INTERVIEW WITH YOTARO KOBAYASHI

Chairman of the board - Fuji Xerox Co.

Chairman of Keizai Doyukai (Japanese Association of Corporate Executives)

JAPAN POLITICIANS ARE NOT DOING THEIR JOB

Serge Berthier.- At the onset of the Asian crisis, everyone had something bad to say about Japan. Some thought it was the main culprit because of the exchange rate fluctuation between the yen and the dollar, or because the Japanese economy was so weak that it could not sustain the other economies, or that the banks had been careless, and were indeed in big trouble. In other words, Japan had not only exported goods and services to the South-East Asian countries, but its own bubble as well. Now, two years later, all these comments have a rather hollow ring. As the corporate leader of a company that is present in every capital of South-East Asia, what is your analysis?

Yotaro Kobayashi.- There are several angles to your question. As regards Japan, one of the important things, is that, for a long time, both the government and the corporate sector, have been committed to Asia for very obvious reasons. Not only has it always been a very important market to the Japanese corporate world, because of the potential profits that could be made, or because of the tremendous growth potential the region had and still has in the long term, but also because, in addition to being our second market, it became in the 1990s a major location for our offshore manufacturing which is more cost-effective than our domestic manufacturing facilities. So our commitment has always been long-term (1). With respect to the crisis itself, with a country like Thailand for instance, for some years there had been concern that the country had excessive investments, some of which, I admit, originated from Japan.

S.B.- Who would you blame, then, the corporate world or the banking industry, or both?

Y.K.- Both probably had assumed that Asia would continue to grow with, maybe, some small ups-and-downs but no major earthquake. It is true that a lot of financial Japanese institutions were extending credits excessively (2). There was nothing sinister in such a move. It was also a proof of our interest in the region.

S.B.- If there was some concern, then it did not come as a big surprise, did it?

Y.K.- To a certain extent, it was not. When the crisis really happened, triggered by the baht crisis, the feeling of the corporate world was not a real surprise, but rather like something happening that was expected. However, initially we never thought it would become that bad and nor it would lingered this long.

S.B.- Some would say that it did not in fact linger that long, since two years later most of the countries are recovering speedily.

Y.K.- Yes, maybe some would say that it is not that long.

S.B.- What the corporate world of Japan had perceived at first as not so surprising, as an ordinary downturn in an economic cycle, started to surprise everyone. What was the biggest element of surprise?

Y.K.- I think it was the question raised by the shouting match between George Soros and (Prime Minister) Mahathir. We all of A sudden had to realize how fragile most of the Asian economies had been, particularly how fragile the structure of their financial market was. And then, we had not realized how huge were the movements of short-term capital that were around (3). Fortunately, our initial surprise was somewhat compounded by the responsible attitude on the part of China, defending its currency rather than let it go.

S.B.- Would you say that the corporate world was in fact rather defenseless against the vagary of the market?

Y.K.-Absolutely. All along 1997 and 1998, our views were that, although we were dependent on Asia to a large extent, yet we had been somewhat defenseless. We probably had assumed that no major economic earthquake could happen in the region. So we have probably been taught two things, one is that Asian economies had been fragile all that time, and another that we had been very ill-prepared for the contingencies of this particular magnitude.

S.B.- And today? Would you call the Miyazawa plan an essential part of the contingencies

Y.K.- Today, I am glad to tell you that, both the private sector and the government have a very supportive attitude, as exemplified by the Miyazawa initiative. We have stood firm to support Asia and I am not aware of any major withdrawal of investments from the corporations. Of course, financial institutions had to restructure themselves, not necessarily because of the crisis itself but because of their global restructuring.

S.B.- Are the lessons of the Asian crisis affecting the way the Japanese corporations look at the future?

Y.K.- We have not really changed our hopes and expectations on the long-term but the next round of Japanese investments and financial involvements in South East-Asia, in many ways, would probably take a somewhat different form, to be better prepared for, not necessarily, an immediate second wave of crisis, but still anything could happen. We hope too that the Asian economies have learnt something very important through such a crisis.

S.B.- Do you think that the weak corporate governance of Asian corporations was really a cause, as the Western analysts pointed out rapidly in 1997?

