JFS Newsletter No.86 (October 2009)
http://www.japanfs.org/en/mailmagazine/newsletter/pages/029491.html

When the Democratic Party of Japan (DPJ) won an outright majority in Japan's 45th House of Representatives election on August 30, 2009, the Liberal Democratic Party of Japan (LDP) lost its place as the leading party in the national Diet for the first time since the party was established in 1955. For the first time since World War II, an opposition party won a single-party majority in a general election and caused a major shift in political power. New Prime Minster Yukio Hatoyama took office on September 16 after this landslide victory.

With the dawn of this new DPJ-led administration that came to power calling for a greater role for politicians in running the country, the dynamics of political decision-making is changing dramatically here, and this includes the relationship between bureaucrats and politicians. The new government has also started to exercise leadership in the international arena. In this article, I will examine the situation this new government brings, and changes expected to happen in the Japanese approach to the environment.

First, I will briefly explain the political decision making process that existed in the past. Since 1955, the strong relationship between the LDP and industry has propelled the Japanese economic recovery and growth after World War II. The situation sometimes led to cozy relationships between the two. Many people believe that the rejection of the LDP by voters who demanded changes in the long-established rigid systems and sense of stagnation in society brought about the results of this election.

In addition, Japan's governmental bureaucracy is well known for its compartmentalized structure. Each ministry and agency strongly protects its own jurisdiction. This structure limits the power of Japan's Ministry of the Environment (MOE) when it comes to directing national environmental policy, compared to similar ministries in other countries. For example, the MOE cannot take action on issues relating to energy and industry, because they fall under the jurisdiction of the Ministry of Economy, Trade and Industry (METI). Construction and transport are under the Ministry of Land, Infrastructure, Transport and Tourism. Forestry and food are under the Ministry of Agriculture, Forestry and Fisheries. In effect, many environmental-related issues are outside the MOE's formal jurisdiction.

When it came to the economic policy, a strong relationship between METI and industry protected Japanese companies and forged their competitiveness in the global market as they deployed either a convoy system or flagship system. Under a convoy system, non-competitive industries were protected from international competitors. Under a flagship system, METI chose two or three large companies for preferential treatment, allowing these companies to become strong contenders in global markets. The relationship between bureaucrats and industry was reinforced by the practice of "amakudari," or "descending from heaven," whereby retired ministry officials would be given important positions in companies, which could in turn have a strong influence on governmental policy through them.

Keidanren, or the Japan Federation of Economic Organizations, has had an enormous influence within Japanese industry. It is a multi-industry federation of large corporations, and key posts within it are shared among strong companies. Outside of the country, the best-known Japanese companies are in relatively newer exporting industries like automobiles, electrical equipment, and machinery. Within Japan, however, the older industries like steelmaking and power utilities, which have long supported Japanese industry, are still very powerful and have a strong influence over politicians and bureaucrats.

Under these circumstances, the LDP administration was bogged down in various obligations and ties. The party was often criticized for favoring industry rather than the public. In the previous administration, led by Prime Minister Taro Aso, Japan announced its medium-term greenhouse gas emissions reduction target for the year 2020 as 15 percent below the 2005 level (equivalent to 8 percent below the 1990 level). These figures were partly the outcome of the LDP administration listening to the strong voice of industry claiming that an ambitious medium-term target would hurt Japanese industry and the economy.

Against this backdrop, the DPJ came to power in response to public demands for change. Unlike the LDP, the new administration has neither strong connections nor political ties to the Keidanren, and it is also telling bureaucrats that politicians will have a greater role in running the country. These factors have let the DPJ-led administration take a series of drastic actions in rapid succession, including the suspension or review of dam construction projects even while they are in progress.

Internationally, the new administration has also started taking the initiative to increase its influence in the world, ending the "inward-looking" politics of the past. When it comes to climate change, the DPJ-led administration is well aware that Japan should play a major role in developing a system that enables the United States, China, and other major countries to discuss the issue on equal footing. Instead of the previously-announced goal for the reduction in greenhouse gas emissions (stated above), which disappointed many countries and people, the Japanese government has proudly declared a new medium-term target based on scientific requirements, on the premise of establishing an effective international framework in which all major emitters will participate.

On September 22, 2009, during his address to the United Nations Summit on Climate Change, Prime Minister Hatoyama announced the medium-term goal of reducing greenhouse gas emissions by 25 percent from the 1990 level by 2020. He announced a number of domestic policies to help reach the target, including the introduction of a domestic emissions trading mechanisms and a "feed-in tariff" for renewable energy (set prices for power producers), and said the country would consider a tax to fight global warming. Moreover, he proposed the "Hatoyama Initiative," calling for the active involvement of the international community in providing financial assistance and transferring energy efficient-technologies to developing countries.

