Thursday, March 28, 2024

Japan's Monetary Policy Changes toward Normalization

But Unlikely to Boost Kishida Administration

By Takuya Nishimura, Senior Fellow, Former Editorial Writer for The Hokkaido Shimbun
The views expressed by the author are his own and are not associated with The Hokkaido Shimbun
You can find his blog, J Update here.
March 24, 2024. Special to Asia Policy Point

The Bank of Japan (BOJ) decided to end its negative interest rate policy and to modify its Yield Curve Control (YCC) program, at the Monetary Policy Meeting (MPM) on March 19. Closely watching the condition of the Japanese economy, in particular the current trend of wage hikes, the Central Bank judged “it came in sight that the price stability target of two percent would be achieved in a sustainable and stable manner.”

However, this is not a declaration of having reversed decades-long deflation. Welcoming the BOJ decision, Prime Minister Fumio Kishida stressed his determination to end the deflation.

In the statement issued after the MPM, the BOJ raised the target for the uncollateralized overnight call rate (otherwise known as the short-term interest rate) from a negative rate to just above zero -- 0 to 0.1 percent. The target rate, which is based on trades in accounts that that private financial institutions hold at the BOJ, was minus 0.1 percent to zero percent before the decision.

The BOJ also decided to discontinue two parts of the YCC program. First, the YCC had included a hard cap of 1.0 percent on Japanese government bonds (JGB). The BOJ removed this cap. Second, as part of the program, the BOJ purchased exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs). The bank had started the purchases of these assets in 2010. BOJ has now ceased these purchases.

BOJ has not entirely abandoned the YCC, however; it will continue to purchase long-term Japanese government bonds (JGB) in the same amount as before -- six trillion yen per month. Although the bank recognized in the latest MPM that the negative interest policy and the YCC had fulfilled their roles, it will continue to purchase JGBs in case of a rapid rise in long-term interest rates.

On the reason for this change of policy, in his press conference the BOJ Governor Kazuo Ueda referred to the current tendency to raise wages in the annual wage negotiations of private firms. In the interim report of the Japan Trade Union Confederation, or Rengo, in mid-March, the average ratio of wage increases showed a 5.28 percent rise, exceeding five percent for the first time since 1991.

The mixture of a short- and long-term interest rate policy has been unusual for a Central Bank. The BOJ was the last Central Bank in the world to hold to a negative interest rate policy. Ueda stressed that the Bank would use the short-term interest rate as the BOJ’s primary policy tool once monetary policy is normalized. “It is anticipated that accommodative financial conditions will be maintained for the time being,” said Ueda.

“It is appropriate to maintain accommodative financial conditions from the perspective to assure a positive trend in the economy,” said Kishida about the BOJ decision. He added that he was not thinking about revisions to the joint statement, commonly called the accord, released by the government and the BOJ in 2013. To overcome deflation and achieve sustainable economic growth, the accord set a two percent inflation target. This remains the BOJ’s target.

The accord is the origin of the BOJ’s ultraloose monetary policy. Two months after the accord, the BOJ Governor Haruhiko Kuroda, who was appointed by Prime Minister Shinzo Abe, announced in his first press conference that he would attain the price stability target of two percent within two years. Although the target was not achieved in two years, the BOJ maintained this goal. The Bank introduced the negative interest rate policy and the YCC in 2016, pouring a large amount of money into the market.

The BOJ policy was closely connected to the economic policy of the Abe administration, called Abenomics. “The Government and the Bank of Japan will strengthen their policy coordination and work together,” says the accord. Bold monetary policy was one of the three pillars of Abenomics, together with an agile fiscal policy and a growth strategy for the private sector. Although Abenomics brought about the depreciation of the Japanese yen, encouraging exporters in Japan, it did not result in an increase in workers’ real wages, an index which takes price hikes in account.

It was after Abe retired as the prime minister that consumer prices showed an apparent rise, mainly caused by foreign events such as Russia’s invasion of Ukraine. Repeatedly encouraged by the government, private firms began to increase workers’ wages. The stock market rallied with foreign investments attracted by the cheap yen and by the instability of the Chinese economy. The BOJ decided that a positive cycle of price hikes and wage hikes can be expected, even though the current condition of the Japanese economy does not necessarily reflect its power for growth.

The BOJ’s large-scale monetary easing policy has been criticized for distorting the market. The BOJ holds over half of all JGBs in the market. If the BOJ were to remove its JGBs from the balance sheet along with other changes to the YCC policy, it would have a great impact on the market. If the interest rate on JGB goes up, the government, whose budget is highly dependent on JGBs, has to pay it.

The interest rates on housing loans are expected to be rise, possibly shrinking consumption. The people in Japan need to live in “the world with interest rates.”

Higher interest rates also may affect small and medium-sized enterprises (SMEs) when they borrow money from bank. Seventy percent of all firms in Japan are categorized in SMEs, and their profitability is lower than large firms. Whether SMEs can add their cost increases from higher interest rates to consumer prices may be the key to achieving a sustainable price rise.

