyo Kasei University and an expert on social welfare, and Wakabayashi Yoshihara (52), chair of the Japan Communist Party's Tokyo Metropolitan Committee. Ishihara is seen as a heavy favorite to win the April 13 vote despite his history of offending large sections of the population of the city he represents. In 2001 he denounced elderly women as 'the biggest obstacle to the progress of civilization' and called their existence 'pointless'. A year earlier he had told Self-Defence Force soldiers that one of their duties in the aftermath of an earthquake in Tokyo might be to shoot rioting foreigners. Many thousands of Korean and Chinese residents were murdered after an earthquake in 1923 simply because of their ethnicity. Ishihara has achieved some success with his initiatives to reduce Tokyo's budget deficit and to limit the number of diesel vehicles without emission control technology but he has also faced setbacks. His controversial measure to tax the profits of banks operating in Tokyo was overturned by the Tokyo High Court in January and the Metropolitan Government was forced to return the money it had collected in FY2001 and FY2000. Ishihara is backed by the LDP and the New Komeito Party. His chief opponent, Higuchi Keiko, is running as an independent but has the support of the Democratic Party of Japan leadership, although the party's Metropolitan Assembly members are divided. Higuchi has criticized Ishihara's style of government accusing him of consulting with only a small number of people before making policy decisions and, at the press conference to announce her candidacy, denounced him as an 'old militarist' for his support for the war in Iraq and Japan's re-armament. Higuchi has promised to focus on welfare issues and improving quality of life for Tokyo's inhabitants. Mr. Ishihara has been quoted as saying that welfare spending is a luxury that Tokyo cannot afford. Wakabayashi is the first internal candidate the JCP has fielded in the Tokyo race. Previously it had backed independent candidates but was unable this time to find any whose platform it could support. The Communist candidate has attacked Mr. Ishihara for his support for the war and his anti-welfare policies and also criticized Higuchi for her backing by the DPJ. He said she would not be able to offer a new agenda for Tokyo.

Although the rejection of party support by many gubernatorial candidates suggests that election results will not overly affect national politics the results could have important consequences for the ruling coalition and the largest opposition party the DPJ. The results in the Kanagawa and Hokkaido races where LDP and DPJ candidates are in direct opposition will show much about how opinion is prevailing. They may give some clue as to whether the Prime Minister's support of the war in Iraq in teeth of public opposition has cost his coalition support, while for Kan Naoto of the DPJ success for candidates backed by his party could go some way to healing the wounds inflicted by a divisive leadership campaign in December 2002.

Political Scandal

Two lawmakers from the ruling coalition, Agriculture Minister Oshima Tadamori and Lower House Health, Labor and Welfare Committee Chair Sakai Takanori, were involved in financial scandals that resulted in their resignation and indictment respectively. Oshima resigned his ministerial post on the 30th after coming under heavy opposition pressure. Allegations that a former aide of his had solicited and received bribes from construction and real estate companies had dogged the minister since his appointment in September 2002. Passage of the FY2003 budget had been briefly held up in the Lower House earlier in the month when opposition lawmakers sought to question the minister further regarding the matters. After submitting a letter of resignation to Prime Minister Koizumi Oshima addressed a press conference. Explaining his timing the former minister said that the passage of the budget on the 28th had been the trigger and that he deeply regretted that the Lower House had had so much of its time taken up debating the allegations of financial impropriety. He said in a statement that he is 'a person who (has) said that politicians bear responsibility for supervising their aides'. Oshima himself was not named as a major suspect in the solicitation of bribes but was heavily criticized for not overseeing his staff strictly. He was elected to the Diet in 1983 and had previously held the positions of Deputy Chief Cabinet Secretary, Education Minister and Environment Minister. He is the first minister to be forced from office due to a financial scandal in the Koizumi administration.

LDP Diet member Takai Sakanori was stripped of immunity from prosecution, expelled from the LDP and then subsequently arrested on the 7th. The politician was alleged to have infringed the Political Funds Control Law which stipulates that all donations received by Diet members over the sum of ¥50,000 per year must be reported. Mr Takanori was indicted on charges of concealing over ¥160m in donations later in the month. Two of his aides had been earlier charged for similar offenses. The money is alleged to have been donated by a recruitment agency and a mortage securities firm over a five year period from 1997. The close links between lawmakers, companies and bureaucrats have been responsible for a number of similar financial scandals in the past. On the 4th Ezoe Hiromasa, former Chairman of the Recruit group of companies, was given a suspended sentence for his part in a bribery scandal that erupted in 1988. Mr Ezoe was convicted of giving ministers and officials of Nippon Telegraph and Telephone Corp. shares in his Recruit Cosmos Group whose value subsequently rose with the flotation of the company. Mr. Ezoe denied he had attempted to bribe these officials but was found guilty by the court. The Recruit Cosmos scandal resulted in the fall of the government of Takeshita Noboru in 1989, the same year Mr. Ezoe's trial began.

