Fukuda Replaces Abe as Japanese PM: A Return to Normalcy

Speaking just hours after Japanese Prime Minister Shinzo Abe’s stunning resignation, Professor Gerald Curtis described Abe’s move as “an unprecedented event in Japanese parliamentary democracy.”  

Before an audience of 175 at the Kellogg Center of the School of International and Public Affairs, Professor Curtis commented on Abe’s brief tenure as prime minister, the fate of the ruling Liberal Democratic Party (LDP), and the implications for economic reforms initiated by former Prime Minister Junichiro Koizumi. The event was cosponsored by the Center on Japanese Economy and Business, and the Weatherhead East Asian Institute.

Abe became prime minister on September 26, 2006, replacing the charismatic and popular Koizumi.  Despite Abe’s relative youth and inexperience, Koizumi endorsed him as the politician most likely to carry out his legacy of economic reform. Unable to handle the enormous pressures of the position, Abe abruptly resigned on September 12 after less than a year in office.

Many political observers expected Abe to step down following the party’s crushing defeat in the Upper House elections in July. The defeat was a result of what Professor Curtis calls the Japanese public’s “three nos”:  “no” to Abe’s priorities that favored ideological issues over pocketbook issues; “no” to Abe’s crisis management skills during a series of bureaucratic scandals; and “no” to the LDP’s economic reforms that came at the expense of the rural areas of the country. Nevertheless, Abe vowed to stay on, reshuffled his Cabinet, and set a goal of renewing the legislation that allows the Japanese military to provide support to U.S. military activities in Afghanistan. 

With Abe now gone, the fate of that legislation is in doubt, and the pace of economic reform is sure to slow. According to Professor Curtis, many outsiders overestimated the Japanese public’s willingness to embrace the economic reforms introduced by Koizumi.  “The public liked Koizumi personally, so they were willing to go along with his reforms, even if they were unsure about them.” However, once Koizumi stepped down as prime minister, he took with him the enthusiasm for reform. As his replacement, Abe simply did not have the charisma necessary to carry on Koizumi’s reform agenda. “Abe’s biggest failure was his inability to buy enough time to let the benefits of reform spread across the country,” Professor Curtis stated.

No one was happy about Abe’s abrupt resignation. For the opposition party, it removed an unpopular prime minister who was a convenient target. For the ruling LDP, it led to a fight for succession at a time when there was no consensus on who should take control of the party. And in the business and financial communities, it has led to questions about the government’s ability to carry out economic reforms.  Professor Curtis remarked, “It’s hard not to feel sorry for the man on a personal level, but people all over the country describe Abe’s action with the same word, musekinin—irresponsible.”

After a week of political negotiations, the ruling LDP selected an experienced politician and consensus-builder, Yasuo Fukuda, to replace Abe and lead the party.  Fukuda was sworn in as Japan’s new Prime Minister on Wednesday, September 26, 2007.  

In a private interview following Fukuda’s selection to head the party, Professor Curtis said that the LDP understands the discontent in Japanese society. “Fukuda’s selection as head of the LDP shows that the LDP gets it. The party understands that it has to listen to the people who haven’t benefited from Japan’s recent economic recovery.” Professor Curtis suggested that Fukuda will focus on pocketbook issues such as healthcare and pensions and will avoid the ideological issues that were favored by Abe. “Fukuda is in the mainstream of Japanese conservatism.  He will reestablish normalcy to Japanese politics.

”Professor Curtis believes that Fukuda’s leadership will benefit the Japanese economy.  The LDP’s usual strategy is to increase pork-barrel spending whenever its support wanes, but this time may be different.  Professor Curtis explained, “Right now the LDP is not throwing money at the problem because they know that no one wants to pay higher taxes for more public works projects.”  

It is also unlikely that the new government will backtrack on Koizumi’s economic reforms because everyone understands that the current economic recovery is driven by the private sector, not government spending. 

“Backtracking on reforms would mean more intrusion by the government into the economy, and nobody wants the government to be making those decisions anymore,” Professor Curtis suggested. “The Japanese business community likes him a lot because they want political stability, and they want the LDP in power.” 

And the long-term outlook for the Japanese economy?  “The problems in the Japanese economy won’t be solved in the short term by Fukuda or anyone else,” Professor Curtis stated. Because of Japan’s rapidly aging society, changes in the global economy, and the country’s strict regulatory regime, it is unlikely that the country will return to the high-growth era of the past. 

Professor Curtis continued, “Japan’s economy is tied to the economic prosperity of China and the U.S. because domestic demand is not a strong driver of the economy. However, Japan will benefit from its competitive advantage in areas such as quality and high technology. Going forward we won’t see the high growth rates of the past, but we can expect steady economy growth in the range of 2 per year.  In an economy as large as Japan’s, that’s a lot of money.”

An event report of this lecture is forthcoming. 

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