Humiliating Japan

Gordon G. Chang,
10.30.09, 12:01 AM EDT


America's dangerously flawed Asia policy.

President Obama starts his November trip to Asia with a visit to Japan. He has four other stops on the itinerary--Singapore, Beijing, Shanghai and Seoul--but none of them will be as interesting as the two days in Tokyo. He arrives in the Japanese capital just weeks after his defense secretary embarrassed the prime minister, insulted Defense Ministry officials and inflamed public opinion.

Once, American presidents took the Japanese for granted. Bill Clinton even failed to touch down in their country as he traveled to and from China in 1998, thereby triggering the "Japan passing" frenzy. It was not so much that Bubba thought the Japanese were has-beens--although there was some of that strain evident in his thinking--it was more that he figured they didn't need attention. Japan, after all, was a reliable friend, the "cornerstone" of America's alliance structure in Asia.

Mr. Obama can go through the motions in the other cities--especially in Beijing where nothing of great importance will occur--but he will have to be alert in Tokyo. There, Japanese diplomacy looks as if it is in the midst of a once-in-a-generation transition, and America's leader will have to be particularly careful.

In September, the Japanese electorate ended the reign of the Liberal Democratic Party, which had governed the country with but one short interruption since 1955. The LDP had built its foreign policy around the military alliance with the U.S., but the party has now lost control of both houses of the Diet, or legislature. Yukio Hatoyama, the new prime minister, says nice things about America--but only when he is prompted to do so. And, significantly, he has signaled he wants to shift Japan's focus to China and the rest of Asia.

As he takes Japan in new directions, Hatoyama is bumping up against Washington. For one thing, he wants to end Japan's eight-year-old refueling site in the Indian Ocean, which supports NATO operations in Afghanistan, as well as investigate secret arrangements reached in the early 1960s regarding the shipment and storage in Japan of American nuclear weapons. Most important, he is now trying to show Japan is an equal partner in the alliance by renegotiating a 2006 agreement to reorganize American forces in his country. A particular sore point is Marine Corps Air Station Futenma, which is located near residential areas on Okinawa. Simply put, the Japanese prime minister wants the base off the island, not merely transferred to another part of it.

The Futenma matter is extremely controversial. An overwhelming majority of Okinawans want the American military to leave, but the Pentagon is adamant about not reopening the deal involving the Air Station's relocation. Defense Secretary Robert Gates, in a visit to Japan last week, publicly shot down the concept of renegotiation in blunt words, embarrassing the Hatoyama government by calling its proposals "immensely complicated and counterproductive" and telling it to "move on." Washington would like to settle the spat before President Obama arrives in Japan on Nov. 12, but Chief Cabinet Secretary Hirofumi Hirano has made it clear there will be no early end to the already nasty disagreement.

FACTBOX-Key facts about Japan's lower house election

07.13.09, 03:35 AM EDT

July 13 (Reuters) - Japan's embattled Prime Minister Taro Aso plans to call a general election on Aug. 30, a top ruling party official said on Monday, despite prospects that his long-ruling conservative party is headed for a big defeat.

The long-ruling Liberal Democratic Party and its junior partner, the New Komeito party, are all but certain to lose the huge majority they gained in the last lower house poll in 2005, and analysts say they are likely to be defeated by the main opposition Democratic Party of Japan and its smaller allies.

Following are some key facts about how the election works.

TERM OF OFFICE, CAMPAIGN PERIOD

-- The lower house is the more powerful of parliament's two chambers and has the right to select the prime minister as well as enact the budget.

-- Lower house members are elected for four-year terms, but the prime minister has the right to dissolve the chamber at any time and call an election.

-- Election campaigns last for 12 days.

-- The number of eligible voters, including Japanese living overseas, stood at 104 million as of Sept. 2, 2008, according to the government.

-- The last lower house election was in September 2005, when popular Junichiro Koizumi called a poll as a referendum on his plan to privatise the postal system and his economic reform platform more broadly.

-- Voter turn-out in the 2005 election was 67.5 percent.

-- Upper house members serve a six-year term, with half standing for re-election every three years on fixed election dates. The next upper house election is due in 2010.

-- Opposition parties won a majority in the upper house in 2007, creating a political deadlock because the chamber can delay bills approved by the more powerful lower house.

