Japan's double elections to test staying power of Nakasone's economic policy

Prime Minister Yasuhiro Nakasone's decision yesterday to hold parliamentary elections July 6 is aimed at strengthening his ruling party's position just as Japan braces for major economic changes in the months ahead. The simultaneous elections for both the lower and upper houses also will be a test of whether Mr. Nakasone is popular enough to remain prime minister after his second two-year term ends in October. The rules of his Liberal Democratic Party currently ban a third consecutive term. Thus there is considerable intra-party maneuvering over who will succeed Nakasone.

But the prime minister's main reason for holding elections of the House of Councillors (the upper house) and the House of Representatives is to try to strengthen the LDP in the more powerful lower house. Voters turning out for the Councillors' elections, the theory goes, would tend to favor the LDP. In a double election, that would help the LDP in the House of Representatives.

The Japanese bicameral system resembles the United States system in that the terms of members of the upper house are staggered, while the lower house stands for election all at once.

The LDP currently controls 250 of the lower house's 511 seats (with one to be added as a result of reapportionment).

Election issues vary from national defense, to education, to the economy. But in the end, it is the economy that seems the most pervasive, elemental issue in Japanese public life.

Japan's role in the world is almost exclusively defined by its formidable economy. Business and trade are what Japan does. Superpower politics and international ties are the purview of other countries. And right now, because of their incredible success, Japanese business and trade are at a critical point. The huge trade surpluses Japan has been running with the rest of the world have engendered resentment with its trading partners and contributed to election-year protectionist rhetoric -- and legislation -- in the US.

Japanese economists and government officials admit that, as a new study by the Ministry of International Trade and Industry puts it, ``it will be a matter of serious concern if Japan's trade surpluses should grow any larger than they are now.''

They are red-faced about it and know that changes must be made to head off rising tariff barriers.

Moreover, the yen's rising value over the past year -- and especially since last September -- has begun to slow down Japanese exports (although, for the moment at least, the dollar value of these surpluses have actually grown, due to the higher prices Japan's popular cars, video recorders, and other consumer products fetch).

The strong yen, however, has many Japanese manufacturers worried, even though it has weakened in recent weeks from historic postwar highs. That recent weakening of the yen should also aid Nakasone's party, analysts here believe.

Nonetheless, at the Tokyo economic summit last month, Nakasone agreed with other leaders of developed countries that Japan must begin to boost its own domestic spending in order to begin to decrease those enormous trade surpluses.

The Nakasone government already has urged Japanese to work a little less single-mindedly and to buy imported goods as well as those made in Japan. But some economists here think it is likely that the government will need to do much more than coax Japanese to change their spending and saving habits. They talk of ``structural adjustment'' to ensure ``international harmony.''

What this means is a more old-fashioned Keynesian economics approach -- boosting Japanese domestic demand by stimulating industries such as home construction and creating public-works projects.

As economist Kazuo Nukazawa of the Japanese Business Federation puts it, ``Ten or 15 years ago it would have been considered intervening in the internal affairs of another country [to urge stimulation of domestic demand], but now we are all interdependent, so it is in the realm of friendly persuasion.''

Still, all the talk about ``domestic demand'' amounts to a sharp swerve for Japanese workers and businessmen, who have been urged mightily over the years to boost productivity and penetrate foreign markets with Japanese goods. A new government may be necessary to effect that change. It seems highly likely that, as in the past 30 years, that new government will be LDP in color. But the question is whether Mr. Nakasone will be at the helm after next fall.