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It's the Economy, Baka

© Jason Gottlieb

Two years after pledging that he would deregulate the economy or burst into a ball of flame, Japanese Prime Minister Ryutaro Hashimoto finally combusted. In the July 12 elections for the Upper House of Parliament, his Liberal Democratic Party (LDP) suffered a crushing defeat, winning a majority but far fewer seats than expected. The poor showing was a resounding vote of no confidence from the Japanese people, still frustrated by their government's complete lack of ability to rescue the ailing economy.

Taking over as LDP chairman (and almost certainly Prime Minister) is Keizo Obuchi, a former Foreign Minister who has most memorably been described as "cold pizza." He beat out 72-year-old veteran LDP politician Seiroku Kajiyama, and the young Turk head of the Ministry of Health, Junichiro Koizumi, 56. Kajiyama is reputed to be fairly knowledgeable about economics, and Japan's financial markets supported him. But his age, combined with a remark comparing prostitutes in Japan with blacks in America -- they both ruined a neighborhood when they move in, he said -- made the rest of the public a bit uneasy. Koizumi is best known, and well respected, in Japan for sacking dozens of officials a few years ago involved with a scandal where the Ministry used blood it knew was tainted with HIV in administering transfusions to hemophiliacs. However, he is seen as rather young for Japanese politics, and widely seen as lacking expertise in economic matters, which is of crucial concern of the Japanese public.

The LDP, never a party to pay much attention to the public, chose Obuchi as their new leader. At 26, he left graduate school in English literature to become the youngest politician ever elected to the Japanese Diet, and he has served as Okinawa development minister, chief cabinet secretary, and, most recently, Foreign Affairs Minister. He is the classic gray man in a gray suit, who reached the top by keeping his head down, never voicing an unusual or unpopular opinion, never angering anybody. Naoto Kan, head of the Democratic Party of Japan (DPJ), Japan's leading opposition party, said of Obuchi that he "appears to be a mild-mannered person, but I have no recollection of him offering a strong message on the economy." Or, indeed, much of any message.

Obuchi's economic expertise is quite limited, and what Japan needs now is economic help. With its economy officially in recession, Japan remains teetering on a very precarious brink. Falling off that brink carries with it an excellent chance of ending the bull run in the United States and Europe. The United States, experiencing almost record low unemployment, is already starting to feel the pressures of an economy running too hot. So far, the Asian crisis has put enough of a damper on things that American interest rates, and inflation, have remained steady.

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