Although the BOJ does not believe that the price stability target has been achieved, Prime Minister Kishida is searching for the right time to declare that the era of deflation has ended. He expects the declaration to boost his administration’s low approval ratings. However, BOJ Governor Ueda did not indicate when Japan would exit from deflation or when the Bank would further raise the target interest rate. It is thus uncertain whether the condition of the Japanese economy will help the Kishida administration.

Sunday, March 24, 2024

Monday Asia Events March 25, 2024

THE RIPPLE EFFECT: CHINA’S COMPLEX PRESENCE IN SOUTHEAST ASIA. 3/25, Noon-1:30pm (EDT), HYBRID. Sponsor: Columbia-Harvard China and the World Program. Speaker: author Enze Han, Associate Professor at the Department of Politics and Public Administration, The University of Hong Kong. PURCHASE BOOK:

BOOK TALK: SOMEONE ELSE’S EMPIRE. 3/25, Noon-1:00pm (EDT), VIRTUAL. Sponsor: Quincy Institute for Responsible Statecraft. Speakers: author Tom Stevenson, Contributing Editor, London Review of Books; Anatol Lieven, Director, Eurasia Program at the Quincy Institute for Responsible Statecraft. PURCHASE BOOK:

BOOK TALK: TOWARD A COMPARATIVE HISTORY OF SEXUAL VIOLENCE BY LEADING FEMINIST CHIZUKO UENO. 3/25, 2:00-3:30pm (EDT), HYBRID. Speaker: Chizuko Ueno, Professor Emerita University of Tokyo, Chief Director of the Non Profit Organization, Women’s Action Network; Moderator: Carol Gluck, George Sansom Professor Emerita of History, Columbia University.

Saturday, March 23, 2024

Apology at the LDP’s National Convention

Snap Election not yet 

By Takuya Nishimura, Senior Fellow, Former Editorial Writer for The Hokkaido Shimbun
The views expressed by the author are his own and are not associated with The Hokkaido Shimbun
You can find his blog, J Update here.
March 18, 2024. Special to Asia Policy Point

Japan’s Liberal Democratic Party (LDP) held its annual national convention in Tokyo on March 17. The party decided to amend its constitution to impose stricter penalties on its members who were involved in the slush fund scandal. Prime Minister Fumio Kishida, LDP president also apologized for the scandal that increased public distrust of the government. Although Kishida repeated his hope for the restoration of confidence in the LDP, he remained unsuccessful in raising the approval rating for his cabinet, casting a dark shadow on his future.

Kishida’s speech at the national convention dealt with party reform to restore confidence in the LDP. “I am very sorry that party members received criticism from the local community on the slush fund scandal. We are amending laws related to political funds and urging related lawmakers to take full responsibility for the scandal,” he said. He added that he had ordered the Secretary General to penalize the lawmakers who were involved in the scandal.

The national convention is the meeting for decision-making in the LDP. Its agenda includes approving a platform for the year. This year the platform calls for political reform in light of the regret about mishandling of political funds by several factions, including Kishida’s own. The platform proposes amending the Political Funds Control Act, the LDP constitution, and other internal rules to ensure transparency of political funds.

The slush fund scandal affects the party activities of the LDP’s local branches. In a meeting of the secretary generals of the prefectural branches, held on the eve of the national convention, local LDP leaders complained about the mishandling of the scandal by party leaders in Tokyo. They demanded punishment of the offending lawmakers as soon as possible. Kishida responded, “I am going to make my best effort risking my life for revitalizing the party.”

The LDP failed to agree on the kind of penalty that should be imposed on each lawmaker involved in the scandal. The LDP listed 82 lawmakers, each affiliated with the Abe or Nikai faction, who had received secret funds from their faction. Although Kishida was not listed, he was the former head of his faction, The faction’s accounting manager has been found guilty of false reporting of the funds. It remains to be seen whether Kishida can avoid responsibility for the management, or rather mismanagement, of his faction.

The lawmakers involved in the slush fund affair have not taken heed of Kishida’s urging that they explain their involvement in the scandal. In the Deliberative Council on Political Ethics in the Upper House, one of the five leaders in Abe faction, Hiroshige Seko, said that he did not know about any secret funds of the Abe faction, even though he knew about the kickback system in the fundraising parties. The lawmakers who appeared on the council in both Houses repeatedly said that they did not know about the secret funds.

Kishida’s inability to put to rest the criticisms about the slush fund scandal further affects the approval rating for his cabinet. While the approval rating for the Kishida Cabinet was up one point, to 22% from 21% over the past month, according to Asahi Shimbun mid-March poll, the disapproval rating rose by 2 points to 67% over the same period. This was the highest disapproval rating since the LDP retook the ruling position in 2012. Polls in Mainichi Shimbun and Sankei Shimbun showed low approval ratings around 20%, although they showed a little improvement from February.

Kishida is focusing on the by-elections in the House of Representatives in late April to regain power in his administration. These elections will show how frustrated the public is with LDP politics. “If implementing policies is an aspect of politics, elections are another. Recognizing sharp criticisms against our party, though, I’m going to do my best to win the by-elections,” said Kishida to party members at the national convention, demanding unification of the party in its current difficult situation.

