How Koizumi Did In The LDP

If there were obituaries in politics, the following would likely appear in Tokyo in late August: "The Liberal Democratic Party—which ruled the nation for five decades, presiding over its phenomenal rise and its more recent slide into stagnation—died on Aug. 30 due to complications from political sclerosis. It was 53 years old."

Declaring the LDP dead in advance of Japan's general election may seem a bit hasty. But with the ruling party trailing the opposition Democratic Party of Japan by roughly nine points in the polls, the results seem all but guaranteed, and the campaign itself has become something of a death march for the once proud Liberal Democrats. Even before the electioneering started, former defense minister Yuriko Koike likened her party's quandary to that faced by Japan's Army during the World War II Battle of Guadalcanal, when more than 20,000 Japanese soldiers died in a suicidal operation. Prime Minister Taro Aso has lately been heard discussing a "graceful defeat."

As with any high-profile death, experts have already started trying to determine the causes. So far, most of the blame has focused on Aso, but he is merely an aggravating factor. Vaulted to the leadership last September in the hope he could cure the faltering party, he squandered his modest popularity through indecision and a string of gaffes. By July, things had gotten so bad that more than a hundred LDP legislators rebelled, calling for his resignation. Aso survived, but the party that produces such leaders—both of his predecessors threw in the towel after only a year—may not.

The death of the LDP system has been inevitable for some time, for two reasons. First, its core political model—trade pork for votes—has become unsustainable in a country with a slow-growing economy and a public debt of $8 trillion. Second, the party had been grievously weakened by its supposed savior, former prime minister Junichiro Koizumi. Koizumi's reforms, though popular at the time and viewed as good for Japan, had two potentially fatal, unintended consequences: they undermined the LDP's ability to govern effectively and alienated its vote base.

Things weren't always so tough. The LDP's core strategy was solidified in the 1970s, when the steely Prime Minister Kakuei Tanaka revamped the nation's infrastructure, building a vast new network of highways and bullet trains connecting the cities to rural areas—all of which sped Japan's industrial development and distributed plenty of pork to key allies like the construction industry. Tanaka's effort to improve rural conditions was part of a popular campaign to make Japan more egalitarian—and it worked, spreading wealth and strengthening the LDP. In the decades that followed, Tanaka's followers and Japan's bureaucracy kept the machine humming by continuing to generously dole out cash to favored supporters, and the farm lobby became a pillar of the party's base. The LDP's increasingly powerful operation was funded by the government's highly successful cultivation of the export sector and its efforts to drive domestic demand, which created the growth—and the tax revenue—that made LDP pork so plentiful.

But the good times came to a crashing end in the early 1990s, when the crash of a huge real-estate bubble triggered the beginning of Japan's "lost decade." As real-estate prices plummeted, domestic demand withered and the financial sector became saddled with bad loans. Yet the LDP failed to squarely deal with these problems, and it spent so much on pork that Japan failed to invest in new export industries, even as lower-cost rivals began threatening its dominance. Instead of directly addressing slowing growth, the LDP continued to steer cash to old allies in construction and in rural areas rather than create industries of the future. The result was that the Japanese government kept building impossibly expensive roads and bridges to nowhere, even as average annual GDP growth for the 1990s dropped to less than 2 percent. Disgruntled voters began noticing the party's darker side—its coziness with interest groups and its endemic corruption. In 1993 the LDP even briefly lost power when scores of its legislators bolted its ranks.

As conditions worsened further, the LDP doggedly stuck to its old ways. From 1992 to 2002 it came up with 18 different stimulus packages. But these measures were all short on fresh ideas and full of wasteful spending. The LDP still managed to cling to power, but only because there was no real alternative in Japan—for most of the LDP's life, the only significant opposition came from the socialist and communist parties, which were unattractive to Japan's conservative majority. The LDP's chief cabinet secretary, Seiroku Kajiyama, seemed to capture this key to his party's success in 1996 when he reportedly said, "The LDP's raison d'être is that corruption is at least better than communism."

Then Junichiro Koizumi swept onto the scene in 2001, and suddenly it seemed that the LDP might have found its savior, a man who would break with the party's ineffective old habits and create a modern operation full of new ideas. Koizumi, who was 59 when he became prime minister, was an unusual Liberal Democrat in both style and substance. With his longish hair, his penchant for heavy metal, and his unconventional and confrontational tactics, he stood in stark contrast to his party's bland, geriatric pols. Voters were electrified by his personal charisma, and pundits and the public alike applauded his insistence that there could be "no economic growth without structural reform." Japan had become a one-party state, in which the LDP funneled tax money to favored industries and spread the wealth to its allies. Now the system had ossified and the growth was gone. Koizumi promised to bust it all up and introduce market competition in the process.

Having built high approval ratings by appealing directly to the voters over the party's head, Koizumi began using his personal capital to attack the LDP's notorious faction system, which was criticized at the time for promoting corruption and backroom dealing. To shake things up, he began appointing cabinet members himself, some from the private sector, rather than allowing factions to assign jobs based on seniority, and he publicly attacked a powerful rival faction as "resistance forces" opposing his reforms.