Shifts in Japan’s Political Economy Regime

1. Shifts in Japan’s Political Economy Regime Adjustments and changes

2. Conservative dominance (’60s) • Power and influence of conservatives rose • at the expense of the political left • conservative supporters benefited • prosperity and peace • side payments • successes in economy and in politics reinforced each other • favorable international environment

3. Challenges (1970s and 1980s) • Socioeconomic bases of support • new political parties, independent movements, and changes in voter patterns • divisions within regime supporters superseded earlier left-right divisions • central concern of regime continuity

4. Socioeconomic challenges

5. Socioeconomic challenges

6. Socioeconomic challenges • rise of large and technologically more sophisticated industries • rise of the service sector firms • relative decline of agriculture sector • relative decline of small businesses • shrinking bases of the conservative regime’s electoral coalition

7. Challenge 2: aging population

8. Challenge 3: labor shortage • Economic success • rising demand for labor • expanding influx of labor after WWII • low-cost, young, highly-skilled • changing age profile of the population • bargaining power shift from management to labor

9. Challenges to LDP • Urbanization and rise of middle class • Socioeconomic base of conservative support shrank • Mobilization capabilities of LDP supporters declined • People identified with party independents increased • outnumbered LDP supporters in 1974

10. Challenges to LDP • Increased voter option in 1960s and 1970s • formation of new parties • transformation of existing parties • in both conservative & the political left • threatened both LDP and JSP • threatened conservative electoral and legislative hegemony

11. LDP responses (1970s & ’80s) • Attract new electoral support • shore up conservative support • draw away organized labor from DSP & JSP • attract the new middle class • non-voters and non-partisan voters • LDP dilemma between traditional supporters and new appeal

13. LDP responses • Adjustments in policy or institutions • less tightly linked policy profile • firm-level cooperation with labor • substantial deficit finance for political target • fiscal austerity and privatization • manufacturing firms became multinational • defense and security policies

14. LDP electoral recovery

15. Economic recovery (1980s)

16. Bubble burst

17. Stock market woes (2000s)

18. International challenge • External conditions • challenged conservative policies • threatened conservative socioeconomic support • challenges to exchange rate policies • Bretton Woods monetary system broke down

19. International challenge • international price of raw materials • Japan’s dependency on imported oil (99%) • oil prices quadrupled in 1973 • oil prices rose by 2.8 times in 1979-80 • inflation • balance of payments • domestic productivity

20. International challenge • Increasing pressure from US and Europe • reductions in Japanese tariffs, import quotas, and non-tariff barriers • voluntary export restraints • open Japanese market • Japanese military spending • challenges to vital aspects of Japan’s conservative economic policy profile