The election campaign in each district is far from hopeful for Kishida. In the Nagasaki 3rd district, where a lawmaker indicted for the false reporting of political funds resigned, Kishida has reportedly decided not to offer a LDP candidate. It is unusual for a ruling party not to enter any candidate in a district election. By default, this by-election will be counted as a defeat in one of the three by-elections.

A LDP lawmaker from the Tokyo 15th district was arrested last December on suspicion of violating the Public Official Election Act. He was found guilty in Tokyo District Court last week. The LDP has not found a new candidate for this by-election. Although the LDP is hopeful that it will have a candidate in the Shimane 1st district, it is not easy to win there. The former representative of the district was the late Speaker of House of Representatives, Hiroyuki Hosoda. The Shimane LDP faces an uphill battle because Hosoda was one of the former heads of the Abe faction, which was responsible for the slush fund scandal.

If the LDP loses all the three by-elections, there will be serious thought given to replacing Kishida. The results of by-elections typically foreshadow the results in the next general election of the House. The Representative of LDP’s coalition partner Komeito, Natsuo Yamaguchi, has rejected an early snap election, saying that Kishida should not call for dissolution of House of Representatives until the LDP has restored public confidence for its politics.

In the discussion of the Upper House Committee on Budget on March 18, Kishida denied he would call a snap election before LDP concludes determining penalties for the lawmakers involved in the slush fund scandal.

Apart from the slush fund scandal, Kishida’s political situation is not so bad. Reflecting a booming economy with stock market rallies, corporations announced unusually high increases in workers’ compensation in their annual negotiations with labor unions. The Bank of Japan followed by deciding to scrap its negative interest rate policy. An official visit to the United States in mid-April and a tax reduction in June should boost his administration. However, public distrust of Kishida may be too strong to overcome.

Sunday, March 17, 2024

Monday Asia Events March 19, 2024

FURTHERING US-JAPAN COLLABORATION ON COMMUNICATIONS SECURITY. 3/18, 9:00-10:00am (EDT), HYBRID. Sponsor: Hudson Institute. Speakers: Yoshikazu Okamoto, Deputy Director-General for International Economic Affairs, Global Strategy Bureau, Japan Ministry of Internal Affairs and Communications; Mark Cullinane, Director of Bilateral and Regional Affairs, Information and Communications Policy Division, Cyberspace and Digital Policy Bureau, US Department of State; Meredith Potter, Managing Director for Policy (Indo-Pacific and ICT), US International Development Finance Corporation; Hisashi Inoue, Senior Representative, Japan Bank for International Cooperation, Washington, DC; Riley Walters, Senior Fellow, Hudson. 

RICHARD HAASS ON FOREIGN POLICY IN AN ELECTION YEAR. 3/18, 11:00- Noon (EST), VIRTUAL. Sponsor: Foregin Policy. Speaker: Richard Haass, President emeritus, Council on Foreign Relations. 

AN ERA OF ECONOMIC WARFARE: EXAMINING THE EU’S ECONOMIC SECURITY STRATEGY. 3/19, 11:00am-Noon (EDT), VIRTUAL. Sponsor: Information Technology & Innovation Foundation. Speakers: Reinhard Bütikofer, Member of the European Parliament; Mathieu Duchâtel, Resident Senior Fellow and Director of International Studies, Institut Montaigne; Tobias Gehrke, Senior Policy Fellow; European Council on Foreign Relations.

ELECTION 2024: EXPECTATIONS AND SPECULATIONS IN FOREIGN POLICY. 3/19, Noon-1:00pm (EDT), VIRTUAL. Sponsor: National Committee on American Foreign Policy (NCAFP). Speakers: Heather Ashby, Principal Consultant, Corner Alliance; Carla Anne Robbins, Senior Fellow, Council on Foreign Relations on Defense and Security; Ali Wyne, Senior Research and Advocacy

RIDING THE TIGER: VLADIMIR PUTIN’S RUSSIA AND THE USES OF WAR. 3/19, Noon-1:00pm (EDT), VIRTUAL. Sponsor: Alexander Hamilton Society. Speaker: author Dr. Leon Aron, senior fellow at the AEI. PURCHASE BOOK:

FREEDOM UNDONE: THE ASSAULT ON LIBERAL VALUES AND INSTITUTIONS IN HONG KONG. 3/19, Noon-1:30pm (EDT), HYBRID. Sponsor: Weatherhead East Asia Institute, Columbia University. Speaker: Michael Davis, Global Fellow, Woodrow Wilson International Center for Scholars, Research Affiliate, Weatherhead East Asia Institute, Columbia University; Professor of Law and International Affairs, O.P. Jindal Global University.

