Japan's Paternal Ways Are Back in Name Only

Reform thrust upon protectionist LDP as it retakes reins

Atsumi Ohno is part rice farmer, part heretic.

Sitting in his spacious house in this rural community three hours from Tokyo, the rakish, husky-voiced Mr. Ohno remarks that consumers, even Japanese ones, have a right to a choice. "The government," he adds, "will keep trying to satisfy consumers' demands."

He says Japan will continue to liberalize its markets and deregulate the economy regardless of which politicians are in power. His views are remarkable - something like a Republican in the United States advocating a huge tax increase - because rice farmers here have long fought liberalization, operated without much regard for consumers, and been deeply committed to continued rule by the Liberal Democratic Party.

On Nov. 7 the LDP is expected to form a minority government, after last month's national elections in which the party won 239 of the 500 seats in the lower house of parliament. The number falls short of a simple majority but party leader Ryutaro Hashimoto has been horse-trading for sufficient outside support to win reelection as prime minister.

On the surface, this new government will mean an end to a period of political and economic reform that began in 1993, when the LDP lost power after running Japan for nearly four decades. But as the example of farmer Ohno indicates, some of the currents of change in Japan will not be altered by a resurgent LDP.

The reformers who defeated the conservative, pro-business LDP managed to pass political reform legislation, but their internal unity disintegrated in mid-1994, paving the way for the return of the LDP in a ruling coalition. Now the LDP is back on top and virtually on its own.

The LDP voices a commitment to reform, but many Japanese say the party is more devoted to the status quo than anything else. One reason is that the LDP is most interested in putting more vigor into the economy, which has been languishing between recession and recovery for years. Party strategists insist that large-scale reform of the bureaucracy and further changes in the economic system can only take place once the economy is in better shape.

No matter what the emphasis, governments and businesspeople around the world will be watching. They are interested in seeing the Japanese economy improve and, in many cases, hoping for systemic change as well.

Japan is generally perceived as a country that, in economic terms, takes more than it gives. Japanese corporations traditionally have prospered by selling goods abroad, but official regulations and business practices have made it difficult for foreign companies to enjoy the same success here.

In recent years, however, Japan has gradually provided a growing market for goods from abroad. That is due to the combination of the long-term strengthening of the value of the yen, which reduces the price of imported goods, trade pressure from foreign governments, and a reformist sensibility among some top business leaders who say that Japan must integrate itself more fully into the international economy.

Many foreign observers want this trend to continue. They are particularly eager to see the balance of power in Japan shift from the regulation-minded bureaucrats to consumers and the reform-oriented politicians who claim to represent them. Such a shift, in the eyes of outsiders, would make Japan's markets more accessible and its corporations less formidable.

That is why last month's election seemed to derail the momentum for change, since reformist politicians did not do as well as the LDP. Nonetheless, there are at least three things to keep in mind in watching how Japan evolves, economically and politically, in the months and years ahead:

*Many analysts see the LDP's resurgence as temporary. The LDP's political power has long derived from a pork-barrel type of politics, protecting farmers and small businesses from competition, and generally using money as a political weapon.

But in these days of high debt and fiscal constraint, this sort of approach is untenable, says political analyst Minoru Morita. He argues that farmers and other special interests will soon see that the LDP cannot meet their expectations and withdraw their support.

*Until that time, the LDP cannot go it alone. Given its current parliamentary strength - 12 seats short of a simple majority and dozens of seats short of a truly stable government - the LDP will be forced to work with opposition parties. Many of those groups will continue pressing for change.

*Some Japanese have embraced change and want to further it. Farmer Ohno, for instance, has nothing but scorn for the protectionist, parochial politics of the LDP.

"We now see how spoiled and weak we are in international agricultural markets," he says with a sigh.

He and neighboring farmers recognized a decade ago that Japan's rice market would inevitably be opened to foreign competition, as it was in 1994, and switched to a premium, organically grown type of rice that now fetches twice the going rate.

That strategy has made them exceptions among Japanese rice farmers - many of whom want a return to the days of protectionism. But it has served Ohno and his colleagues well.