Y.K.- In fact, I just heard on the radio that the International Monetary Fund has now admitted that Prime Minister Mahathir was right after all. I don't think he was very much interested in corporate governance.

S.B.- Your company is everywhere, in Thailand, in Malaysia, in China, in Taiwan, in the Philippines and even in Indonesia. What is your feeling about the economic recovery of those countries?

Y.K.- We are impressed with the rapid recovery everywhere. I am personally impressed by the way China has handled the situation in its provinces. There is much to be said about their attitude as well throughout the experience. Even in Indonesia we are beginning to see some signs of recovery. Globally, we do believe that Asia will not only come back to us as an important market but also again as a resource centre. And the next wave of Japanese investments will not just be in terms of putting short-term money but, most likely, will be looking at taking advantage of the local resources in those countries, particularly in the software industry. There are a lot of talents waiting to be exploited and capitalized for the right purposes.

S.B.- Why is it that the Japanese corporate world seems to be more efficient when it helped the Asian economy to recover than it is when trying to put the Japanese economy back on track?

Y.K.- What I continue to hear from outside about our predicament are two conflicting views: on the one hand, you have those who keep saying that Japan deserves to have these difficulties because, for so long, we have delayed important structural reforms. Therefore it is natural for Japan to have this very difficult long economic slump. On the other, you have those who point out that, although Japan suffers and because of the size of the economy the degrees of suffering are visible and significant, it does not however justify the degrees of pessimism that spread all over the country. Look at the savings, the high level of education and the resources. Why be so pessimistic? Why take such a negative attitude?

S.B.- Is the pessimistic attitude prevalent, then?

Y.K.- To a point, yes, not only in the government but also in the private sector although I have been hearing both views. Now, as the Japanese economy begins to show a brighter side, we are encouraged by two consecutive quarters of economic growth, our view is that the Japanese economy has begun to recover.

S.B.- Nevertheless, the government is pushing a supplementary budget to give further momentum to the recovery (4). Do you think it is wise to believe that only a government package can revive the economy? After all, it was very much the method favored by central planners in the past, wasn't it?

Y.K.- The economy needs some supplementary budget measures but, as you mention, the fundamental responsibility lies with the private sector.

S.B.- Why then is the private sector so inefficient, or say, so slow, at moving forward?

Y.K.- We are still in the process of restructuring. When you are in between two stages, it is a difficult situation all the more because the society is receiving mixed signs about it.

S.B.- Everybody knows that when an economy goes through such a process, there is a major impact on the labor market, meaning people are at risk of losing their jobs, which was unheard of in Japan. Is that the problem?

Y.K.- Yes. To restructure means people have to move from sunset industries to hopefully more potentially rising industries, and not everyone succeeds in making the move. Even in the same industries, to restructure will mean less numbers. Conceptually , people understand such a process but when it affects them, of course, it is very hard to accept that it is part of reality. In a society such as Japan, where for such a long time, people had more or less naturally accepted that job security was a matter of life like air, it is even harder.

S.B.- But unemployment is not yet a major issue since the jobless rate is about the same now as the jobless rate in the United States which consider actually to have the best employment record so far they have ever enjoyed, or is it in fact already a major issue because the social conscience is different?

Y.K.- In Japan, as the media are reporting, the jobless rate is historically high. It is irrelevant that it is the same as another country or much less than elsewhere. The simple fact that it is historically high encourages the sense of insecurity in the society. Everyone wonders. Are we all right? What is going to happen? People save money for a rainy day, just in case. The sense of gloom is affecting consumption.

S.B.- It is the story of the glass of wine. Is it half-full or half-empty?

Y.K.- Yes. Corporate leaders and the mass media have to do the right job.

S.B.- What strikes me in what you say is that the politicians seem pretty much out of the picture, while in Europe, any change in the labour market would first have the politicians right in the middle of the picture.

Y.K.- For the politicians, it is very difficult to say that we will continue to have high unemployment but that it is part of the process to become healthy again. Yet, they have their part to play and I admire the way Prime Minister Obuchi has been handling the matter, and we have to support him. But the reason why the corporate leaders have to do the right job, rather than the politicians, lies in the fact that, so far, it is the Japanese corporations that have the safety network within the corporation where in other places it would have been provided by the nation.