THE TAMING OF SCARCITY AND THE PROBLEMS OF PLENTY: RETHINKING INTERNATIONAL RELATIONS AND AMERICAN GRAND STRATEGY IN A NEW ERA. 3/19, 5:00-6:30pm (EDT), IN PERSON ONLY. Sponsor: International Institute for Strategic Studies. Speakers: author Francis J. Gavin, Giovanni Agnelli Distinguished Professor and Director, Henry A. Kissinger Center for Global Affairs, Johns Hopkins School of Advanced International Studies; Colin Kahl, Sydney Stein, Jr. Scholar in Residence at The Brookings Institution, Former Under Secretary of Defense for Policy; Alexandra T. Evans, Policy Researcher, RAND, Professor of Policy Analysis, Pardee RAND Graduate School. PURCHASE BOOK:

An Insufficient Political Reform Draft

Protecting Privilege

By Takuya Nishimura,
Senior Fellow, Former Editorial Writer for The Hokkaido Shimbun
The views expressed by the author are his own and are not associated with The Hokkaido Shimbun
You can find his blog, J Update here.
March 9, 2024. Special to Asia Policy Point

Japan’s ruling Liberal Democratic Party (LDP) on March 7 presented its members with a draft plan for political reform. Revisions are proposed to the party’s rules, disciplinary regulations, and governance code, including a ban on traditional factions. Although LDP lawmakers criticized party leaders for loopholes in the draft, they reluctantly approved it.

The draft imposes tougher penalties on lawmakers whose staff is arrested or indicted for involvement in illegal activities involving political funds. The draft also provides for the expulsion of any lawmaker whose accounting manager is convicted for a violation of the Political Funds Control Act.

The LDP Political Reform Headquarters, headed by Prime Minister Fumio Kishida, has held discussions over party reforms from the beginning of this year. In an interim report from the headquarters late January, the party proposed banning factions from dealing with political funds and from involvement in the selection of ministers or party board members.

The draft of political reform was offered at the March 7 meeting concluding discussions over the past two months. It is expected to be approved in the national convention scheduled for March 17.

There are some rules that apply to LDP itself. The draft revises the Party Constitution, the Party Discipline Rules, and the Governance Codes. For example, Chapter 8 of the LDP Constitution establishes the Party Ethics Committee and the Political Ethics Hearing Committee. The March 7 draft proposes that the Political Ethics Hearing Committee can request the Secretary General to convene the Party Ethics Committee, when a party member or a policy group violates the Ethics Charter in the Party Discipline Rules. The Political Ethics Hearing Committee can also recommend that the Secretary General take necessary measures when an activity of policy group needs to be improved.

The preamble of the Party Discipline Rules establishes political ethics to secure public confidence in politics and requires each party member not to lose the trust of the people. When an accounting manager is arrested or indicted on a charge of violating the Political Funds Control Act, the draft empowers the party to impose on the lawmaker one of five penalties: suspension of appointment to party officials, recommendation to resign from the Diet or government, deregistration as an official candidate of the party in elections, disqualification as a party member, or a recommendation to leave the party.

If an accounting manager for a member is found guilty (after appeals are exhausted) of a violation of the Political Funds Control Act, the party will recommend that the lawmaker leave the party or be expelled. The expulsion clause was highlighted in news reports as the point of revising party rules after the slush fund scandal.

The Governance Code is a relatively new rule, having been introduced in 2022. The Code sets forth the responsibilities of party members and transparency of the party in order to maintain public confidence in the LDP. The March 7 draft adds to the basic principles of the code “strict treatment on the issue of political funds.” Defining “faction” as an organization, which tries to maximize its power and increase its membership, whenever it is backed by the power of money and can influence appointments to posts in the government or party board, the draft prohibits maintenance or establishment of this kind of faction. And it also prohibits policy groups from holding fundraising parties and obliges them to have an external audit.

Changes to the Governance Code do not include the elimination of factions, because it allows factions in the form of policy study groups, to which the definition of “faction” is not applied. There were some complaints in LDP that the definition did not extend to all political organizations.

The LDP has so far failed to disband factions. The party released a Political Reform Guidelines in 1989, when LDP was involved in the Recruit scandal of receiving unlisted stocks. The Guidelines have yet to be implemented. The Guidelines provide for three actions to initiate abolishing a faction: 1) the supreme adviser leaves the faction, 2) the president, vice-president, secretary general, chair of general council, chair of policy research council, chair of Diet members of Upper House, and ministers in cabinet leave the faction, and 3) the officials of the factions do not take action as if they are making party decisions.

In early 2000s, Junichiro Koizumi supported the abolition of factions. He left his faction when he became Prime Minister. However, the result of the “Koizumi reform” was that the Koizumi faction, Seiwa-kai, was subsumed by Yoshiro Mori. Under the Koizumi administration, the Mori faction grew to be the biggest faction in the LDP. It was succeeded by Nobutaka Machimura, Hiroyuki Hosoda, and Shizo Abe. Now, it is cynically expected that the factions will be reborn in the LDP, notwithstanding the latest reforms.

LDP will limit factions in the party organization by ending their role in the selection of personnel for governmental minister and party board posts. Nothing in the draft, however, excludes the influence of factions, or policy study groups, in the appointment process.

The March 7 draft also does not refer to which part of the national laws the LDP plans to amend. Although LDP urges tougher penalties for violations of the Political Funds Control Act, the opposition parties demand the resignation of any lawmaker if his/her accounting manager is conclusively found guilty of violating the statute. Some opposition parties also propose a total prohibition on donations from the business sector or organizations such as trade unions. The LDP has shown no sign of acceding to this demand.