SEATS

-- There are 480 lower house seats, of which 300 are for single-member districts, where the candidate with the most votes wins.

-- The remaining 180 are for multiple-seat proportional representation districts from 11 regional blocks in which voters vote for a party.

-- The LDP had 303 seats in the lower house before the election and its coalition partner New Komeito 31. The opposition Democrats had 112, the Communists nine and the Social Democrats seven. The remainder were held by small parties or independents, and there are two vacancies.

RURAL VOTER CLOUT

-- The way electoral districts are drawn up has traditionally given a disproportionate amount of influence to less-populated rural areas that have been the backbone of support for the LDP. In some urban areas, one vote is worth less than half of that of the most sparsely populated rural district.

-- However, an electoral reform law enacted in 2002 resulted in the number of such under-represented districts falling to nine from 95.

(Reporting by Linda Sieg)

(linda.sieg@thomsonreuters.com; Reuters Messaging: linda.sieg.reuters.net@reuters.com; 81-3-6441-1881)

Taro Aso's Secret Weapon

Tokyo Dispatch
Tim Kelly, 07.12.09, 06:00 PM EDT

With election catastrophe approaching, Japan's beleaguered prime minister may get help from a mad dictator.

There's a joke making the rounds among Japan's political elite, a group not normally known for its sense of humor. It goes something like this: Japanese Prime Minister Taro Aso's grandfather, Shigeru Yoshida, the nation's first post-American-occupation leader, had a habit of calling snap elections to scold his political rivals. Dismissing them as idiots, he would dissolve the nation's parliament and the nation would go to the polls a week or two later.

Aso may do the same if the Liberal Democratic Party (LDP) tries to dump him--but this time, lawmakers joke, he's the idiot. The ruling group is desperate to get rid of him, because if it doesn't, chances are it will lose the power it has had in ruling Japan for the last half-century.

Elections to decide who governs Japan must be held before Sept. 10, but nobody, it seems, knows how to tell the floundering prime minister that it may be time for a graceful exit. If someone tries, Aso may do like his granddaddy before him, and the LDP will be stuck with one of the most unpopular leaders it's ever had.

The quest for a savior is underway. Leading the search is Makoto Koga, a hard-nosed party elder given the near impossible job of winning the election. He has three possible poster boys who could replace Aso just in time; all of them made their names in television before turning to politics.

The first, Toru Hashimoto, who is still on the youthful side of 40, is governor of industrial Osaka in western Japan. A lawyer by training, he gained fame as a commentator on some of the celebrity variety shows that dominate Japanese TV. Another is Sonomanma Higashi, a comedian who in 2007 was elected head of rural Miyazaki prefecture on the southern island of Kyushu, famed for its juicy mangoes. Finally there is a heavyweight, Yoichi Masuzoe, Japan's minister for health, labor and welfare, who has won plaudits for slapping around bureaucrats and stomping on their fiefdoms.

But there is another contender--one who won't be on Koga's list of saviors--who could help the hapless Aso. He lives in a big house in Pyongyang, favors bouffant hairdos and chunky sunglasses, has his own arsenal of ballistic missiles and just recently got himself The Bomb. That person is North Korean dictator Kim Jong-il, whose unpredictable aggression could swing public opinion back to the ruling group.

Defense is the opposition DPJ's Achilles heel. A broad-based grouping formed from a plethora of political parties a decade or so ago, it's bound together by its opposition to the LDP establishment. On the prickly issue of defense and how far Japan should go to eliminate threats posed by the likes of Stalinist North Korea, it just can't agree with itself.

The LDP's hawks--Aso is one of them--are more sure of themselves. Should Japan's belligerent neighbor start lobbing missiles over the Japanese islands again (or light another atom bomb), Aso gets to play the strongman, thereby gaining the chance to win back a chunk of Japan's 100 million voters.

Time for Aso, however, is running out. If Kim is the only ace up his sleeve, he and his talent-starved party are in big trouble. And if nobody in the LDP has got the guts to tell him so, they ought to start packing now.

Japan finance minister denies wrongdoing on donations

06.24.09, 09:58 AM EDT
By Tetsushi Kajimoto

TOKYO, June 24 (Reuters) - Japan's beleaguered government was hit by a fresh scandal on Wednesday ahead of an election due within months, with the finance minister accused of receiving illegal donations.