S.B.- In a way, the Japanese corporations are very much playing the role that the state-owned enterprises were playing in China, or the chaebols in Korea. They not only provide jobs but also take care of the redistribution of the income throughout the corporation itself. Isn't it surprising then that the Japanese corporations were for a long time, in particular in the eighties, considered a paragon of productivity?

Y.K.- It is paradoxical, because, I think, you will probably find out that in most industries we have never been the top productivity provider. What was happening was that, until the early mid eighties, the Japanese corporations were winning the competition in the world market. The irony, hence the confusion, is that is was not necessarily because of higher productivity. As regards productive growth, yes, we are the fastest but, even when the American automotive industry was suffering in terms of productivity per capita, their automotive industry was still at the top, in terms of sheer productivity. They were better than Nissan and Toyota.

S.B.- So, how did Toyota and Nissan manage to win the competition? By dumping their products, like the Koreans did?

Y.K.- No. There was no question of dumping. They just had the best manufacturing facilities in the world, and we still are probably nº1 with the best manufacturing facilities in most industries. They could produce good cars and good products but, overall, with a low profitability. You can win the competition as long as your productivity is reasonably good. It is not necessary to be the best productive player. Of course, unless you are productive, you cannot be a winner for a long time but for certain things you can win.

S.B.- Why is it that the formula does not work anymore?

Y.K.- Things change. At the time, we have been helped by the combination of still struggling Europeans and arrogant Americans. South-East Asia was not yet a competitor. It was just not on the map. So that combination helped Japan to win without being at the top of the productivity. But while we were winning that game, the Americans started to improve, and restructure. At the mega level, they did what we were not doing, re-engineering their industries, and they also did what we were doing best. Europeans were also putting their economic house in order and in Asia, you know what was then happening. So Japan was suddenly caught by all these economies that were now as efficient as the Japanese one. The Americans were sharper and more focused in management. They had better strategists, better financial experts and were more ruthless. And they had that huge stockmarket that was shaped with the rise of the pension funds. They started to sort of control the direction of the market. Again, we were, either consciously or unconsciously, nothing of the sort was happening in Japan, somewhat ignorant of what was happening.

S.B.- Then Japan went into a stall.

Y.K.- Then, at the later part of the eighties and in the beginning of the nineties we learned that unless we improved our productivity, the corporations could not be allowed to continue.

S.B.- That was nearly a decade ago. Why is it taking so long to take stock of what is happening?

Y.K.- Because the corporate world is intermingled with the social fabric of the country. Furthermore, for a while some could tell our investors that the productivity might not be very high, but we had the growth, no one could deny that, so five/six years later the investors could expect substantial capital gains. That is what you had and I guess we had the track record to give confidence. But if the growth slows down, that story does not float anymore. It happened eventually. So we came slowly to the point where we had to improve the profitability. It means improving the productivity and the pay-out ratio. But it brought social problems.

S.B.- For an economist, what you say is challenging. What the Japanese experiment means is that the higher the productivity, the higher the social problem.

Y.K.- It is not new. I remember reading in the eighties an article by Peter Drucker. He was arguing that one of the major changes we would face, would be that in the past greater volume meant more employment, while in the future greater volume will bring less employment. That is exactly what is starting to happen everywhere in the Western economies. In Japan, call it what you like, we continued to employ more people than a certain level of productivity demanded. Even today, there are corporations which are willing to continue to employ people as long as they are profitable and their productivity remains within an acceptable range in the global financial community.

S.B.- Is globalization threatening such social attitude?

Y.K.- Well, we realized that we have been caught in this global game of productivity and that at least you had to provide that minimum level of profitability to the investors. We quickly realized that we had a very very difficult game in terms of dealing with the unemployment. We are still there, but gradually though very painfully, people are realizing what is happening, even in Japan where everybody thought life was secured through almost lifelong employment contracts which were taken for granted except in the small businesses.

S.B.- What all this mean in the medium term is that the Japanese corporations would no longer provide a safety net within the corporation as it was the case since Japan is Japan. Elsewhere, such safety-net is provided by the State, and therefore it is part and parcel of the political agenda where in Japan it was very much left out of the agenda. Is the process of restructuring leading to a wider restructuration of the Japanese way of governance?