The draft did not touch on penalties by the LDP on the lawmakers who were involved in the slush fund scandal. In the discussion in the Deliberative Council on Political Ethics in the House of Representatives, former Prime Minister Yoshihiko Noda insisted that Kishida punish those lawmakers. Kishida answered that the LDP would decide on sanctions. Young lawmakers in the LDP are frustrated that the leaders of the Abe faction have not taken responsibility for their false control of political funds.

The opposition parties argue that the revisions of the LDP’s internal rules are too weak to guarantee transparency and establish ethics in politics. But the LDP has not put its own ideas for amendments of the Political Funds Control Act on the table in the negotiations with the opposition parties. The LDP remains reluctant to have hearings on all 32 lawmakers who have been requested by the opposition parties to appear before the Deliberative Council on Political Ethics in the Upper House. The failure to make much progress undermines the political basis of Kishida administration, which continues to have low approval ratings.

Sunday, March 10, 2024

Monday Asia Events March 11, 2024


HOW TO WIN AN INFORMATION WAR: THE PROPAGANDIST WHO OUTWITTED HITLER. 3/11, Noon-1:00pm (EDT), VIRTUAL. Sponsor: New America. Speaker: author Peter Pomerantsev, Senior Fellow, SNF Agora Institute at Johns Hopkins University.

A CONVERSATION WITH THE AUKUS ARMY CHIEFS ON LAND POWER’S CONTRIBUTION TO AUKUS PILLAR 2. 3/11, 4:00-5:00pm (EDT), VIRTUAL. Sponsor: CSIS. Speakers: General Randy A. George, Chief of Staff of the Army, U.S Army; General Sir Patrick Sanders, Chief of the General Staff, British Army; Lieutenant General Simon Stuart, Chief of Army, Australian Army; Charles Edel, Senior Adviser and Australia Chair; Seth G. Jones, Senior Vice President; Harold Brown, Chair and Director, International Security Program.

THE WAR BELOW WITH AUTHOR ERNEST SCHEYDER. 3/11, 4:00-6:00pm (EDT), HYBRID. Sponsor: CSIS. Speakers: Ernest Scheyder, Senior Correspondent, Reuters; Joseph Majkut, Director, Energy Security and Climate Change Program; Baskaran Gracelin Baskaran, Research Director and Senior Fellow, Energy Security and Climate Change Program. PURCHASE BOOK:

*INNOVATION AND GROWTH PROSPECTS FOR A COMPETITIVE JAPAN. 3/11, 7:00-8:00pm (EDT), VIRTUAL. Sponsor: Wilson Center. Speakers: Izumi Devalier, Managing Director and Head of Japan Economics, Bank of America Merrill Lynch; Robert Feldman, Senior Advisor, Morgan Stanley MUFG Securities; Kenji Kushida, Senior Fellow, Asia Program, Carnegie Endowment for International Peace.

Saturday, March 9, 2024

Unusual Appearance of Prime Minter Kishida before the Ethics Council

An unsatisfying occurrence

By Takuya Nishimura, Senior Fellow, Former Editorial Writer for The Hokkaido Shimbun
The views expressed by the author are his own and are not associated with The Hokkaido Shimbun
You can find his blog, J Update here.
March 2, 2024. Special to Asia Policy Point

The first example of an incumbent prime minister’s appearance before the Diet’s Lower House Deliberative Council on Political Ethics (DCPE) occurred last week. The DCPE was established in 1985, two years after former Prime Minister Kakuei Tanaka was found guilty in Tokyo District Court of involvement with the 1976 Lockheed Bribery Scandal that damaged Japanese politics.

On February 29, Prime Minister Fumio Kishida sat before DCPE to take questions about the slush fund scandal. He apologized for losing public confidence in politics as the result of the scandal. Despite his hope to restore that confidence, Kishida was not successful in removing all the doubts about the control of political funds in the LDP.

Kishida’s original plan was to have the DCPE meet on February 28 and 29 and to have the Lower House send the FY 2024 budget bill to the Upper House by March 1. But the meeting on February 28 was cancelled because some lawmakers from the former Abe faction refused to attend and to take questions from the committee if the meeting was open to the public. If it had been held as a closed meeting, it was obvious that the Kishida administration would have been seen as not serious about restoring public confidence in political ethics.

Making the second surprise this year, after the dissolution of his faction in January, Kishida decided on the morning of February 28 to attend the public committee meeting to explain the scandal, hoping to break the deadlock that was delaying the budget. His unusual decision helped the LDP to agree with the opposition parties to hold committee meetings on February 29 and March 1. As part of the deal, the budget bill passed the Lower House in an unusual weekend session on Saturday, March 2.

An isolated prime minister is emerging from the process. Even when Kishida orders LDP lawmakers to fulfill their responsibility to explain the scandal, they are reluctant to follow him. Lawmakers in the Abe faction have been frustrated with Kishida’s leadership since he fired all the Abe faction ministers when the scandal unfolded last December. Kishida’s trilateral cooperation with two other faction leaders, Taro Aso and Toshimitsu Motegi, has weakened after Kishida unilaterally announced the dissolution of his own faction.

