ANOTHER DISMAL ELECTION: IN JAPAN
http://online.wsj.com/article/SB10001424127887324352004578132492249786894.html?mod=opinion_newsreel
As giant problems in need of urgent solutions go, Japan is a thing of beauty. Its economy contracted by 3.5% on an annual basis from July to September, and slack exports and declining industrial production suggest another recession is coming. Demographic decline is well underway and Tokyo’s fiscal position—with debt roughly twice annual output—appears ever more precarious. So it’s a shame, as the Japanese head to the polls next month, that no candidate is offering even plausible solutions.
Start with Prime Minister Yoshihiko Noda, who staked his economic claim on his move to increase the consumption tax in a stab at fiscal consolidation. This is such an obviously bad idea that to secure passage Mr. Noda had to agree that the tax hike will take effect only if real growth reaches an unlikely 3%. The measure is still so unpopular that it set in motion the collapse of his government.
Mr. Noda’s other main “achievement” is a grudging agreement to reduce Japan’s dependence on nuclear power, in response to a public outcry over last year’s Fukushima disaster. Yet so far the government has shown no commitment to reforming the government-sanctioned, monopolistic regional utilities that charge some of the highest rates in the world.
No better is Shinzo Abe of the Liberal Democratic Party. The former Prime Minister promises a return to Japan’s Keynesian lost decades, with a pledge of 15 trillion yen ($181 billion) in spending stimulus over three years. While his proposal to cut the top corporate tax rate to 20% is a good move, so few Japanese companies currently pay tax due to long-time economic slack that the immediate positive effects would be limited.
Mr. Abe also opposes Japanese participation in multilateral Trans-Pacific Partnership trade talks involving the U.S., Canada and Southeast Asia. Such a deal is Japan’s best opportunity to open domestic markets to stimulative competition, especially in services. Yet Mr. Abe dismisses the idea because it is unpopular with rice farmers.
Meanwhile, the LDP supports the consumption tax on a conceptual level, even if party leaders were happy to criticize Mr. Noda for being foolish enough to impose it. Cynics suggests that Mr. Abe would use a Keynesian blowout to boost the appearance of growth to trigger the consumption-tax hike.
If there’s a silver lining, it’s that more promising politicians are waiting in the wings. Mayor Toru Hashimoto has risen to prominence with administrative reforms in Osaka and pledges of power devolution from Tokyo. The Your Party, though small, has emerged as a voice of sanity on some economic policies, such as its opposition to the consumption tax and support for freer Pacific trade. These efforts are just beginning, however, and voters can be forgiven for waiting to see how credible they turn out to be. It’s a bad sign that Mr. Hashimoto has allied himself with Tokyo Governor Shintaro Ishihara when their views diverge on trade and nuclear energy—raising the prospect that the Osakan’s party is more about personality than policies.
Japan needs wide-ranging reforms, from freer trade in goods to fewer restrictions on foreign companies to a utility overhaul. But given what the politicians are offering, it’s no surprise that voters are unlikely to hand a mandate to any party in this “none of the above” election.
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