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07/03/2009 | Japan - The Politics of a Construction Scandal

Stratfor Staff

Japanese opposition leader Ichiro Ozawa reiterated that he was not considering resigning as leader of the Democratic Party of Japan (DPJ) on March 6.

 

Ozawa has been entangled in a corruption case involving alleged illegal contributions to his party from Nishimatsu Construction Co. On March 3, authorities arrested Takanori Okubo, the DPJ’s secretary and the accountant for Ozawa’s political fundraising. Okubo and the DPJ allegedly received 24 million yen (about $246,000) from two former Nishimatsu executives who were also arrested.

Corruption between Japan’s powerful construction industry and its politicians is a perennial factor in Japanese politics that stems back to Japan’s “lost decade” after the economic crash in 1990. During this time, Japan’s typically robust consumer and corporate demand fell flat and recession seemed inescapable. Tokyo resorted to massive fiscal stimulus packages, heavy on infrastructure development, in an attempt to soak up surplus labor and materials and re-energize the faltering economy. But in many cases the small island nation did not need the infrastructure upgrade — the result was not to reinvigorate demand but to leave Japan with infrastructure redundancies and lavishly designed dead ends.

More significant, the economy became distorted by an overreliance on construction companies, which employed a large proportion of the work force and hence wielded a powerful voting bloc. Construction firms could handpick candidates for political office and ensure them many votes if these politicians kept up their end of the bargain by awarding meaty government contracts to the construction firms. The dysfunctional cycle of overspending on infrastructure to maintain economic growth was established.

Therefore, it would be surprising if the corruption allegations against the DPJ’s leaders were not accurate — in fact, it would be surprising if any political party or sitting member of the Japanese parliament were not wrapped up in a similar scandal. At this point, construction companies and Japanese politics are structurally intertwined. The current spate of fiscal stimulus to ward off the global recession is likely to strengthen this relationship.

Still, the timing of the case against Ozawa and his fellow party leaders is convenient for the Liberal Democratic Party (LDP), which is suffering widespread public disapproval and appears on the verge of losing an election to the opposition for the first time since 1993 (and only the second time in its 59-year history). Firmly entrenched as Japan’s dominant party, the LDP is striking back at Ozawa in an attempt to pressure him into resigning or to persuade the public that he cannot be trusted (even though the LDP — as the ruling party — is almost certainly even more guilty of collusion than Osawa). But the public has never had much enthusiasm for Ozawa. Instead, it is Japan’s deteriorating economy, and the LDP’s inability to act, that has made voters more inclined to vote for the opposition in this year’s yet-to-be scheduled elections.

Stratfor (Estados Unidos)

 


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