The scandal, the latest in a series of reports about dubious donations to politicians, could further erode sagging support for Prime Minister Taro Aso's government ahead of an election the ruling party may lose.

Kaoru Yosano's political support group apparently received illegal donations from a futures trading firm, the Mainichi Shimbun newspaper reported. The minister said he was unaware of any wrongdoing.

Yosano holds the three main financial cabinet posts and is widely seen as the driving force behind Japan's economic policy as it struggles to escape its worst slump since World War Two.

But analysts said the potential impact was more political than economic, with Aso's unpopular Liberal Democratic Party (LDP) trailing in polls and in danger of losing the election to the main opposition Democratic Party.

'This kind of a news report is certainly not positive for the LDP ahead of an election,' said Kyohei Morita, chief economist for Barclays ( BCS - news - people ) Capital Japan. 'It will make it harder for the LDP to win the election and raise the chance for the Democratic Party to become a ruling party.'

The Mainichi Shimbun said a group that managed Yosano's political funds accepted more than 55 million yen ($580,000) in donations between 1992 and 2005 from a dummy organisation that was funded by a futures trading company and related firms.

Such indirect payments are illegal in Japan, the newspaper said, adding some donations were made in the late 1990s when Yosano was trade and industry minister, a position that put him in charge of futures trade.

Yosano indicated he had no plans to resign.

'If there's any problem and if I was in a position that I should have known, even if I didn't know about it, then I will decide what to do with the donation itself,' he told a news conference.

'But I'm not thinking about anything beyond that.'

Polls show the opposition Democratic Party in the lead among voters, raising the likelihood it will end more than 50 years of almost unbroken rule by the LDP. An election is due by October but many expect it earlier.

The Democratic Party has its own funding scandal headaches. Ichiro Ozawa resigned as leader in May after a close aide was charged with accepting illegal corporate donations, while his successor has also come under scrutiny by media.

Kyodo news agency reported on Wednesday that three individuals listed as donors to a funding group for Democrat leader Yukio Hatoyama said they had not contributed. Officials at the party and Hatoyama's office were unavailable for comment.

POLICY EFFECT UNLIKELY?

Markets focused on global economic fears, with traders playing down the impact of yet another political scandal.

Yosano has advocated repairing Japan's tattered public finances, with public debt at some 170 percent of GDP but the global financial crisis has prompted the government instead to focus on stimulating the depressed economy.

A trader said even Yosano's resignation would only be a brief negative for stocks, and the reaction was similarly muted in the currency market.

'Ultimately, the report is unlikely to have any impact in the currency market as the financial policy of the LDP and the Democrats isn't all that different, even if the Democrats were to end up winning the election,' says Hideki Amikura, deputy general manager of forex trading at Nomura Trust and Banking.

Aso has already lost three cabinet members, including close ally Shoichi Nakagawa, who resigned as finance minister in February after being forced to deny he was drunk at a G7 news conference. The internal affairs minister quit this month after a public feud over the state-owned postal system.

Aso was likely to try to retain Yosano, given his central role in the cabinet, analysts said.

'Yosano is one of the few assets in the Aso cabinet,' said Koichi Nakano, a political science professor at Sophia University in Tokyo. 'The LDP strategy will be to ignore the issue as if it didn't happen. Whether they can get away with that is another question. But they don't have any option except to shrug their shoulders and say nothing happened.'

($1=95.16 Yen)

(Additional reporting by Isabel Reynolds, Elaine Lies, Yoko Nishikawa and Aiko Hayashi; Writing by Linda Sieg; Editing by Bill Tarrant)

FACTBOX - Possible Democratic Party Japan finance ministers

06.03.09, 04:55 AM EDT

TOKYO, June 3 (Reuters) - Polls show Japan's opposition Democratic Party would win a general election that is due by October, but there is no clear indication of who would be its finance minister in government.

The party is leading the Liberal Democratic Party of Prime Minister Taro Aso by more than 10 percentage points in voter polls.

In government, it would have to tackle Japan's recession, putting a sharper focus than normal on the finance minister's role.

Following are some Democratic Party names seen by political analysts as possible candidates for finance minister and other leading minds behind its economic policy:

MASAHARU NAKAGAWA, 58:

Nakagawa is the party's current finance spokesman but sources at the party say the current 'shadow cabinet' is largely symbolic and title holders, including Nakagawa, may not be in the cabinet in a Democrat-led government.

