Shifts in Japan’s Political Economy Regime

Adjustments and changes

Conservative dominance (’60s)

• Power and influence of conservatives rose– at the expense of the political left

• conservative supporters benefited– prosperity and peace– side payments

• successes in economy and in politics reinforced each other

• favorable international environment

Challenges (1970s and 1980s)

• Socioeconomic bases of support– new political parties, independent

movements, and changes in voter patterns– divisions within regime supporters

superseded earlier left-right divisions– central concern of regime continuity

Socioeconomic challenges

Socioeconomic challenges

40%

20%

40%

16%

18%

66%

10%

11%

79%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Employment at Different Businesses in Japan

firms 40% 66% 79%

self-employed 20% 18% 11%

family business 40% 16% 10%

1947 1970 1985

Socioeconomic challenges

• rise of large and technologically more sophisticated industries

• rise of the service sector firms

• relative decline of agriculture sector

• relative decline of small businesses

• shrinking bases of the conservative regime’s electoral coalition

Challenge 2: aging population

5%

7%

14%

0%

2%

4%

6%

8%

10%

12%

14%

1945 1975 1995

% of Japanese Population Aged 65 or Older

14%

25%

33%

0%

5%

10%

15%

20%

25%

30%

35%

1975 2000 2015

Ratio of Retirees to Workers

Challenge 3: labor shortage

• Economic success– rising demand for labor

• expanding influx of labor after WWII– low-cost, young, highly-skilled

• changing age profile of the population– bargaining power shift from management to

labor

Challenges to LDP

• Urbanization and rise of middle class

• Socioeconomic base of conservative support shrank

• Mobilization capabilities of LDP supporters declined

• People identified with party independents increased– outnumbered LDP supporters in 1974

Challenges to LDP

• Increased voter option in 1960s and 1970s– formation of new parties– transformation of existing parties– in both conservative & the political left

• threatened both LDP and JSP

• threatened conservative electoral and legislative hegemony

LDP responses (1970s & ’80s)

• Attract new electoral support– shore up conservative support– draw away organized labor from DSP & JSP– attract the new middle class

• non-voters and non-partisan voters

• LDP dilemma between traditional supporters and new appeal

19701975

19801985

19901991

1992

Japan

United States

0

1

2

3

4

5

6

7

Infrastructure Spending as % of GDP

Japan 4.5 5.3 6.1 4.7 5.1 5.1 5.7

United States 2.6 2.1 1.7 1.7 1.7 1.8 1.8

1970 1975 1980 1985 1990 1991 1992

LDP responses

• Adjustments in policy or institutions

• less tightly linked policy profile

• firm-level cooperation with labor

• substantial deficit finance for political target

• fiscal austerity and privatization

• manufacturing firms became multinational

• defense and security policies

LDP electoral recovery

Economic recovery (1980s)

Bubble burst

Stock market woes (2000s)

International challenge

• External conditions– challenged conservative policies– threatened conservative socioeconomic

support

• challenges to exchange rate policies– Bretton Woods monetary system broke down

International challenge

• international price of raw materials– Japan’s dependency on imported oil (99%)– oil prices quadrupled in 1973– oil prices rose by 2.8 times in 1979-80– inflation– balance of payments– domestic productivity

International challenge

• Increasing pressure from US and Europe– reductions in Japanese tariffs, import quotas,

and non-tariff barriers– voluntary export restraints– open Japanese market– Japanese military spending

• challenges to vital aspects of Japan’s conservative economic policy profile