Monday, Jan. 8, 2007

By KEIZO NABESHIMA

Prime Minister Shinzo Abe is under intense pressure to overhaul his administration after two scandal-tainted aides were forced to resign in December. The trouble came only three months after he took office.

Abe's influence could decline sharply, and the reform plans he inherited from predecessor Junichiro Koizumi could stall. His fate hangs in the balance.

Like Koizumi, Abe has tried to run his administration under the leadership of the Cabinet office. However, that strategy failed when the ruling Liberal Democratic Party overrode the Cabinet office and decided to allow 11 rebels to rejoin the party after they had been ousted for voting against Koizumi's postal-reform legislation last year. The rebels' reinstatement, which made irrelevant the Lower House election over postal reform, gave the impression that the LDP had returned to its old form.

The LDP also overruled the Cabinet office in watering down a plan for diverting road-specific tax revenues to the general account.

In both cases, Abe failed to take the leadership in pushing reform strategies. The Koizumi-introduced politics of having the Cabinet office take the lead is becoming undermined.

Masaaki Honma, who resigned as chairman of the government's Tax Commission, embodied Abe's "high-tide" strategy, which basically calls for economic expansion to increase tax revenues and improve fiscal health.

The commission's report on fiscal 2007 tax reform, published Dec. 1, called for corporate tax cuts to reinvigorate the economy but made no mention of the focal issue, a raise in the consumption tax. On the other hand, the LDP's Research Commission on the Tax System favors raising the consumption tax to help balance the budget. The LDP and the Cabinet office are divided by sharp policy differences.

The feud reportedly prompted LDP officials to demand the ouster of Honma from the government commission. The resignation of Honma, who was crucial to the government's reform strategy, was a serious blow to Abe.

Six days after Honma resigned, Genichiro Sata stepped down as state minister for administrative reform because of improper handling of political funds. There were widespread views in the LDP that Sata had been awarded his post for his efforts in uniting middle-echelon LDP lawmakers to support Abe in the LDP presidential election last year. Abe appointed many of his cronies to LDP, ministerial and Cabinet-office posts. His appointments were not based on abilities.

The post of state minister for administrative reform is very important, as it is responsible for reforming the bureaucracy and regulations. Abe is likely to face tough questioning from opposition forces when the ordinary Diet convenes late this month.

Abe created the Education Resuscitation Council, which reports directly to the prime minister. However, the council is in serious confusion after private-sector members criticized the council's first draft report. Critics said the report was compiled at the initiative of bureaucrats who favored LDP lawmakers representing special education interests. The confusion surfaced because Abe failed to exercise leadership over the problem.

Abe has failed to explain to the public many crucial issues, and this has caused the popularity ratings of his Cabinet to drop sharply. The administration lacks an engine necessary for take-off.

Former Prime Minister Koizumi took away the power of personnel appointments from LDP factions and the policymaking power from the ruling coalition, and had the Cabinet office take over the mechanism for implementing reform. Still, Koizumi's reform ended half-finished, and important tasks, such as the reorganization of government-backed financial institutions, were left for the Abe administration to finish.

There is the perception that the Cabinet office's superiority over the LDP during the Koizumi years is beginning to crumble under the Abe administration. Abe lacks Koizumi's charisma, and the LDP appears to view Abe as "easy to deal with." Lawmakers representing special interests and bureaucrats are regaining the power they once had.

The government draft for the fiscal 2007 budget calls for a 1.3 percent increase in general-account, policy-related expenditures, the first such hike in three years, on the assumption that tax revenues will rise 16.5 percent from the initial fiscal 2006 budget. New bond issues have been reduced by 15.3 percent to help improve fiscal health.

Nevertheless, the ratio of Japan's outstanding long-term debt at the end of fiscal 2007 to gross national product is expected to stand at 148 percent, twice as large as comparable ratios in Germany and the United States. Japan will continue to carry a heavy debt burden.

Hikes have been made in social-security expenditures -- which account for a quarter of total expenditures -- tax money allocated to local governments and outlays for helping smaller businesses. LDP pressure to increase the outlays has mounted ahead of local elections in April and an Upper House election in July.

In elections, the party chief's power has a strong influence on the outcome. The question is whether the party head can exercise the leadership needed to run his administration and how much power he has to convince the voting public of the merits of his reform agenda. With the Cabinet office losing its grip on politics, the ruling coalition is likely to suffer a severe setback in the Upper House election.

In four Kyodo News polls conducted from last September to December, popularity ratings for the Abe Cabinet fell by 17 points. The percentage of nonpartisan voters who supported the Abe Cabinet decreased by 30 points, while support by women dropped by 23 percent. The percentage of nonsupporters in their 30s increased by 31 points. Among nonsupporters, those citing Abe's lack of leadership increased from 5 percent to 16 percent.

There are signs that the LDP is reverting to an old-fashioned party dependent on men and senior citizens for support.

In a new year statement as LDP president, Abe declared that the LDP will never go back to its old ways. Yet, if nonpartisan voters who supported the LDP due to Koizumi's dramatic political performance end their support, the ruling coalition could lose its majority in the Upper House. This crucial election is only six months away.

Keizo Nabeshima, former chief editorial writer for Kyodo News, writes on political and international affairs.

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