Other Issues

MARCH 3rd Six JCO Co. officials were given suspended sentences by the Mito District Court for violating the Nuclear Reactor, Nuclear Fuel and Nuclear Source Material Regulation Law, which resulted in Japan's worst nuclear power accident. Two people died and six hundred and sixty three were exposed to radiation when workers inadvertently set off a chain reaction lasting 20 hours while filling a processing tank with uranium solution at a nuclear facility in Tokai, Ibaraki. The six were found guilty of devising and implementing new processing procedures that were not approved by government oversight committees.

MARCH 3rd The Times of London quoted an unnamed 'senior Imperial Palace source' as saying that the court had been studying changing the law so that Princess Aiko could succeed her father, Crown Prince Naruhito, as sovereign. The source claimed that the court had been led to look into this discreetly by the lack of male heirs. No male child has been born to the imperial family in over thirty years.

MARCH 13th A plan to allow graduates of sixteen foreign high schools offering western patterned education to automatically take university entrance exams was put on hold after schools catering to ethnic Chinese and Korean students protested that it discriminated against their graduates.

MARCH 20th The Central Council for Education, a government appointed panel, submitted a report proposing the first amendments to Japan's Basic Law on Education since its adoption in 1947. The Council said that 'basic principles' such as a 'love of country and hometown' and 'morality' should be emphasized in schools. The panel also said that the aim of education should be 'to nurture sturdy and compassionate Japanese who will pioneer the twenty-First Century'.

Business and Finance

Bank of Japan

On March 20th the five year term of Hayami Masaru as governor of the Bank of Japan came to an end. He was replaced by Fukui Toshihiko, a former vice-governor of the bank and director of Fuji Research Institute. Mr. Fukui and his two deputies, Muto Toshiro and Iwata Kazumasa, met with Prime Minister Koizumi on the 14th and pledged to adopt a unified posture with the government in the fight over deflation. On the 27th, at an emergency meeting of the Monetary Policy Board the banks governors agreed unanimously to keep their policy unchanged. In another meeting later the same day the board voted 7-2 in favor of expanding the purchase of equities held by private banks in a bid to boost liquidity in the banking system and offset the market instability generated by the war in Iraq. The Bank expanded the value of the equities it was prepared to buy from ¥2trillion to ¥3trillion. The new governor was congratulated by members of the ruling coalition who had previously called for expanded stock purchases for his prompt response to the declining economic situation.

The seeming unity of purpose between the government and BoJ in reacting to the nations economic problems comes after a period in which the bank and the Finance Ministry often seemed to be at loggerheads over the correct approach to take on issues such as deflation. Former governor Hayami's fractious relationship with the ministry and the government cost him and the bank a good deal of credibility during his term. Despite the independences granted to the bank in 1998 political pressure forced it to take a number of steps that it had previously said would be ineffective in aiding the economy, such as the adoption of a zero interest rate policy in February 1999 and the purchase of equities from banks in September 2002. Humiliatingly the bank was also forced to revert to the zero interest rate policy less than a year after it had suspended it in the face of opposition from the Finance Ministry in 2001. The bank, and the governor in particular, was a frequent target of politician's complaints that it would not take radical steps to address the banking crisis and the continuous fall of consumer prices. The newly appointed vice governors both have close relationships with Nagatacho and the Finance Ministry and have in the past favored easing the money supply in a bid to beat the deflationary cycle that Japan is trapped in. Mr. Fukui's swift action on expanded equity purchases have pleased politicians but there remains scope for a clash between the two sides at a later date. Mr. Fukui has stated that purchases of equities are 'not a magic wand' and that he feels that ¥3trillion is the highest he can envisage the upper limit for purchases rising to. With the Nikkei continuing to decline to lows it has not seen in two decades Mr. Fukui might face calls for the bank to break that limit from lawmakers. He might also clash with Takanaka Heizo, the Financial Services Minister. Mr. Takanaka is said to favor inflation targeting as a means of fighting deflation. The board of the BoJ is more cautious on that issue, but as Japan's four year and counting decline in consumer prices continues calls for an adoption of the policy may become louder from the Finance Ministry and the politicians.