Nakagawa has said Japan should avoid buying U.S. government bonds denominated in dollars because of currency risk, and a Democratic Party government would continue to buy U.S. government bonds only if they were denominated in yen.

EISUKE SAKAKIBARA, 68:

Known as 'Mr Yen' for spearheading intervention in currency markets as a top finance ministry official in the 1990s, Sakakibara has recently called for a change in government.

He says drastic reforms would require breaking away with vested interests which he says have come to thrive after five decades of almost unbroken rule by the ruling LDP.

The Democrats tapped him as their candidate for finance minister in the 2003 election, when he was a professor at Keio University. Some media reports said Sakakibara was involved in drafting policy proposals for former party leader Ichiro Ozawa last year.

KATSUYA OKADA, 55:

Some party officials say the post of finance minister may go to a veteran lawmaker Katsuya Okada, a policy expert with a 'Mr Clean' image and the secretary general of the party.

Okada, a former trade ministry official, has said he wants the party to discuss how to tackle fiscal reform, including an increase in consumption tax, unlike Hatoyama, who has said the party should abandon such debate for now.

NAOTO KAN, 62:

Naoto Kan is another party veteran who, together with Democratic Party leader Yukio Hatoyama, founded the party a decade ago.

Kan has said the Democrats would aim not only to strengthen the social safety net for those out of work but create jobs in sectors such as agriculture and 'green' technology as part of an 'Environmental New Deal'.

NAOKI MINEZAKI, 64:

The finance minister is normally chosen from parliament's more powerful lower house, but some upper house lawmakers have been leading policy discussions within the party, such as policy chief Naoki Minezaki, the head of the upper house financial committee.

A former shadow finance minister, Minezaki once expressed doubt that the party could finance plans to abolish expressway tolls, provide child-rearing allowances and give aid to farmers by cutting wasteful government spending, without a tax hike.

MASAYUKI NAOSHIMA, 63:

Another possible from the upper house is Masayuki Naoshima, a former motor industry union official. He has said child allowances and removal of highway tolls could be funded by tapping government reserves and cutting waste, an idea dismissed by critics who say reserves would quickly dry up.

But Naoshima said the reserves would be a stop-gap providing time for an overhaul of the budget to strip out redundant layers of bureaucracy and perks for former officials.

(Reporting by Hideyuki Sano and Tetsushi Kajimoto; Editing by Rodney Joyce and Neil Fullick)

((hideyuki.sano@thomsonreuters.com; +81 3 6441 1827; Reuters Messaging: hideyuki.sano.reuters.com@reuters.net)) Keywords: JAPAN ECONOMY/OPPOSITION

Make War, Not Love

Tokyo Dispatch
Tim Kelly, 03.22.09, 06:00 PM EST


East Asian tensions give Japan reason to back away from pacifist promise.

Floating in Yokohama bay, the Hyuga, a 13,500-ton vessel commissioned on March 18, is Japan's first aircraft carrier since America dismantled the Imperial Navy a half century ago. Yet, insists Japan's military planners, it isn't a war weapon.

To admit that it is would force them to tow it back to the shipyard and cut it up for scrap, because in its U.S.-penned postwar constitution, Japan gave up the right to wage war, and with it an army, navy or air force capable of delivering deadly force beyond its shores. The reality, however, doesn't match up to the document's aspirations; the aircraft carrier represents a step back from Japan's pacifist ideal. Nearly as long as two football fields, it can carry 11 helicopters tasked with destroying submarines that threaten Japanese shipping, a useful capability when you import almost all your oil from the Middle East. It's not, however, an offensive weapon, argue its designers, because it has neither a ramp nor catapult necessary to launch attack bombers. That assessment ignores the fact that aging Harrier jump jets or the F22 Raptor capable of vertical take off and landing could operate from the floating platform.

And if America ever lets Japan buy its latest state-of-the-art warplanes, Asia's pacifist nation has the cash to pay for them. It's one of the world's biggest military spenders, with a defense budget on par with the more militarily active U.K. Driving its more aggressive weapons choices over the past decade has been its capricious Stalinist neighbor, North Korea.

