For Japan, a Timeout Will Be Costly : Takeshita’s Action Is Only a Step in Getting Off the Sidelines

The Recruit Co. scandal has brought the political system of the world’s second largest economic power to a screeching halt. But the announcement of the forthcoming resignation of Prime Minister Noboru Takeshita is an attempt to get Japan moving again.

Like the long-running saga of Watergate, the Recruit scandal has prevented the ruling Liberal Democratic Party from advancing its domestic and foreign policy agenda. The opposition parties have refused to consider the 1989 budget until the leadership of the Liberal Democrats, namely former Prime Minister Yasuhiro Nakasone and Takeshita, explained their involvement in the scandal to the Diet or resigned.

During the past six months Takeshita has been totally incapacitated by the scandal. Three members of his Cabinet were forced to resign; he was caught making several inaccurate statements concerning the contributions he received from Recruit, and his public-approval rating plummeted to a record low of 3.9%. Takeshita was so handicapped that he could not even send his finance minister to Washington for the recent meetings on Treasury Secretary Nicholas Brady’s Third World debt plan.

Takeshita’s willingness to step down was a vital first step toward moving beyond the Recruit scandal. Within the next several weeks the public prosecutor’s office is likely to complete the investigation, arresting a handful of politicians on charges of bribery. By late August, Japan will have passed its budget, held elections and handed the reins of leadership over to a new prime minister.

Yet the world should not expect much from Japan between now and the end of summer. Without domestic political stability, Japan will lack the ability to build a consensus around foreign-policy initiatives or trade concessions. Even with a new prime minister, Japan’s ability to play a role in the July summit of the Western industrial democracies in Paris will be minimal.

In fact, despite the sacrificial resignation of Takeshita, the Liberal Democrats will remain frozen in anticipation of major losses in the forthcoming Upper and Lower House elections. These elections, likely to take place toward the end of the summer, will present the Japanese public with its first real opportunity since the scandal broke to express its deep anger, resentment and bitterness toward the party that has ruled Japan since 1955.

The two leading candidates to replace Takeshita, former Foreign Minister Masayoshi Ito and former Prime Minister Takeo Fukuda, are both able statesmen who believe in the need for Japan to play a greater role in the international community. Even so, regardless of who replaces Takeshita, the new prime minister will essentially be a “caretaker,” chosen because he was one of the very few party leaders left untainted by the scandal.

Just as Watergate lingered on long after the departure of President Richard M. Nixon, Takeshita’s exit will not remove the deeply rooted damage done by the scandal. Instead of judging politicians on the basis of the legality of their actions, the Japanese public is holding its leaders accountable for an outdated political system badly in need of reform.

The Japanese have always had great cynicism with regard to politics and are still suffering from the shock of the arrest of former Prime Minister Kakuei Tanaka in 1976. The perception of corruption once again at the most senior levels of society is causing the Japanese to ask themselves how Japan can be a world leader when it has yet to develop a political system thatcommands respect at home and abroad.

Takeshita tried to reform the tax system, restructure agriculture, upgrade the nation’s global leadership role and handle the scandal simultaneously. Instead of tackling this agenda on a wide front, his successor is likely to emphasize one battle at a time, the first of which must be political reform.

Most likely to suffer will be the reforms necessary to bring about the reorientation of Japan’s economy away from exports. A weakened Liberal Democratic Party may lack the political strength to pursue the myriad structural adjustments, including market liberalization, that would ultimately improve the U.S. trade deficit. As the party deals with difficult problems at home, it is unlikely to succumb to American pressure to confront its domestic constituencies with unpleasant reforms. Thus, if the Bush Administration and Congress are expecting speedy progress in our bilateral trade negotiations with Japan, they will be greatly disappointed.

During Watergate and the Iran-Contra affair, U.S. allies complained that while we remained obsessed with our problems, the world suffered from the resulting leadership vacuum. As a new leading member of the global community, Japan must be reminded that timeouts are costly.

America, Japan and Europe should work toward a cooperative approach to financial issues, allied security, multilateral trade negotiations and the environment. As the Bush Administration grapples with these global issues, it cannot afford to have Japan sitting on the sidelines. Takeshita’s resignation is only the first step in a long process of bringing Japan back into the game.