Other Issues

MARCH 1st Daiwa Bank and Asahi Bank integrated their operations to form Resona Bank and Saitama Resona Bank. The new companies had over thirteen thousand employees and deposits of nearly ¥30 trillion. A celebration of the launch of the new companies was marred by technical problems with some ATM machines in western Japan.

MARCH 1st Softbank announced that it would sell forty thousand shares in Yahoo Japan for ¥81.6 billion. The sale reduces Softbank's stake in Yahoo Japan to 42%. This is the latest in a line of sales by Softbank, which is using the revenue generated to fund the expansion of its broadband network business.

MARCH 6th Kurodo Haruhiko was appointed as a special advisor to the cabinet on economic matters. Mr. Kuroda is a proponent of monetary easing and advocates setting a target for inflation, a move the BoJ has so far resisted. Mr. Kuroda was a former Vice-Minister for International Affairs at the Finance Ministry.

MARCH 11th Mizuho Financial Group announced that it would increase its capital base by issuing ¥1.2 trillion worth of preferred shares to domestic and overseas corporations. The group had initially intended to issue only ¥1 trillion worth of shares but stronger than expected demand amongst Japanese companies persuaded them to increase the amount. The move amounts to the largest ever capital hike in one offering by a Japanese financial company.

MARCH 11th The Nikkei Stock Index closed below 8,000 for the first time in twenty years when it finished the day at 7,988.85.

MARCH 13th The Financial Services Agency announced six new measures including lifting the limit on companies re-purchase of their own shares and closer monitoring of suspected illegal trading in an attempt to halt the decline of the Nikkei Index. Critics contended that the steps would have little effect.

MARCH 14th The special advisor to the Cabinet on economic affairs Kuroda Haruhiko met with Federal Reserve Chairman Alan Greenspan to discuss the state of the global economy.

MARCH 15th Troubled supermarket chain Daiei was reported to be asking one of it's major creditor banks to provide ¥40billion in financial assistance to allow it to slash the heavy interest bearing debt associated with its interest in the Fukuoka Daiei Hawks baseball team.

MARCH 19th Taiyo Mutual Life Insurance, the eight largest insurance company in Japan, made an initial public offering of one million shares. The sale, worth a reported ¥75.3 billion, was the largest so far this year.

MARCH 24th Okinawa was announced as the host site for the 2005 Inter-American Development Bank meeting.

MARCH 25th Mitsubishi Motors announced that it would abandon seniority based pay and switch to a performance based system for all staff from April. Performance based pay was introduced for management in April 2002.

MARCH 27th Sony Corporation called off talks with Dutch insurance firm Aegon NV over the sale of its life insurance unit.

MARCH 27th UFJ Holdings, one of Japan's largest banking groups announced it would post a loss of ¥650 billion for the fiscal year, reversing an earlier forecast that it would post a ¥70 billion profit.

Foreign Politics

Iraq

The threat of war in the middle east brought hundreds of thousands of protestors to the streets, caused ruling coalition members to denounce the unilateralism of the Bush administration and led, most surprisingly of all perhaps, to Prime Minister Koizumi expressing strong support for US policy in Iraq. Mr. Koizumi's backing upset an anti-war public and has raised questions about whether Japan's UN centered diplomacy has become a thing of the past.

