IMD International

Japan’s parliamentary election results

IMD Professor Jean-Pierre Lehmann on the implications

December 17, 2012

The LDP, which won a resounding victory in the Japanese parliamentary elections on 16 December, is back. LDP stands for Liberal-Democratic-Party. The quip when I was living and working in Japan during the 1960s, '70s and into the '80s was that it was neither "liberal", nor "democratic", nor really a "party", but a loose coalition of rival factions bound together to keep the socialists out. These were the decades when the Japanese economic miracle was transformed into the Japanese economic "menace" for some and the Japanese economic "model" for others. The former elicited what was known as "Japan-bashing", the latter gave birth to the huge "learn from Japan" industry that developed in business schools and consultancies. There was no interest in Japanese politics which were seen as byzantine and boring. In any case, it was widely (not unjustifiably) believed that it was not the politicians who really ran Japan, but the bureaucrats, the famed "Japan, Inc".

Then in the early 1990s the Japanese economy tanked and entered its "lost decades" from which it has not yet exited. As this coincided with the phenomenal rise of China, interest in Japan evaporated; from "Japan-bashing" in the 1980s came "Japan-passing" in the '90s. The LDP, which basically held monopoly political power since the 1950s, was increasingly challenged and indeed had been out of office since 2009. In December 2012, however, one can say that not only is the LDP back, but Japan is back, albeit in a very different guise from that of earlier decades.

Since the early 1990s the Japanese economy has been in stagnation and was recently overtaken by China. In the 1980s, when the Japanese economy seemed to be growing on anabolic steroids, the consensus was that it would overtake the US and become number 1. In fact, not only did it not become number 1, it lost its number 2 position and now has been relegated to number 3. While Japan may be the "sick man" of the 21st century global economy, it should not be forgotten that it is a very, very rich sick man. The idea that Japan does not matter would be totally false. It matters a lot.

What is noteworthy about Japan now, however, is the emergence of politics, and perhaps more significantly, geopolitics as crucial driving forces. As Japan has become economically and socially depressed, politics have gained in stridency. Many pundits have commented on Japan's alleged drift to the right. This is wrong, it has always been to the right (on social, economic and political issues); the main political force has been the rise of extreme nationalism and what may be termed atavistic imperialism vis-à-vis its neighbours.

For a variety of reasons, which have mainly to do with realpolitik arising from the victory of the Chinese Communists in 1949, the outbreak of the Korean war the following year, and the spectre of the cold war and the Soviet threat, Japan was basically exculpated from its war responsibilities and guilt. By failing to prosecute the Emperor – in whose name the war had been fought and invasions carried out – the entire population of Japan was exonerated. In contrast to Germany, therefore, where there has been a complete discontinuity before and after World War Two, which allowed for the creation of the European Union, in Japan there has been a marked degree of continuity. Thus the future prime minister Abe Shinzo's grandfather was Kishi Nobusuke, who served in the wartime cabinet of General Tojo Hideki, was briefly imprisoned, then released, and proceeded to become prime minister from 1957 to 1960.

In the Japanese contemporary political landscape there are extreme nationalists, notably the former governor of Tokyo Ishihara Shintaro and the recently elected mayor of Osaka Hashimoto, there are nationalists, but there are no internationalists. Thus, while Abe is extreme because, to cite one example, he denies that the Japanese army engaged in sexual slavery during the war – the evidence for which is beyond any reasonable dispute – and other politicians may stay silent on the subject, none is going to stand up and say, yes, there was sexual slavery and we should express remorse. That would be political suicide. Japan's amnesia is deeply offensive to its neighbours, especially China and Korea.

In the meantime, there are very dangerous territorial disputes between Japan and, respectively, China and Korea. With China the dispute is over a number of islands located in the East China Sea called Diaoyu by the Chinese and Senkaku by the Japanese. The confrontation between the two countries has rapidly escalated to the point where war is not seen as an inevitable outcome, but certainly a not to be lightly dismissed scenario. With the Koreans the dispute is over what they term the Dokdo and the Japanese Takeshima. War between Japan and South Korea would seem unimaginable, not least because Seoul has other fish to fry with their neighbours to the north. The dispute, however, clearly contributes to the overall deterioration of the situation. More than the Middle East, the "Far East" (as it used to be called, i.e. East Asia) could be the hottest geopolitical spot of the future.

China, Japan and Korea are respectively the world's second, third and eleventh largest economic powers. They are also major trading powers and all engaged actively in the global supply chain. Many famous brand products, especially, but not exclusively, in telecommunications and electronics are composed of vital inputs from firms in all three countries. Indeed, business is alarmed at what is taking place and the impact it is having, but remains relatively impotent before the nationalist populist surge.

There has been leadership change recently in China – with Xi Yinping assuming the position of president – and now in Japan. While Xi seems to be making moderate noises on the domestic social, political and economic front, he has raised the tone in the confrontation with Japan. On 19 December a presidential election will be held in Korea. Both candidates, though to different degrees of intensity, have vowed they will "stand up" to Japan.

Should the situation badly deteriorate in East Asia the consequences will of course be regional, but also global. Even an unarmed conflict – say trade wars, following on from the skirmishes that have already been occurring – could have dramatic effects, far more so than the US fiscal cliff or the Eurozone kafuffle.

Global business leaders must integrate these dimensions in their perspectives and strategies in respect to the region. They must monitor developments closely. They must also ask what they might do as a means of contributing to a more "pacific" business environment. The biggest mistake would be to underestimate the gravity of the situation.

Jean-Pierre Lehmann is Emeritus Professor of International Political Economy at IMD.  

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