As for the Nikai faction, its former secretary general, Ryota Takeda, tried to protect his boss, Toshihiro Nikai: “While Mr. Nikai is apparently the symbol of our faction, he has nothing to do with any office work or accounting,” said Takeda at the PEC meeting. By contrast, Kishida has no follower defend him as Takeda did for Nikai.

Was Kishida successful in the Q&A session of the DCPE on February 29, anyway? The short answer is no. He proposed an amendment to the Political Funds Control Act seeking heavier penalties for lawmakers whose staff engaged in illegal activities. He also said he is considering an official LDP punishment for members who were involved in the slush fund scandal. He promised to have no more private fundraising parties during his term as prime minister. Critically, however, he failed to explain the truth of the scandal.

The committee members from opposition parties asked when, by whom, and for what Abe faction’s “kickback system” had been established. The system returned to a member the proceeds of ticket sales for fundraising parties beyond the member’s quota. Kishida said that the return of excess proceeds had begun at least ten years ago. But everyone already knew that because that was revealed in the LDP’s internal survey. “We could not find exactly when and how it had been established,” said Kishida.

Another point was why the Abe faction resumed the kickbacks, even after Shinzo Abe, as the president of the faction, decided to abolish that practice in the spring of 2022. Kishida explained that LDP, which had no power to enforce its requests for information, could not find everything. Asked whether he made a request to former factional president and former Premier, Yoshiro Mori, Kishida simply answered that there had been no reference to Mori in the LDP survey.

The facts of slush fund scandal were made rather clearer in the Council on March 1 with the attendance of four leaders of the Abe faction: Yasutoshi Nishimura, the former Minister of Economy, Trade and Industry; Hirokazu Matsuno, the former Chief Cabinet Secretary; Ryu Shionoya, the former Minister of Education; and Tsuyoshi Takagi, the former chair of the Diet Affairs Committee of the LDP. Nishimura, Matsuno and Takagi were former secretary generals of the Abe faction, and Shionoya chaired regular meetings of the Abe faction after Abe died.

On when the kickback system started, Matsuno told of his experience. He learned of the kickback system after he became a lawmaker and joined the Abe faction in 2000. The president of the faction at the time was Jun-ichiro Koizumi, and the prime minister was Mori. Shionoya said that the system was established over 20 years ago to help young lawmakers who could not raise political fund by themselves.

How Abe’s decision to abolish the kickback had been reversed was still not clearly explained. Nishimura, who was the secretary general of the Abe faction at the time, recalled that Abe decided in a meeting in April 2022 to end it out of his concern that the obscurity of the fund would invite doubts about the integrity of the LDP. Nishimura then said that some members requested the LDP leaders to resume the kickback system after Abe was shot to death in July.

Although Nishimura said that no conclusion was reached during an August 2022 meeting, Shionoya remembered that they talked about keeping the kickback system at least for 2022. Opposition party members quickly noted the contradiction. However, no Abe faction leaders could name who requested the resumption of kickbacks or who decided to continue it. They also denied that they had recognized the illegality of the kickbacks, even after Abe decided to abolish it.

Another big question was how the kickbacks had been spent. All four leaders said that they had been used for political purposes. If the kickbacks were sent from the faction to the political organization of each lawmaker as a donation and were used for political purpose, then they would not be taxed. But if a kickback was treated as the private income of the lawmaker, it would be taxed. Matsuno explained that some funds were kept in his office in cash and some to support meetings with lawmakers, but he did not reveal who were at the meetings.

According to the discussions in the DCPE the facts in the Abe faction were as follows: someone started the kickback system over 20 years ago and Abe decided to end it in April 2022; Abe was unfortunately assassinated three months later, and someone wanted to be given his surplus funds back; the system was reactivated in 2022 by whom no one knows; no one realized that the kickback was illegal even though it was not recorded on the political funds report; and the funds were used only for political purposes.

The opposition parties were not satisfied with this story and demanded further investigation in the Diet. There are some options going forward: asking other leaders to speak in the PEC, inviting the former president of the Abe faction to the Budget Committee hearing, or establishing new special committee for investigation. Whatever the next step, the scandal is still hanging around.

Sunday, March 3, 2024

Japan’s Economic Support for Ukraine

Promises not actions

By Takuya Nishimura
, Senior Fellow, Former Editorial Writer for The Hokkaido Shimbun
The views expressed by the author are his own and are not associated with The Hokkaido Shimbun
You can find his blog, J Update here.
February 25, 2024. Special to Asia Policy Point

As seen during his chairmanship of the Group of Seven last year, Prime Minister Fumio Kishida has been keen to show Japan’s leadership role in supporting Ukraine. Because Japan’s constitution precludes explicit military contributions, Kishida has focused on the economic reconstruction of Ukraine. The February 19 international conference in Tokyo to address reconstruction in Ukraine was an attempt to demonstrate Japan’s capacity for economic contribution. However, the prolonged war makes Japan’s investment in Ukraine difficult, for now.

