Shifts in Japan’s Political Economy Regime Adjustments and changes

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

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support new political parties, independent movements, and changes in voter patterns divisions within regime supporters superseded earlier left-right divisions central concern of regime continuity

Socioeconomic challenges

Socioeconomic challenges

Socioeconomic Challenges Small businesses Service sector firms Agriculture sector Large and more sophisticated industries Shrinking bases of the conservative regime’s electoral coalition

Challenge 2: aging population

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

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

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

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

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

LDP electoral recovery

Economic recovery (1980s)

Bubble burst

Stock market 1987-2018

United States versus Japan Emphasis on total demand vs. total supply Corporate emphasis on maximization of profits versus market share and growth Shareholders>Customers>Employees vs. Employees>Customers>Shareholders Individual emphasis on consumption and leisure versus saving and work ethic Individualism versus communitarianism

International challenge External conditions challenged conservative policies threatened conservative socioeconomic support challenges to exchange rate policies Bretton Woods monetary system broke down In 1973 Yen began to float freely against US$ In 1985 G5 countries signed the Plaza Accord

International challenge international price of raw materials Japan’s dependency on imported oil (99%) inflation balance of payments domestic productivity

International challenge Increasing pressure from US and Europe reductions in Japanese tariffs, import quotas, and non-tariff barriers voluntary export restraints open Japanese market (rice tariff ¥442/kg) Japanese military spending (1% of GDP) challenges to vital aspects of Japan’s conservative economic policy profile