Japan's New Leader Aso Promises More of the Same

Consider the situation in Tokyo today. Japan's economy is teetering on the brink of recession. Consumer confidence is hitting lows not seen in years. The population is graying and shrinking. And next-door China is on a tear.

Given these challenges, you might expect Taro Aso, 68—who was named Japan's prime minister last week after the shocking resignation of Yasuo Fukuda—to bring a clear economic agenda, a sound international strategy and a team that put competence first.

If so, you'd be wrong on all counts. On the economy, Aso has said little and backed away from government targets to balance the budget. Several members of his cabinet are hardline conservatives with revisionist views on Japan's wartime record. And his team is heavy on party insiders—just the sort of people who have blocked change in the past.

There is a certain logic behind this. Though he just took office, Aso is likely to face a constitutionally mandated election within months. The opposition Democratic Party of Japan (DPJ), which already controls the upper house of Parliament, promises to put up a good fight. Unless Aso can win over key constituencies fast, he could soon be ousted.

Hence the pandering. Koji Shimamoto, chief strategist at BNP Paribas in Tokyo, says that Aso's economic proposals, such as financial support for small businesses and fishermen, are meant "to appeal to traditional supporters of the LDP." Observers fear that means a return to the 1990s, when the LDP lavished government money on public works in an attempt to pull the country out of its doldrums.

Of course, such an approach didn't work then and only saddled Japan with massive public debt. Pointing to that debt (now around 170 percent of GDP), some analysts argue Aso won't be able to dole out much pork even if he wants to. But so far, he has yet to signal anything different. Pretty much all Aso has proposed is a series of tax cuts for businesses to stimulate the economy. That's a notably small-bore solution given the magnitude of Japan's challenges, notes Tetsuro Okada, an economist at The Japan Research Institute, and unlikely to do much good in the long term. Okada says what Japan really needs are measures such as free-trade agreements and agricultural reform—things to which Aso has given short shrift.

In the absence of a clear agenda, experts are studying Aso's cabinet nominations for clues to his intentions. But this approach offers little cause for hope. New York University's Edward Lincoln notes that Aso and some of his appointees hold opposite views on key economic issues, suggesting ministers were chosen mostly for the constituencies they represent. Lincoln says he finds it remarkable how many appointees are, like the prime minister himself, second- or third-generation LDP members who represent powerful factions. Of 18 cabinet posts, four have gone to politicians with fathers or grandfathers who were prime ministers, and ten cabinet members are the children of former LDP parliamentarians.

Aso may be banking that these machine politicians can help him muster support in the upcoming election. But it's a risky strategy. His nominees are unlikely to promote reform and may cause international problems as well: for example, his new finance minister, Shoichi Nakagawa, is an ultraconservative defender of Japan's wartime past and one of the country's only top politicians to have suggested that Japan develop its own nuclear deterrent.

Aso may think his personal popularity will nonetheless give him an edge on the hustings. His reputation as a comics-reading aristocrat does seem oddly appealing to many Japanese, and a recent Kyodo poll put his personal approval rating at 54 percent, 30 points ahead of the DPJ leader Ichiro Ozawa, who's known for muddled speeches and a penchant for intrigue. Even if Aso does manage to lift his party to victory, however, the DPJ will retain control of the upper house, leading to legislative gridlock—the very thing that helped undo Aso's predecessors, Fukuda and Shinzo Abe.

That could prove maddening for Aso, who's been bred to expect LDP dominance and control. "Imagine watching your granddad and your dad being able to push through whatever they want, and suddenly you're stuck with actually having to talk with Ichiro Ozawa," says Ken Worsley, editor of the Web site JapanEconomyNews.com. "I'd last about a week." Aso will probably hang on for longer than that. How much longer, however, remains far from certain.