The day after Russia’s invasion of Ukraine two years ago, Kishida accused Russia of a unilateral change of status quo by arms and a breach of international law by violating the sovereignty and territorial integrity of Ukraine. “It cannot be tolerated, and I strongly blame it. It also cannot be ignored in terms of security of Japan,” said Kishida. He demanded an immediate retreat by the Russian military in order to abide by international laws.

Diplomacy is one of the tools available to a Japanese prime minister to maintain his domestic popularity. Former Prime Minister Shinzo Abe was not willing to join international sanctions against Russia when it annexed Crimea in 2014 because he wanted to maintain a close relationship with Russian President Vladimir Putin. If he achieved a breakthrough in negotiations with Russia over the Northern Territory of Japan, it would have been a great legacy of Abe. Kishida, who served in the Abe cabinet as Minister for Foreign Affairs for four years and eight months, is one of those premiers who is firmly interested in diplomacy.

As Western countries pledged military support for Ukraine, providing tanks, missiles and fighter jets, Japan’s contribution to Ukraine’s war effort has been limited to non-lethal equipment such as bullet-proof jackets and helmets. One of Japan’s three principles for exporting defense equipment prohibits transporting such equipment to a party involved in a conflict.

In the summit meeting between Kishida and Ukrainian President Volodymyr Zelenskyy in Kyiv last March, both leaders shared the view that the private sector should play an important role in the recovery and reconstruction process. Zelenskyy showed strong expectations toward Japanese investments in various ways.

After returning to Japan, Kishida convened a small meeting with other government officials to discuss public-private cooperation in rebuilding Ukraine. Kishida sought to pave the way for any company willing to participate without taking on the risks of war.
Attendees at the meeting discussed the improvement of the economic environment for investment, inclusion of third parties, cooperation with international organizations and the involvement of Japan’s official development assistance (ODA). A former foreign minister, Yoshimasa Hayashi, visited Kyiv last September with a business delegation to investigate the opportunity for investment in Ukraine.
After those preparations, Kishida administration held the Japan-Ukraine Conference for Promotion of Economic Growth and Reconstruction at Tokyo in on February 19, with Ukrainian Prime Minister Denys Shmyhal in attendance. Japan pledged economic support for Ukraine in seven categories.

One of the seven categories typical of Japan’s foreign assistance is mine sweeping and disposal of debris. With advanced search technology, Japan has experience with mine sweeping in Cambodia and South Sudan as part of ODA or United Nations peace-keeping operations. To rebuild the cities in Ukraine destroyed by Russian attacks, Japan’s skill in sorting and disposing of debris that was sharpened in responding to the East Japan Great Earthquake may bring efficiency to reconstruction efforts.

Japan also offered assistance with humanitarian relief, including medical care, electrical power, agriculture, biotechnology, digital industry, infrastructure and prevention corruption. To make investment in Ukraine easier, both counties agreed to tax breaks for companies engage in reconstruction and to expedite the visa process for businesspeople. Japan also decided to open an office of the Japan External Trade Organization (JETRO) in Kyiv.

The greatest hurdle for Japanese private investment in Ukraine is security. For any company that plans to invest in Ukraine’s recovery, guaranteeing the safety of workers will be a critical issue. With no end in sight for the war, a company must take safety costs into account when assessing the feasibility of a reconstruction project. The Japanese government has taken no position on a ceasefire.
It is undeniable that Japan has a sense of fatigue in its support of Ukraine, much like other Western countries. The prolonged war has caused commodity prices in food and energy to rise. There is a political argument that the Kishida administration must address domestic inflation before helping Ukraine. Some companies, which still have business relationships with Russia are skeptical about supporting Ukraine, considering Russia’s adverse reaction to their doing so.

As a lawmaker elected from Hiroshima, Kishida has shown determination in supporting Ukraine, which remains under a nuclear threat from Russia. “The more success Russia will have in Ukraine, the more conflicts and wars around the world will see in the future,” said Shmyhal in the press conference in Tokyo. But as long as the war continues, it is unrealistic to expect full-scale investment in Ukraine. As a result, the reconstruction effort will be a long-term consideration for Japanese businesses.

Monday Asia Events March 4, 2024

TWO YEARS AFTER THE RETURN OF WAR ON EUROPEAN SOIL: CHARTING THE PATH FOR EU DEFENSE WITH AMBASSADOR CHARLES FRIES, DEPUTY SECRETARY GENERAL FOR PEACE, SECURITY AND DEFENSE. 3/4, 10:00-11:00am (EST), HYBRID. Sponsor: CSIS. Speaker: Ambassador Charles Fries, Deputy Secretary General for Peace, Security, and Defense, European External Action Service.

PAKISTAN’S 2024 ELECTIONS: YET ANOTHER RITUAL? 3/4, 10:00-11:30am (EST), VIRTUAL. Sponsor: South Asian Studies, Yale University. Speakers: Dr. Ijaz Gilani, Author, The Ritual of Election in Pakistan; Dr. Niloufer Siddiqui, Assistant Professor, Albany-State University of New York (SUNY); Sushant Singh, Visiting Fellow & Lecturer, South Asian Studies Council, Yale University. 