Until recently, Japan's environmental diplomacy was regarded as "reluctant" and "ambiguous." Hatoyama's statement marked a turning point, showing Japan's desire to provide strong leadership in tackling climate change. In fact, the address was highly appreciated by the leaders at the summit and in many other countries.

How are these new commitments regarded in Japan? In a national opinion poll by the Yomiuri Shimbun, a major Japanese newspaper, immediately after the new cabinet was launched, 74 percent of respondents supported the new target of a 25 percent reduction by 2020. In a national opinion poll on October 11 and 12 by the Asahi Shimbun, another major newspaper, the approval rating for the international commitment of a 25 percent reduction by 2020 was 72 percent, while the disapproval rating was 21 percent.

On the other hand, strong concerns are being expressed by industry, particularly steelmaking, power utilities, and oil industries, which hold an important position in business communities across the country. The following are some of these comments reported by the media.

The chairman of the Kobe Chamber of Commerce and Industry, Koshi Mizukoshi, criticized the target as nonsense at a press conference, saying that it would definitely be against the national interest and would hamper Japanese companies' production activities at home. Akio Mimura, representative director and chairman of Nippon Steel, also said the target would greatly harm the competitiveness of Japanese industry, and might result in the exodus of Japanese companies forced to move overseas. Hiromasa Yonekura, the chairman of the Japan Chemical Industry Association (also the chairman of Sumitomo Chemical Co., Ltd.) criticized the target, saying it was wrong to set such a high goal just to demonstrate leadership in the world.

Meanwhile, the media has also reported comments from executives of corporations with environmental technologies, saying that the heavy industries were unaware of global trends that now require companies to take environmental initiatives to remain competitive. A growing number of companies clearly state that the high target should be seen as a great opportunity for industry.

Yoshio Tateishi, chairman of Kyoto Chamber of Commerce and Industry, who also serves as the chairman of Omron Corp. (Japanese manufacturer of control and electronic devices) praised the medium-term goal of the Hatoyama Cabinet as "a high aspiration in which Japan plays a leading role in tackling global warming" and commented that "(the goal is) feasible with technical innovations." In a speech, Katsumasa Shinozuka, chairman of OKI Electric Industry Co. (Japanese information technology and electrical equipment company) expressed his acceptance of the medium-term goal, saying it was necessary to set a high goal for greenhouse gas emission reductions.

Akio Toyota, president of Toyota Motor Corporation, said, "To reach the medium-term goal of the government, this company will step on the accelerator, not on the brake." The company is "currently conducting an in-house study" of the necessary measures to achieve the goal, he said. Since the advent of post oil society is inevitable, he said the company has to consider the introduction of electric and fuel cell cars, and he emphasized that his company has policies to accelerate the development and broad use of various kinds of environmentally-friendly vehicles in addition to commercially-available hybrid cars.

Kazuo Inamori, honorary chairman of Kyocera Corp. (Japanese manufacturer of electronic and communication devices and solar panels) said, "The Japanese government and industry need courage to overcome the difficulties. Some people in the business world criticized the government's goal as too heavy a burden, but the failure to act now will lead to ruin for humanity."

Noriyuki Inoue, chairman of Daikin Industries, Ltd. (Japanese air-conditioning manufacturer) said "There is a business opportunity. Against a backdrop of a deteriorating global environment, we need to challenge ourselves with a high goal, and from there innovation will occur." Katsuhiko Machida, chairman of Sharp Corp., expressed doubts with the 2020 deadline, but as a leading manufacturer of solar cells welcomed the birth of a new government in Japan, saying "The DPJ is very environmentally conscious, which makes it easier for us to do our work."

The previous administration insisted that for a 25 percent reduction in emissions, the required public and private investment would total 190 trillion yen (about US$2.11 trillion), with an annual burden per household of 360,000 yen (about US$4000). It also claimed that such a reduction target would inevitably mean an increase in unemployment and the loss of production (due to relocation to overseas) in energy-consuming industries. The Hatoyama administration has taken a different stance, commenting that the previous administration was using a model that sought the highest economic growth by 'doing nothing' to stop climate change. It has decided to completely revise the numbers presented by former Aso administration, which failed to adequately consider the economic benefits of environmental investments and technological innovations.

In early October 2009, the government unveiled its plan to finalize the overall plan and detailed regulatory design to achieve the medium-term goal of a 25 percent reduction in greenhouse gas emissions. The details, including consideration of impacts on citizens'lifestyles and concrete approaches for emission reduction, are to be finalized by the spring of 2010.

The policy measures promoted by the DPJ will now go into a concrete regulatory design phase. These policies include a plan to eliminate highway tolls -- a plan criticized for its potential to go counter to the goal of tackling global warming. I will monitor how the new government exerts its leadership inside and outside of Japan, and will criticize where necessary, but also support and encourage actions in right direction.

In the future issue, I will introduce the concrete policy measures promoted by the DPJ including an interview with a DPJ legislator involved in environmental governance. Don't miss it!