Facebook Blogging

Edward Hugh has a lively and enjoyable Facebook community where he publishes frequent breaking news economics links and short updates. If you would like to receive these updates on a regular basis and join the debate please invite Edward as a friend by clicking the Facebook link at the top of the right sidebar.

Tuesday, July 20, 2010

Japan's 2010 House of Councillors election: another "twisted Diet" coming up?

Guest Post by Manuel Alvarez Rivera
Election Resources On The Internet

Without doubt, the Democratic Party of Japan (DPJ) has had a decidedly rough ride in power in the ten months since its historic House of Representatives election victory, which brought to an end more than half-a-century of nearly uninterrupted Liberal Democratic Party (LDP) rule. Last month the Japanese public was treated to the all-too-familiar spectacle of a prime minister stepping down following a decidedly short tenure: after less than nine months as Japan's head of government, Yukio Hatoyama left office over his inability to fulfill campaign promises, and was subsequently replaced by Naoto Kan; Kan, who also succeeded Hatoyama as DPJ leader, is Japan's fifth prime minister in less than four years.

Meanwhile, more grief was in store for DPJ. Prime Minister Kan's initially strong popularity ratings steadily slid over the course of the election campaign, and another very familiar political spectacle took take place on election day, when voters finally went to the polls on Sunday, July 11 to renew half the membership of the upper house of Japan's bicameral National Diet, the House of Councillors: the DPJ and its remaining ally, the small People's New Party (PNP) lost their joint upper house majority.

The loss of the upper house (whose electoral system is described in Japan's 2007 House of Councillors election and Parliamentary Elections in Japan) constitutes a major setback to Prime Minister Kan's government: under Japan's 1947 "MacArthur" constitution, bills rejected by the House of Councillors can't become law unless the House of Representatives - the Diet's lower chamber - overrides the Councillors' veto by a majority of at least two-thirds. Consequently, an opposition-controlled upper house is now able to derail the government's legislative agenda, as was the case between 2007 and 2009, when DPJ and its allies controlled the House of Councillors, while LDP and its coalition partners held a large majority in the House of Representatives; not surprisingly, this state of affairs - known in Japan as a "twisted Diet" - led to repeated clashes between the two legislative bodies.

However, the lower chamber retains the final word on a number of important matters, most notably among them the designation of a prime minister. In addition, it is still possible that Prime Minister Kan and DPJ could now find new coalition allies to secure an upper house majority, although the small Your Party, which now holds ten upper house seats following sizable gains in the recent vote, have formally ruled out the idea. Evidentally, Kan and the Democrats have done themselves no favour with their insistence on increasing the five percent consumption tax, which has proven unpopular with potential coalition partners, not to mention voters.

As a result of the election the government has been reduced to 110 seats in the House of Councillors, while the opposition parties will hold 132 seats.

Although DPJ received the largest number of both prefectural district and party list votes, LDP won the largest number of seats by capturing 21 of 29 single-member districts; DPJ, which only carried eight single-member seats, won more seats than LDP in both the multi-member districts and the party list vote, but this was not sufficient to overcome LDP's large single-seat lead. That said, the election outcome wasn't exactly a ringing endorsement for the Liberal Democrats, as Japan's erstwhile dominant party had its lowest party list share of the vote ever. On the other hand, LDP breakaway Your Party (YP), which favors small government, soared to third place in the election, displacing traditional LDP ally New Komeito (NK; an offshoot of the lay Buddhist organization Soka Gakkai).

It may be debatable whether the result polled by DPJ in the recently held House of Councillors election was particularly bad or not, but it is clear that in terms of seats won it was well below the party's already limited expectations. Historical precedent strongly suggests the upper house election setback will in all likelihood lead to the fall of Prime Minister Kan's government; however, only time will tell if this will turn out to be the case.

---------------------------------------
You can find fuller details of the recent election results on Manuel's Japan page, here.

Thursday, July 15, 2010

Japan's turn to China as a primary export market

According to the Financial Times, "China replaced the US as Japan’s biggest export market last year(2009)".(1) Here's a chart from RIETI showing the relative shares of Japan's total exports:


It's remarkable that the proportion of exports to the USA has practically halved in ten years. Figures from Japan's Ministry of Finance show that Japan actually had a trade deficit with China in 2009, while maintaining a trade surplus with the US.(2) This result would be consistent with the idea that Japanese companies source components from China for products that are in part then exported to the rest of the world.

This shift might cause the focus of Japan's monetary authorities to switch somewhat regarding foreign exchange matters. The dollar/yen rate will be a concern more for the potential effect on Japan's holdings of US Treasury debt than for its effect on exports to the US. Ending the yuan peg by the PRC and the likely resulting appreciation versus the dollar would have the effect of increasing the costs to Japanese manufacturers of parts sourced in China but would also increase the purchasing power for Chinese buyers of Japan's finished goods. At the same time, Japanese manufacturers would be squeezed by the increased cost of components from China for products shipped to the USA given that the yen/dollar exchange rate remained stable. Increasing exports to China would be a logical priority for Japan's economic policymakers.