Initially the government remained vague on its position on the Middle East; supporting a second UN resolution and refusing to answer questions about 'hypothetical' situations regarding action taken without such backing. The Prime Minister worked hard to secure a diplomatic solution, dispatching his own envoy, Senior Vice Foreign Minister Motegi Toshimitsu, to Iraq to urge compliance. He is also rumored to have lobbied the President of Chile, one of the key undecided Security Council nations, on behalf of the US/UK position as set out in its draft second resolution. Mr. Motegi's mission at least was unsuccessful, as he was brusquely dismissed by the Iraqi Foreign Minister Tariq Aziz and accused of simply repeating Washington's position. The effect of Mr. Koizumi's efforts was never tested as on the 18th of March the US/UK/Spanish document was withdrawn. The Prime Minister met with reporters at his official residence later the same day and told them that the US had taken great steps to rally world opinion but that in the end action possible without a new resolution on the basis of existing resolutions 678, 687 and 1441 which all dealt with the disarmament of Iraq. Revealing some of the motives behind his move towards supporting the move to war Mr. Koizumi said that 'Japan has enjoyed peace for more than fifty years…thanks to the Japan-US alliance. It is not in our interests to hurt the credibility of the alliance'. To a great degree the Prime Minister's freedom of action over Iraq is constrained by the threat posed by North Korea. Acutely conscious of the need for US support in dealing with Pyongyang and cogniscent of the reaction of the Bush administration to recalcitrant allies like France and Germany Mr. Koizumi felt he had little choice but to offer his support to Washington. Although his government worked to achieve a solution through expanded inspections and then attempted to get UN backing for military action, when the decision was made to go to war Tokyo was compelled to fall into line behind the coalition. After the outbreak of hostilities on the 24th Mr. Koizumi said on television that the alliance with the US and multilateral diplomacy were of equal importance in countering threats to Japan's security and that he still believed that the UN had an important role to play, especially in the rebuilding of Iraq after the war was over. Constitutional constraints as well as public opposition prevent Japan from contributing combat or even support forces to the coalition but the government has pledged over ¥13.5 billion in aid for surrounding countries. Humanitarian aid such tents, sheets and bedding have also been sent to Jordan for distribution to refugees. The war, and Mr. Koizumi's position regarding it, was condemned by the opposition parties. The Japanese Communist Party denounced the government for meekly following the US line in a 'lawless and barbarous' war while the DPJ said that Japan should not support the position of Washington and London when they had started hostilities without a new UN resolution.

Japan's contribution in the post-war policing and rebuilding of Iraq was also the cause of division and confusion within the ruling coalition. LDP Secretary General Yamasaki Taku said the bills dealing with Japan's role in the reconstruction could be submitted to the Diet by as soon as May and also noted that Tokyo could shoulder up to 20% of the cost of the re-building. Former Prime Minister Hashimoto Ryutaro, a rival faction leader within the LDP, indirectly criticized Yamasaki saying that it was still far too early to think about Japan's role. Despite the uncertainty everyone seemed to be in agreement on the need for a new UN resolution before the SDF could be dispatched. Both Secretary General Yamasaki and Foreign Minister Kawaguchi have stated that this is a prerequisite and the Prime Minister himself confirmed it at a news conference on the 28th. President Bush telephoned the Prime Minister the day after fighting broke out to thank him for his 'courage and friendship' so it seems as if the Prime Minister's strategy has paid off in terms of avoiding the condemnation Japan suffered for it's non-participation in the last Gulf War. Condemnation of a very different kind may be Mr. Koizumi's reward at the polls the next time the Japanese public get a chance to exercise their vote, and it is by no means sure that unwavering support will bring US agreement on the correct way to deal with North Korea. There already exists a split between Washington and Seoul over the refusal of the former to directly engage with Kim Jong Il. Japan's support for a military solution in the Middle East does not mean support for the use of force in North East Asia. A US administration, emboldened by victory over President Hussein, pursuing a hawkish policy with Pyongyang would be very unsettling for the officials in Nagatacho.

Other Issues

MARCH 1st Deputy Chief Cabinet Secretary Abe Shinzo criticized France over its opposition to the United States. He said that inspections were 'made possible only because two hundred thousand US troops are stationed around Iraq. To have there stay for months longer, is France prepared to bear the costs during that period?'

MARCH 2nd Six thousand anti-war demonstrators gather in Hiroshima.

MARCH 3rd Defense Agency chief Ishiba Shigeru told a lower house budget committee that Japan currently has no means of stopping a missile strike on one of it's cities and the role of the SDF would be limited to rescuing the injured after any attack took place.

MARCH 1st-3rd President Fidel Castro of Cuba visited Japan. He called for expanded trade and investment in his country and offered to use whatever influence he had in North Korea, but warned that he had not actually had any contact with Pyongyang in almost nine years. The President also laid a wreath at the Atomic Bomb Memorial in Hiroshima before flying off to attend the non-aligned summit.

MARCH 5th Speaker of the House of Representatives Dennis Hastert met with four relatives of the Japanese citizens abducted to North Korea in Washington.