THE CHANGING DYNAMICS OF TERRORISM AND ITS IMPACT ON SOCIETY: LAUNCH OF THE GLOBAL TERRORISM INDEX 2024. 3/4, 11:00am-Noon (EST), HYBRID. Sponsors: Alliance for Peacebuilding; Institute for Economics & Peace. Speakers: TBA.  

REACTOR COSTS AND DECARBONIZATION EFFORTS. 3/4, 1:00-2:00pm (EST), VIRTUAL. Sponsor: Center on Global Energy Policy, Columbia. Speakers: Shannon Bragg-Sitton, Director, Integrated Energy and Storage Systems, Idaho National Laboratory; Jacopo Buongiorno, Director, Center for Advanced Nuclear Energy Systems, Massachusetts Institute of Technology; Karl Hausker, Senior Fellow, World Resources Institute; Julie Kozeracki, Senior Advisor, U.S. Department of Energy Loan Programs Office.

INDIA ON THE RISE: HOW HIGH WILL IT GO? 3/4, 2:00pm (EST). VIRTUAL. Sponsor: Foreign Affairs. Speakers: Alyssa Ayres, Dean, Elliott School of International Affairs, George Washington University and Adjunct Senior Fellow, Council on Foreign Relations; Pratap Bhanu Mehta, Laurence S. Rockefeller Visiting Professor, Distinguished Teaching, Princeton University; Ashley Tellis, Tata Chair for Strategic Affairs and a Senior Fellow, Carnegie Endowment for International Peace.

IGP WOMEN'S INITIATIVE LAUNCH SUMMIT. 3/4, 3:00-6:45pm (EST), VIRTUAL. Sponsor: Institute of Global Politics. Speakers: Stacey Abrams, Ronald W. Walters Endowed Chair for Race and Black Politics, Howard University; Former Georgia House Minority Leader; Voting Rights Activist; IGP Carnegie Distinguished Fellow; Gina Raimondo, 40th Secretary of Commerce; Sara Jacobs, US Representative from California; Laura Kavanagh, Fire Commissioner, New York City Fire Department; Claudia López, former Colombian Senator and Mayor of Bogotá; Alex Hertel-Fernandez, Associate Professor of International and Public Affairs, Columbia SIPA; IGP Faculty Advisory Board member; Ai-jen Poo, President, National Domestic Workers Alliance; Executive Director of Caring Across Generations, and Trustee of the Ford Foundation; Reshma Saujani, Founder, Girls Who Code and Moms First Adina Sterling, Katherine W. Phillips Associate Professor of Business, Columbia Business School; Shabana Basij-Rasikh, Cofounder and President of the School of Leadership, Afghanistan (SOLA), IGP Carnegie Distinguished Fellow; Hon. Henrietta Fore, Former Executive Director of UNICEF; Former USAID Administrator; IGP Carnegie Distinguished Fellow; David Miliband, President and CEO of the International Rescue Committee; 74th UK Secretary of State for Foreign and Commonwealth Affairs; IGP Carnegie Distinguished Fellow (joining virtually); Melanne Verveer, Executive Director, Georgetown Institute for Women, Peace and Security; Former Ambassador-at-Large, Office of Global Women’s Issues, US Department of State; Camille François, Lecturer of International and Public Affairs, Columbia SIPA; IGP Affiliated Faculty; Nina Jankowicz, Former Executive Director, Disinformation Governance Board of the United States; Vice President, Centre for Information Resilience, Maria Ressa, Nobel Peace Prize-Winning Journalist; Cofounder, CEO, and President of Rappler; IGP Carnegie Distinguished Fellow; Rachel Vogelstein, Deputy Director and Special Assistant to the President, White House Gender Policy Council; Special Advisor on Gender, White House National Security Council; Sara Casey, Assistant Professor of Population and Family Health, Columbia University Mailman School of Public Health; Director, RAISE Initiative, Alexis McGill Johnson, President and CEO, Planned Parenthood Action Fund; Jennifer Klein, Assistant to the President and Director, White House Gender Policy Council. 

THE PROJECT-STATE AND ITS RIVALS: A NEW HISTORY OF THE TWENTIETH AND TWENTY-FIRST CENTURIES. 3/4, 4:00pm (EST), VIRTUAL. Sponsors: American Historical Association; Wilson Center. Speakers: Charles S. Maier, Leverett Saltonstall Professor of History, Harvard University; Victoria de Grazia, Moore Collegiate Professor of History.

JAPAN’S STRATEGIC COOPERATION WITH NATO: CONNECTIVITY BETWEEN UKRAINE AND TAIWAN CRISES. 3/4, 4:30-6:00pm (EST), HYBRID. Sponsor: WEAI, Columbia University. Speaker: Tomonori Yoshizaki, Professor, Tokyo University of Foreign Studies (TUFS) Former Vice President of National Institute for Defense Studies (NIDS), Ministry of Defense, Japan.