After narrowly escaping a vote of no confidence last month with many members of his Liberal Democratic Party threatening to or actually voting against him, Prime Minister Yoshiro Mori is now trying to stock a streamlined government with loyalists. As of Jan. 1, Japan's ministries will shrink from 22 to 13, but more slots for political appointees will also be reserved, a change that will likely reduce the influence of Japan's insular civil service.
Mori's weakened position combined with his divided party will not likely bode well for the 1996 auto export agreement with the United States. U.S. auto companies and some politicians have quietly tried to renew the agreement pushing Tokyo to make further concessions on opening up Japan's market. But Mori up to now has stated that there is no reason to reopen that sticky question pointing to the improved market position of American car companies in his country.
Even if the prime minister wanted to make these changes, it is unlikely he will have the political capital to reopen the pact.
The former deputy chief of mission for the American Embassy in Japan, William Breer, said in an interview Monday, "The Japanese are getting tired of all these agreements that obligate them to do things the Americans wanted." He added that "making big decisions is not going to get easier with a weaker Mori."
One problem for Mori is that next year Japan will vote for members of the Parliament's upper house. There is a good chance the LDP will want to get rid of Mori before the election, which will be critical if the LDP wants to regain a majority in Japan's legislative branch. The LDP controls only 233 of the Parliament's 480 seats.
"This is a problem for Mori because the country faces an election for the upper house. The LDP will lose more seats than otherwise if he is still in power," said Ed Lincoln, an economist at the Brookings Institution and a former special adviser to U.S. Ambassador Walter Mondale in Japan. Breer gives Mori three months in power.
Mori's tenuous political footing will also not bode well for furthering Japanese banking reforms. In 1998, Japan finally passed legislation that allowed for some government bailouts of failing banks. But so far, Japan has done very little to enforce the new regulations, with many bad loans unresolved. The issue is particularly crucial to American financial interests, who blamed Japan's loose banking laws on the capital flight from Southeast Asia in the mid-'90s.
"A political situation that remains muddled is not one where this is going to move forward," Lincoln said. "It means politicians who are opposed to cleaning up the financial sector are still there." Rigorous enforcement of the banking reforms would mean shutting down bad banks and forcing those banks that survive to collect on back debts, according to Lincoln.
Breer put it this way: "Reforming the banking system is almost at a standstill. The Mori establishment looks at reform and sees what a gargantuan task it is and how disruptive it can be, and nothing gets done."
On the bright side, Lincoln says eventually a streamlined Japanese government will be better equipped to reform the banks, once a new government comes into power. The reorganization will also mean the number of political appointees in each foreign ministry will increase and political appointees overall will go up from 40 to 60. "The hope is it will mean more political direction over the bureaucracy, and this should bode well for the banking issue," Lincoln said.
Copyright 2000 by United Press International.
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