Ichiro Ozawa's Last Stand

Ichiro Ozawa has tried for two decades to revolutionize Japanese politics. His latest victory came last year, when the Democratic Party he founded wrenched power away from the long-serving Liberal Democratic Party. But in challenging Prime Minister Naoto Kan for the party leadership this month, he will force the DPJ to a long-awaited reckoning--one that will certainly damage it, possibly leading to a party divided against it.

This is true to form for Mr. Ozawa, who has a reputation as a political maverick. He started his career in 1969 as an LDP parliamentarian but broke with the party in 1993, frustrated with its inability to pass major reforms. A coalition he created in that decade briefly took power, yet soon lost it. Mr. Ozawa soldiered on, planning an alternative vision for Japan that included less dependence on the United States, bigger fiscal spending packages and a global role tied more closely to the United Nations.

The Sept. 14 leadership challenge should really be about how Mr. Ozawa plans to revive Japan's sagging economy. The DPJ has yet to construct a coherent growth strategy, which worries consumers, employers and investors alike. Meanwhile deflation continues, the Nikkei stock index has fallen below 9000 and economic growth in the second quarter barely registered at 0.1%. China, not Japan, is now the world's second-largest economy.

Neither Mr. Kan nor Mr. Ozawa seems to have the answers to what ails Japan, and that is why their battle appears to be all about Mr. Ozawa's personal desire to finally become the country's leader.

Yet big as these problems are, the leadership challenge is more about the DPJ's political survival than anything else. Forced to resign as party leader just months before its historic victory, Mr. Ozawa watched former Prime Minister Yukio Hatoyama destroy the party's credibility in a disastrous year as leader. His emergency replacement, Mr. Kan, presided over an electoral defeat in the Upper House after unexpectedly discussing raising taxes in the days before voters went to the polls.

Mr. Ozawa, who remains the most astute politician in Japan, understands that if the DPJ's second year is as problematic as its first, then the party's image of incompetence may be indelibly inked on the public consciousness. That won't bring the LDP back to power, but it will hasten the formation of numerous smaller parties and ensure a longer period of political instability in Japan than most observers currently expect. Given that neither Messrs. Hatoyama nor Kan is part of Mr. Ozawa's circle within the party, Mr. Ozawa felt he had no choice but to challenge for the leadership.

The Kan-Ozawa battle can be seen as a struggle for the soul of the DPJ. Mr. Ozawa is an "originalist" in this fight and argues that the DPJ must honor the campaign promises that got it elected in the first place. He supports further fiscal spending and redistributionist policies such as support for families with young children and abolition of highway tolls. He wants to reverse the privatization of Japan's postal system, the signature reform measure of the 2000s and a bellwether for future reform initiatives. This is a risky strategy that could potentially bust the budget and worsen Japan's stratospherically high 200% debt-to-GDP ratio, all without stimulating job creation.

Mr. Kan, on the other hand, represents the DPJ's embattled realists who have watched the economy flounder further under their rule and recognize the need to compromise. The prime minister has promised to rein in government spending and has even floated a significant corporate tax cut. The realists' problem is that they so far have no compelling master plan for returning Japan to health.

Neither Mr. Kan nor Mr. Ozawa seems to have the answers to what ails Japan, and that is why their battle appears to be all about Mr. Ozawa's personal desire to finally become the country's leader. Japan will yet again not have the vital debate it needs to have to resurrect its economy. And the longer such a debate is put off, the more likely it is that another reckoning will come, one that may upend Japanese politics even further. What a shame that this may be Mr. Ozawa's lasting legacy.

Michael Auslin is a resident scholar at AEI.

Photo Credit: Flickr user Jean-François Chénier/Creative Commons

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