Y.K.- Indeed, corporations, in the past, were taking a lot of responsibilities, going far beyond pure business preoccupation. Today, the corporations are throwing off those responsibilities that they cannot afford from the productivity point of view. As you point out, the government is now aware that it has to be more prepared for all the things that used to be handled by the corporate world. It has to act like the government of the other nations where the safety-net is in the public hand. But you have also in Japan the NGOs which, like in the United States handle a growing number of things. So that is a very encouraging sign. The unfortunate thing is that the government has to tackle its new responsibility at the time when it is facing another reality, the prospect of an ageing population. So you are right to point out that we really have to redefine the government and its purpose.

S.B.- There has been many talks about a political reform, ever since the LDP was evicted from power in 1993 before coming back "en force". The electoral reform which was much talked about (5) did not bring anything new in the political arena and the iron triangle between the bureaucrats, the politicians and the corporate leaders went into pieces. Now that the corporate world is changing its role, what is going to happen?

Y.K.- First, let me say that there is a number of committees and joint-forces, between the government, the politicians and the private sector, which have been set up by Prime Minister Obuchi, to tackle the issues you raise. The triangle was kind of struck and then went into pieces for different reasons in the early nineties. The political branch was caught in it. LDP had maybe been in power too long and then caught in political scandals which spread into the corporate world.

In my opinion, the most damaging aspect from the systemic point of view was the damage done to the bureaucracy. Now, there is no question that the bureaucracy can take all the blame, however it still has many bright people, and all through the eighties and seventies, most of them did not really care about their private interest. They were really concerned about the nation. The people had absolute trust in the bureaucrats. Then, the scandals spread from the political world to the business world to the bureaucrats. People became extremely critical, but most harm was done in the bureaucratic world because they were covering a lot of what politicians could not do in terms of policy-making. We have to recognize that a lot of credibility that the politicians had in the past came really in fact from a set of policies developed by bureaucrats. So when the triangle went into pieces, we just did not have the system working anymore. Paralysis set in. It is now just being regrouped, through all the committees that have been set up but instead of a triangle, what we should see, is a square, with a civil part being more active, playing a checking role vis-à-vis the politicians, the bureaucrats and the private sector.

S.B.- Yet, for all we know, it is very much the old LDP that is at the control of the government lever. Can such a party adapt to a new game and new responsibilities?

Y.K.- LDP is not that new, I agree, but it is now different from the past. The party is humble, maybe too humble for going into a coalition. We have to see. We do need a strong opposition. When we opted for a new election system, our hope was that eventually the people will have the choice.

S.B.- The election did not bring the expected shake-up and did not bring any fresh blood in the political system (6).

Y.K.- I don’t really know what went wrong. I think at the bottom of it that it goes to what the politicians are and what the people's expectations are. It is maybe a measure of the degree of Japanese democracy. On what criteria the people choose? The truth is that people still choose on the guanxi (relations), the personality of the candidate rather than on the agenda. So, the basic question is the maturity of democracy in Japan. I am on the optimistic side. We are gradually moving towards a system, not quickly enough, but nevertheless we are moving towards something like a two parties system, where the people will really have a choice between two clear sets of policies.

S.B.- Prime Minister Obuchi has been attacked for bringing a third coalition partner in the government. Do you think that it is a first step towards such a system, where you have a conservative party, one might say that the Buddhism is in its political expression a conservative force, and a progressive opposition.

Y.K.- Maybe. Consciously or unconsciously, it could be what Prime Minister Obuchi is trying to achieve. He has been very direct in saying that democracy is a game of number (7).

S.B.- Indeed, numbers are what it takes to be in power. The more support, the more you are likely to be in power, but to get those numbers, how far should one go?

Y.K.- You may have to sacrifice certain principles, and really Obuchi-san has proved that he was a stronger leader than many people had thought. Since he came to power, he has formed many commissions to look at the future of Japan. The first commission focused on economic strategy, and then he also formed the Industrial Competition Committee. With a short and medium plan, their purpose is to openly address the question of the competitiveness of the Japanese economy as a whole.

S.B.- Politicians have a knack of referring to the long-term outlook to avoid looking at more immediate concerns, or to justify an unpleasant immediate situation, that paves the way for a brighter future. Is it not again the case?