The hermit state in 1998 lobbed a ballistic missile over Japan that splashed down in the Pacific. To Japan's shocked populace, it revealed what its military already knew: With no missiles of its own, no aircraft carriers or long-range bombers, Japan was defenseless against a North Korean missile strike, a worrying prospect when the atom-bomb-seeking regime regularly threatens annihilation. Reminiscent of desperate wartime kamikaze attacks, some military planners at the time even suggested flying short range jet fighters to knock out North Korean missile bases if an attack was imminent. The pilots would have had to dump the expensive aircraft in the Sea of Japan when their fuel ran out.

A decade on, Japan is better prepared. It is deploying an American-designed sea-based ballistic missile shield and has Patriot missile batteries in Tokyo as a last line of defense against incoming warheads. Alterations to the Hyuga could even provide Japan with a sea-based runway for attack aircraft.

The North Korean threat, however, hasn't been menacing enough to persuade the Japanese to erase the pacifist clause in their constitution, but the pressure on it to do so is gaining.
Comment On This Story

Japan may become bolder too if North Korea starts shooting warheads over its islands again. Kim Jong Il's regime is threatening to do just that in April. The Koreans claim it will be a space launch, but it will give Japan's military heads an excuse to thumb through their latest weapons catalogues. Then, there's the growing military might of China to consider.

With economic stimulus taking fiscal priority, Japan is unlikely to raise military spending, yet to muscle up its armed forces it doesn't need to. Banned from exporting, its military contractors, led by Mitsubishi Heavy, maker of the renowned WWII zero fighter, can sell only to Japan's military. That means small orders and high unit prices. For the same price as a domestically built tank or jet fighter, Japan could buy several equally potent models from overseas. An inefficient procurement system compounds the high price problem.

By letting those companies export, or bid unfettered for lucrative U.S. military contracts, Japan's generals could get a bigger bang for their buck. It might even leave enough spare cash to pay for a few more sister ships for the Hyuga.

Japan Hits The Skids

Tim Kelly 01.30.09, 12:59 AM EST

Data released Friday show the economy is in worse shape than thought, putting more pressure on the embattled government.

TOKYO -- Taro Aso, Japan's beleaguered prime minister, stood up in Parliament on Wednesday, and in a speech mimicking the rhetoric of U.S. President Barack Obama, promised that Japan would lead the industrial world out of recession. Had he waited two more days, he may have blustered less.

A slew of economic data released Friday in Tokyo leaves no doubt that Japan's economy has hit the skids. Japan's unemployment rate in December jumped to 4.4% from 3.9% a month earlier as 340,000 more Japanese began looking for work. Industrial production shrank by a fifth compared with a year earlier and households spent 4.6% less than in November.

After much wrangling and criticism from opposition and ruling party lawmakers, Aso finally won approval for a $50 billion economic package aimed at stimulating domestic consumption. Small compared with the hundreds of billions the U.S. plans to spend, the slide into recession means Aso may have to dig deeper into state coffers. Neither do his plans address the reason for Japan's economic hardship: fewer exports. Shipments from Japan contracted 35% in December from a year ago, the biggest drop ever recorded. (See "Asia's Economic Dragons Wheezing")

Friday's numbers "suggest Japan is plummeting. The collapse is more broad," said Kyohei Morita, chief economist at Barclays Capital in Tokyo. Morita expects real GDP, which takes account of inflation, to shrink 5.8% this year.

In a sign of how much the drop in overseas demand is hurting corporate Japan, its biggest company, Toyota (nyse: TM - news - people ), expects to lose money this business year. (See "Facing Historic Loss, Toyota Returns Its Roots") Japanese media is reporting that its operating loss may be as much as $4.4 billion, more than double the amount the carmaker has so far admitted to. "I cannot confirm or deny the report," Toyota spokesman Paul Nolasco said. The automaker will release its third-quarter results on Feb. 6.

Consumer electronics and entertainment conglomerate Sony (nyse: SNE - news - people ) expects a loss of more than $1.5 billion this business year as it pays for factory closures and layoffs amid a slump in demand. (See "Sony's Own Bermuda Triangle")

Hitachi (nyse: HIT - news - people ) said Friday it will lose $7.9 billion because of plummeting sales that may prompt the electronic and industrial conglomerate to slash thousands of jobs. Carmaker Honda (nyse: HMC - news - people ) also cut its full-year profit forecast in half to $899 million.

