Can Anyone Govern Japan?

In office just one month so far, Japanese Prime Minister Naoto Kan has already messed up badly. The country is holding upper-house parliamentary elections on July 11, and Kan — who began his tenure with a relatively buoyant 60 percent approval rating — has managed to convince voters that his policies are as hapless and ad hoc as those of his predecessor, Yukio Hatoyama.

What’s happening to Japan is bigger than Kan the man. After a series of short-lived, ineffectual leaders, many are wondering if the country itself has become, in essence, ungovernable. Kan is an astute politician with considerable skills, and voters seem to like his tough-love message for kick-starting the economy. Many agree with him that the old policies of vast public-works spending and deregulation have not worked and have instead left the country saddled with debt amounting to a whopping 200 percent of the country’s annual GDP. But voters are still skeptical that Kan can make real change. And what it boils down to is a loss of faith in political leaders after two decades of recession and growing social malaise. In an atmosphere where leaders are expected to fail, can anyone run Japan?

Kan got off to a bad start with the electorate when he proposed raising comsumption taxes — rarely a smart political move. Yes, polls show that the public is ready for an increase in consumption taxes, and media editorials supported the idea. But when Kan outlined his proposal, calling for a doubling of the consumption tax from 5 to 10 percent, he got nailed. As the prime minister was dragged into a debate about the details of his plan, he backtracked and zigzagged, looking far too much like his aimless predecessor. Hatoyama met his downfall for exactly this sort of flip-flopping, over a plan to relocate the Futenma U.S. military base away from Okinawa — and just about everything else. Japanese voters are searching for a resolute leader in the mold of Junichiro Koizumi, prime minister from 2001 to 2006. So far, Kan looks like yet another waffler.

Japan’s leadership crisis couldn’t come at a more inopportune time. This election is going to be about bread-and-butter issues such as unstable jobs and declining household income. The ruling Democratic Party of Japan (DPJ) has drawn attention to the swelling ranks of the precariat — workers without secure jobs, decent wages, or benefits — who now make up 34 percent of the workforce. Unemployment, at 5.2 percent, is quite high by Japanese standards, where 2 percent is the usual benchmark. The DPJ argues that the government can best address this issue, channeling tax revenues into expanded social programs. The next two most popular parties, the Liberal Democratic Party (LDP), which dominated Japanese politics for more than five decades, and the upstart Your Party want the government to get out of the way — they argue that deregulation, more flexible labor laws, and lower corporate taxes will generate growth, profits, and better jobs.

Even if they are sympathetic to Kan’s agenda (and many are), voters have found it hard to ignore his party’s short record in power so far — which is abysmal. Since Hatoyama swept the LDP from power in September 2009, campaign-financing scandals have dogged leading DPJ figures, the U.S. alliance has frayed, and the party has yet to show any policy successes. There was a brief window after Hatoyama resigned in June for Kan to make a fresh start. He was the new face of the party, a social activist from a middle-class family who joked to reporters that he is a good debater thanks to constant bickering with his wife. He is known as Ira Ira Kan, a reference to his fiery temper, and unlike Hatoyama, he is a leader with a record of passion and toughness. And the initial signs were promising: He extended the olive branch to Washington over Okinawa and to the business community in Japan, trying to convince both that they can rely on the DPJ despite its previous stumbles. That’s where the good news ends, however. The tax gaffe sent his approval rating plummeting, deep-sixing any hopes that he would rise above the politics of the past.

Pollsters now expect the DPJ to lose seats in the Diet’s upper house on Sunday, where half of the 242 seats are up for grabs. The DPJ has 54 seats going into the vote and is aiming for 60, which would give it an outright majority. But given how things have been going of late, the party will be lucky even to hold onto its current number. That won’t necessarily be fatal: The party still holds a commanding majority in the more important lower house and can remain in power until 2013, but it will need to find a coalition partner to form a working majority. And that won’t be easy. The DPJ would like to form an alliance with Your Party, which shares the DPJ’s affinity for budget austerity, but its leader, Yoshimi Watanabe, has repeatedly rejected suggestions to that effect. So whatever coalition does result will be fraught by awkward compromises and policy paralysis. If the DPJ does badly enough, winning less than 50 seats, the scandal-tainted Ichiro Ozawa, who was forced to relinquish his previous role as DPJ secretary-general in June, might try to unseat Kan in the party leadership contest slated for September. That would unravel Japan’s ongoing political realignment, and the leadership crisis will intensify.

Foreign relations are another stumbling block. After Sunday’s election, the government will continue nurturing better relations with China, despite a variety of festering issues such as disputed gas fields, overlapping territorial claims, food safety, transborder pollution, and China’s relentless military buildup, one conducted in the absence of reassuring transparency.

But the DPJ’s biggest problems are with Washington, which held firm on a 2006 deal between the United States and Japan over Futenma. Hatoyama had pledged in his campaign to relocate the base, but backed down under intense U.S. pressure. Okinawans felt betrayed, and the reversal exposed the prime minister as feckless, precipitating his sudden downfall in June.

Kan has sought to defuse tension by saying that he will abide by the 2006 agreement. But anger over the DPJ’s backtracking and ineffectual leadership has undermined the party’s credibility. Barack Obama will visit Japan while Okinawa has gubernatorial elections in November, raising the risk that the U.S. president will get embroiled in Japan’s increasingly lively domestic politics.

And lively they are indeed. Voters in Japan were once loyal and predictable, keeping the LDP in power for more than 50 years. But now that they have thrown the bums out of office, they are feeling more feisty and ready to do so again. In the last few elections, voters have swung dramatically to the party that convinced them it was the party of reform. And each time, their expectations have been crushed. As Japan enters its third decade of stagnation, the public is desperate for far more drastic reforms than any politician is offering them.

Will Kan at last be the man whom Japan is longing for? The prospect of a hung parliament and a fractious coalition certainly doesn’t bode well. The DPJ won’t have to hold Diet elections again until 2013, leaving a painfully long time for Japan’s massive fiscal problems and economic stagnation to fester. Yes, the DPJ inherited this mess, but it now "owns" the economy, one that China is set to overtake sometime later this year — a poignant reminder of how fast and far Japan is slipping. Here’s hoping that Kan can be the one to pull the country back from the brink.