Y.K.- I don't think so, because the initial purpose of the commissions is to save the manufacturing sector of the economy from excesses.

S.B.- What excesses? To lay off too many people at once? Or not to layoff enough people when it is the only way out for the company to become competitive again?

Y.K.- In fact, the media were quick to accuse the commission of helping the manufacturing sector to survive. But the truth is that Japan is in the process of redefining who is doing what as regards who takes care of the social content of the society. It is a very different proposition.

S.B.- Is it absolutely clear for the government now, and for the business world too, that the way the society was organized can no longer be sustained and that a new approach is the only solution?

Y.K.- Absolutely. I am sitting on several committees and one phenomena I am seeing which is absolutely clear to everybody is that the corporate world is heading in a totally new direction and has to deal in a totally new environment. The business world is now extremely market-driven. It is pure capitalism. We simply don’t have the choice anymore. Now, such narrow focus will produce the kind of problem we have never seen, such as in terms of unemployment. It is a different world since that question of employment and unemployment has always been dealt with by the corporate world. That paradigm is no longer. Therefore, more and more people agree that something has to be done, and someone will have to sell it to the public.

S.B.- Who else than the government can sell the idea that the iron bowl provided by the business world will be replaced by a safety-net provided by the government, while historically it has never been the case, neither before the war, nor after the war?

Y.K.- The government is in everything a very important part of the new body that would be responsible for dealing with the social problems.

S.B.- Japan was run by consensus rather than numbers. Do we have a consensus on a new paradigm?

Y.K.- What I see is not a consensus but a strong united view about this.

S.B.- About what exactly?

Y.K.- What is agreed upon is that the corporate world will be driven by the market, and the social contents of its policies are no longer its responsibility. That is only one of many issues, because there are so many things for the government to deal with now, which previously were outside of its scope, such as public spending, employment measures, safety net, social security, Medicare that priorities have to be decided, since you can't possibly deal with all the issues at the same time. Now to fix priorities is a most difficult political question. This is where the leadership, not necessarily Obuchi himself, will be tested very, very hard.

S.B.- Yes, but all those issues are interrelated in a way. You have social problems if you have unemployment. And if the economy does not do well, the labor market is soft, inducing further unemployment, and so on and so forth.

Y.K.- Right. Everybody agrees that the employment issue is the new very important responsibility for the government. I have a very strong view that for the next ten years, the government will be spending a lot of time in looking at the overall employment and unemployment question.

S.B.- In Europe, governments are now used to living with high unemployment rates. So the situation of the Japanese government is not really special.

Y.K.- It is going to be completely different from its counterparts elsewhere, because while it has to deal with rising unemployment, it also has to deal with an ageing population. That is a problem no other countries have and it leads to paradoxical problems. For example, foreign workers in Japan are going to be a very important issue in the future because we have a decreasing labor force. How do you explain to the public that, while unemployment is rising, we have so many Japanese Brazilians coming back (8)?

S.B.- Is it already a sensitive topic?

Y.K.- Not today. Not yet, but it is going to be a real political issue which Japan will have to deal with the future. We can see signs of that coming.

S.B.- The picture you paint is that of a consensus in the business world, but you mentioned earlier that some business leaders and their political associates are publicly saying that companies have a social duty, in order to ease the pain. How far do such conflictual views go?

Y.K.- Now there were some public statements a few weeks ago against the managers of some companies which are doing well, whose shares are moving higher, and so on so forth, and who are restructuring. It is also said that those who have no skill and imagination as to how to deal with the unemployment problem should go. It would be irresponsible to restructure irrespective of the pain, but then, on the other hand, the real issue is that we have to look at Japan as a whole. Thus your message can be mistaken in the short term and bring a freeze on the necessary measures. That would be a mistake because doing so will never bring the Japanese economy to the next stage. What we need is to encourage the measures that are building the labor market, while what one is saying might sound exactly the reverse.

S.B.- If my understanding is correct, it is the question of speed that is starting to be the centre of the discussion. How far, and how fast one can go?

Y.K.- Yes, and I admit that we are in a stage of flux, yet looking in the right direction.