For Aso, whose approval rating has dipped below 20%, the pressure to act is growing. He has to call national elections by September that will decide who governs Japan. Aso's crowd pleasers so far have included calling on corporations to retain workers and increase salaries.

In Japan fiscal spending "is more like social planning than economic policy," said Barclay's Morita. Japan's recovery will have little to do with what Aso or his successor do, and will, he added, "highly depend on fiscal spending in the U.S. and China."

Why Japan Should Prime The U.S. Pump

Tim Kelly
01.26.09, 01:08 AM EST


The odds that Tokyo can get Japanese to boost spending are long. Stimulating Western demand could pay higher dividends.

TOKYO -- After throwing money at its moribund economy for a decade, Japan gave up trying to stimulate domestic demand in 2001 and began mulling ways to cut the massive national debt it had amassed trying. U.S. consumers were on a spending spree and they, rather than Japanese shoppers, helped pull Japan out of a decade of recession as the likes of Toyota Motor, Sony and Panasonic gulped down profits overseas.

Now that Americans are aping the tight-fisted habits of their Japanese counterparts, policymakers in Tokyo are dusting of their tried and failed efforts at priming the domestic pump. Japan's deeply unpopular prime minister, Taro Aso, is struggling to persuade lawmakers to approve two stimulus packages worth $110 billion that include cash payments and tax breaks. With political paralysis holding up the aid, the refrain from Tokyo's economic gurus so far has been "no we can't."

Thinking instead of ways to get Westerners back into electronics stores and car showrooms may be a more effective way of saving Japan from its economic woes. For every 1% increase in gross domestic product, Japanese corporations can expect a 5% gain in operating profit. The same gain in global GDP adds 18% to Japan Inc.'s operating income, calculates Jesper Koll, director of Tantallon, a Tokyo hedge fund. Abroad, he points out, is where all the profit growth has come from.

That imbalance means that the 35% slump in December exports from a year ago, the biggest drop ever recorded, is a worrying sign for Japanese corporations. They are responding with layoffs and plant closures. Carmakers such as Toyota (nyse: TM - news - people ) have been hard hit and the collapse of auto sales in the U.S. has exposed their weakness at home. (See "Facing Historic Loss, Toyota Returns To Its Roots")

One option for Japanese policymakers would be to help fund American economic stimulus efforts by buying U.S. Treasuries. With President Barack Obama warning of huge federal deficits for years to come, the supply of U.S. government debt will be plentiful.

Japan so far has avoided buying more U.S. debt. Its balance of Treasury securities at the end of November was $577 billion, compared with $589 billion a year earlier. The Chinese, by contrast, have been loading up on American debt, adding $223 billion over the same period to leave it with a balance of $682 billion.

Of course, buying a lot of dollar-denominated debt could be interpreted in Washington as backdoor intervention to weaken the yen. Timothy Geithner, Obama's nominee for Treasury secretary, has warned Japan, China and other trading partners to avoid manipulation of forex rates that would bolster the yen and hurt U.S. exporters. The Japanese, therefore, may feel the need to tread lightly.

Japan should stick with stimulus at home, advises Richard Jerram, chief economist at Macquarie Securities in Tokyo. However, the scale of that spending should be much more than Aso is proposing, as much as 3% to 4% of GDP rather than the current 1.5%. "Massive tax cuts are one way," said Jerram, although, he added, "the chance of that happening are almost zero."

Though the government may have to fixate on persuading penny-pinching Japan to splurge, cash-rich Japanese corporations at least can make a difference to reviving the U.S. economy, reckons Thomas Donohue, head of the U.S. Chamber of Commerce. Toyota alone is sitting on about $23 billion in cash.

"It would be extraordinarily helpful [for Japan] to invest in infrastructure to technology, to financial issues in the U.S.," Donohue said on a recent visit to Japan. After all, for many companies, America is where their best customers are.

Japan's Mounting Discontent

Commentary
Gordon G. Chang, 01.23.09, 04:40 PM EST


What Taro Aso's low ratings mean for his country's future.

"If I dissolved the lower house immediately, would that be an effective economic policy?" asked Japanese Prime Minister Taro Aso last week. "Politics would halt for two months."

Japan's people, given their sour mood of late, would actually like to see the end of politics, or at least politics as they have known it. Aso's Liberal Democratic Party, which has ruled the country for all but 11 months since 1955, is on the verge of losing control of the lower house of the Diet, the national legislature.