MARCH 7th The draft of the annual 'Blue Book', a Foreign Ministry report detailing Japan's international policies was submitted to the ruling coalition for approval. The report calls for international co-operation in tackling security issues posed by states such as Iraq and North Korea.

MARCH 8th The government reported that UN Secretary-General Kofi Annan had called on Japan to provide food aid to North Korea. Japan suspended its deliveries to Pyongyang when talks on normalization broke down in October 2002.

MARCH 10th North Korea test fired a second anti-ship missile in two weeks when it launched a Chinese designed 'Silkworm' from Sisang-Ri on the North east coast. Chief Cabinet Secretary Fukuda Yasuo said he was aware of the likelihood of the test and that he was not alarmed by it.

March 13th The Yomiuri Shimbun reported that the government had received intelligence that North Korea was preparing to test launch a ballistic Nodong missile with the capability of hitting Japan. It said that drums of liquid fuel had been moved to test sites. Chief Cabinet Secretary Fukuda refused to confirm it but said that the Aegis destroyer Myoko would be dispatched to the Sea of Japan to observe activities there. North Korea reportedly told the Japanese government that it would freeze ballistic missile tests until the end of 2003..

MARCH 14th Finance Minister Shiokawa Masajuro announced that the government would consider amending the ODA charter to incorporate a clause stipulating that consideration must be given to Japan's national interests when decisions are made on funding projects. On the 28th the Japanese government was named as a co-defendant in a suit brought by over eight thousand residents of the Indonesian island of Sumatra who allege that a dam built with ODA funding has damaged their livelihoods by destroying lands and crops..

MARCH 15th Prime Minister Koizumi sent a message of congratulation to the new Chinese President Hu Jintao, the new Vice President Zhen Qinghong and the new Chairman of the National Peoples Congress, Wu Bangguo. Prime Minister Koizumi expressed the hope that the two countries could continue to build friendly relations. This year marks the 25th anniversary of the 1978 peace treaty between the two countries. Foreign Minister Kawaguchi announced she would go to China in mid ?April to urge the new leadership to use their influence on North Korea.

MARCH 16-24th The International Water Forum of the World Water Council was held in Kyoto. The Forum discussions were bitterly divided between NGO's who opposed the privatization of water resources and those government and private industry groups who contend that the involvement of the private sector is the most efficient way of providing fresh water. The body was hampered in its deliberations by the outbreak of war which meant many delegates could not attend or had to leave early and Japan's leadership was criticized as weak many of the NGO representatives.

MARCH 18th Peace talks between the Sri Lankan government and the Liberation Tigers of Tamil Eelam got under way in the resort town of Hakone. The talks will deal with the resettlement of refugees, ongoing truce violations and new revenue sharing arrangement. The summit marks a new Japanese approach to the situation in Sri Lanka. Previously it had taken a more hands off approach, refusing to give aid to affected areas until a settlement had been reached.

MARCH 20th Four North Koreans who had sought asylum in a Japanese school in Beijing in February were transported to Seoul.

MARCH 24th Kan Naoto, President of the DPJ, said that he believed that Japan should give serious consideration to introducing some form of missile defense to counter the North Korean threat. Kan's comments do not reflect official DPJ policy but do show a reversal of his earlier position, which questioned the project on the grounds of technical feasibility.

MARCH 25th Foreign Minister Kawaguchi said that Japan would provide $22.62 million for the reconstruction of Afghanistan. The majority of funds will be allocated to the activities of the UN High Commission for Refugees.

MARCH 26th The government announced it had no plans to expel Iraqi diplomats in the country despite a request from the United States.

MARCH 28th An HIIA rocket carrying Japan's first spy satellites blasted off from Tanegashima Space Center. The optical sensor and synthetic aperture satellites that it carried were the first of four planned to be deployed by the summer at an estimated cost of ¥250 billion. The satellites can resolve objects of up to a meter and are likely to target North Korean military facilities such as those at Yangbyon, Kumchang-ri, Taepodong and Nodong. Japan's adoption of intelligence gathering satellites came in December 1998, four months after North Korea had launched a ballistic missile that entered Japanese airspace. The units will be fully under the jurisdiction of Tokyo and will be able to respond within three or four days to a request from the government. All four units will be operated by the Cabinet Satellite Intelligence Center.

MARCH 30th Two government aircraft usually used for VIP transport flew to Jordan carrying humanitarian aid for refugees.