S.B.- In other words, a change in the direction of the society. But how can such a change be engineered and managed by a government with ministers that are in their seventies and eighties? I know that in Asia there is great respect for experience, but we are talking about politicians who have been there before, and were quite satisfied to stay where they were, without looking into the future.

Y.K.- The change involves everybody: the government, the bureaucracy, the business world and the people. The very active information exchange which was part of our life between the business world and the bureaucrats was, as you know, in jeopardy when the bureaucrats became scared of everything. Even today, they are still very afraid when they meet the business world, unless every detail is put in writing of the where and why. It borders on the ridiculous. But we can feel changes to leave those extremes. The feeling of the general public is changing, the tone of the press is also changing. In new Japan, what is really going on and done in the public sector, will be done by a combination of interests. In the past, the public sector was the monopoly of the bureaucrats. You now see private citizens, and corporations, too, acting to the extent that they do not destroy their productivity, to further the public interest together with the bureaucrats.

S.B.- Yes, but what about the politicians?

Y.K.- I agree with you that, if we have young politicians, new fresh blood coming aboard, we can actually see interesting changes in that arena too. Not within the LDP but other parties. How do we quicken the past? The younger generation is very forward looking.

S.B.- But does not have much say, since the seniority system remains very much a political principle…

Y.K.- That system suffers from a lack of competition, I agree.

S.B.- To conclude on the economy, has Japan turn around its economy?

Y.K.- The second quarter of growth has given people a good feeling. Gradually, that kind of sense of confidence is coming back. What we have to do now, is to capitalize on the government measures, but as I said, the actions liaise with the private sector, and in fact, the sense of urgency and a sense of responsibility that we have in the private sector is now spreading. It is sort of sinking into the minds of the people. That is one of the reason why consumption continues to improve from the first quarter into the second quarter, because for consumption to grow you really have to have a solid and optimistic psychological mentality on the part of the general consumers.

Now capital investment is something else. It can be decided by the general mood but also depends on how your company is doing, how your sector is doing. It is a more rational decision-process than just consumption for we know that consumption is very much a psychological process. And the important point is that 60% of GNP is consumption. So, although it is significant, it is only psychological-driven, that is why the good feeling factor is very much relevant.

Autumn 1999

© www.asian-affairs.com

Notes:

1.- At the end of 1990, Asia overtook the US to become Japan's largest export market. Japan is also the largest source of imports for Asia and is the biggest investor too, in terms of annual flow. Furthermore, in the eighties, Japan has been providing around 60% of the official aid flows to Asia as a whole.

2.- At the onset of the Asian crisis, Japanese banks' exposure to Asia was US$89 billion, the largest of all countries. The second largest was Germany with US$47.2 billion. The American exposure was only US$32 billion, behind the French (US$40.4 billion).

3.- In the first half of 1997, new lending to Asian countries rose by US$32 billion to 389.4 billion (+8.9%). The share of short-term debt incurred by Asian borrowers was a very high 62.2%. At the same time, U.S. mutual fund investments in Asia was peaking at US$38.5 billion. There were a record 185 Asian stock funds. No data are available as regards derivative products.

4.- see interview with Tadashi Iwashita - note 8. The package is worth 18.1 trillion yen.

5.- The general election to the House of Representatives in October 1996 was fought under a new format calling for first-past-the-post winners. The constituencies were also reformed. It was expected that it would leave many sitting members without seats. But the electorate opted for stability, and gave the LDP 239 of the 500 lower-house, up from 211 before. The shake-up of the political establishment had not happened at the national level.

In late 1997, the LDP proposed an overhaul of the local elections to address the problem of continually falling voter turnout, suggesting that unified local elections be held once a year in October, to elect mayors, governors and the representatives of prefectural assemblies and municipal assemblies.

In April 1999 unified local elections for 44 prefectural assemblies and 11 municipalities were held. The voter turnout in gubernatorial and mayoral races was 56.78% and 60.88% respectively - a slight rise over previous elections. The outstanding features of the local elections were the defeat of the LDP candidate to the post of governor of Tokyo, the election of the first woman mayor in Tokyo's history (in Kunitachi) and the remarkable success of the younger generation in city assembly elections, signaling, maybe, a new start in local politics. Nevertheless, with a ratio of only 1.5 candidate for one seat, the voters had little choice.