Aso's approval rating last month fell to 16.7% in one poll, the lowest it has been since he became prime minister and lower than either of his two immediate predecessors when they resigned, each after a one-year turn in power. The charismatic Aso has been in office since September, when his party chose him to succeed the bland and worn-out Yasuo Fukuda.

Instead of calling a snap election--at a time when his approval rating was almost 50%--Aso decided to govern without a fresh mandate. Since then, his popularity has steadily declined as the Japanese economy has eroded. In November, Tokyo officially declared a recession. That month, exports plummeted 26.7 %, the biggest drop on record, and the current account surplus fell for the ninth straight month.

December numbers, which are beginning to come out this week, look even worse than those for the preceding month. The slide in the economy's fourth quarter is likely to be the worst in 34 years, and the prospects for this year do not appear better. There is, at this moment, nothing that looks like it will break the fall of the Japanese economy. Aso, unfortunately for him, will take the blame for quickly deteriorating economic conditions.

Yet the prime minister is doing little to help himself. His stimulus plan is unpopular, especially the proposal to give every Japanese resident 12,000 yen. In a recent survey, 78% of those polled opposed the cash handouts. Aso, the heir to a fortune, did himself no favors with the electorate when he waffled when asked if he would keep his own payment, which amounts to about $130, if the plan were put into law.

Worse, he has maintained a lavish lifestyle of frequenting upscale Tokyo watering holes while many Japanese have suffered and some have lost their jobs, homes, and most everything else. "Aso is worse than a lame duck," noted one political science professor in Tokyo. "He's more like a headless chicken."

Despite Aso's political problems, his Liberal Democratic Party and its coalition partner, New Komeito, currently exercise control in the Diet's lower house. That hold, however, was weakened last Tuesday when Yoshimi Watanabe, a minister in previous governments, resigned from the LDP. "Unfortunately, Aso's Liberal Democratic Party has practiced politics completely disconnected from the people," he said.

Aso does not have to call a lower house election until September, and he said he would not do so until the budget passes, presumably in April. Until then, he can probably get most of what he wants, despite the fact that the main opposition party, the Democratic Party of Japan, controls the Diet's less powerful upper house.

The only bright spot for the embattled prime minister is that the public does not think much of Ichiro Ozawa, the head of the DPJ. Ozawa polled better than Aso in a recent survey, yet more than half the voters said they did not want either of them. So it is theoretically possible that the upcoming lower-house elections will not change leadership of the chamber. That result--a continuation of split government with the LDP controlling the lower house and the DPJ dominating the upper one--would not be good for a Japan that needs strong and unified leadership in the downturn.

But even if Ozawa throws away his advantage and does not dethrone the LDP between now and September, it seems there will soon be a fundamental realignment of Japanese politics. The last strong prime minister was Junichiro Koizumi, who was popular precisely because he had promised to tear apart the political system. His three successors--Shinzo Abe, Fukuda, and Aso--have been weak largely because they were seen to practice old-school politics. The Japanese electorate, in short, wants change. If neither Aso nor Ozawa can deliver it, someone will, and probably sooner than we expect. Some expect LDP legislators to follow Yoshimi Watanabe's lead and bolt the party after the Diet passes the budget.

Japan now has a restive population that could, at the ballot box, create a once-in-a-lifetime transition, and any fundamental political realignment promises to be a momentous event. After all, Japan has the world's second-largest economy and maintains Asia's only international currency. It is the cornerstone for America's security arrangements in East and North Asia.

Observers talk about Japan's "lost decade" after the crash of the bubble economy in the early 1990s. That period of stagnation now appears to be ending as Japanese voters are getting over their fear of change. The country that emerges from the current political crisis, therefore, will not look like the one we see today. For one thing, it promises to be more assertive due to an engaged citizenry. At one time, the overwhelming majority of the Japanese were content to let the LDP and the bureaucrats run things. That's no longer the case.

As Aso should know by now, Japan's voters, contrary to his expectations, would like him to take two months off from politics as it is practiced today--in fact, they want the current set of politicians to take a permanent holiday. Japan will be better for their discontent.

Gordon G. Chang is the author of The Coming Collapse of China.

http://www.forbes.com/2009/01/23/japan-taro-aso-oped-cx_ggc_0123chang.html