By political party, the LDP fielded 1,557 candidates, by far the largest number, about four times as many as the Japan Communist Party, and seven times as many as the Minshuto (Democratic Party of Japan), the largest opposition party in the Diet. Ultimately, the LDP won a majority in more than 20 prefectures. Minshuto (Democratic Party of Japan), Liyuto (Liberal Party), New Komeito and the Japan Communist Party, all increased their seat, with 307 seat for Minshuto (+11.6%), 173 for New Komeito (+6,8%), 152 for the Japan Communist Party (+24.5%), and only 35 for Jiyuto (+6%). The loser was the Social Democratic Party with only 138 seats.

6.- The last election to the House of Representative was the first to be conducted ( in October 199) under a new electoral system that combines single-seat constituencies with proportional representation districts. Under the multi seat constituency system employed in previous elections, candidates from the same parties ran against each other and spent lots of money to get elected. A candidate's success usually depended on his or her ability to service his or her constituents rather than on the candidate's stance on the issues. It was expected that, in adopting an electoral system that combines single-seat constituencies with proportional representation district, the political system would o shift the emphasis back toward policy and the political parties. So far, it did not really happen.

Voters from Tokyo and four other prefectures had filed suit to overturn the results of the election of October 1996. The plaintiffs had appealed their suit to the Supreme Court after being rebuffed by the Tokyo High Court. On November 12, 1999, nine of the fifteen judges sitting at the Supreme Court ruled that the House of Representatives election of October 1996 was constitutional, asserting that the Diet has the discretion to determine the particulars of the electoral system and that the new system was "within the boundaries of its discretion" and had "rationality."

The plaintiffs based their case on three legal arguments: 1) The electoral system constitutes an abuse of the Diet's discretion because it was designed to keep the Cabinet in power and to serve the interests of incumbent Diet members; 2) The new electoral system violates the Constitution's fair-election clause because candidates who ran and were defeated in single-seat constituencies were able to win seats through the proportional representation district; and 3) The Constitution's guarantee of equality before the law was violated due to large disparities in the value of votes between constituencies.

This ruling could have been anticipated from a reading of past Supreme Court decisions. Butit can be argued that the Supreme Court has given the Diet carte blanche and is not carrying out its duties when it makes abstract references to terms such as "discretion" and "rationality" to validate laws passed by the Diet.

Lower House members supported a revision of the new electoral system. However, around 50 percent said that candidates should not be permitted to run simultaneously in both the single-seat and proportional representation districts.

It is telling that in the current government, which is no different from the precedent in that respect, of the nineteenth ministers, nine are second or third generation politicians. A further two entered politics as secretary to powerful political leaders of the past. Prime Minister Obuchi is the son of a Diet representative. He was elected in his father's constituency for the first time in 1963. Foreign Affairs Minister Kono was elected for the first time in his father's constituency in 1967. His uncle Kenzo Kono once held the post of President of the House of Councillors. Justice Minister Usui was too elected in his father's constituency, so was Finance Miyiazawa, who is a third generation Diet legislator. Education Minister Nakasone is the son of Yasuhiro Nakasone, Prime Minister in 1986. Health and Welfare Minister Niwa is the son of a Diet representative. The father and the mother of Construction Minister Nakayama were both Diet representatives. His older brother, Taro Nakayama was once Foreign Minister. He still serves as a Diet representative. Home Affairs Minister Hori is the son of Shigeru Hori, an influential politician who was once Lower House president. Financial Reconstruction Minister is the son-in-law of former Prime Minister Takeo Fukuda. Cabinet Secreary Aoki left school to serve Diet representative Noboru Takeshita who became later Prime Minister.

The leader of the opposition , Yukio Hatoyama, is also a third generation politician, as are most of the leading personalities of his party. He is the grand-son of Kazuo Hatoyama, once speaker of the House of Representatives, the son of Ichiro Hatoyama, former Foreign Affairs Minister. His brother Kunio was a member of the House of Representatives.

7.- See interview of Prime Minister Obuchi

8.- Immigration law was revised in 1990, allowing Brazilians of Japanese descent to legally work in Japan.

Autumn 1999

© www.asian-affairs.com