Hatoyama backs fiscal regulation; says he's not turning to socialism

Saturday 05th September, 06:00 AM JST

TOKYO —

Japan’s next prime minister said Friday the financial sector must be regulated to foster healthy growth and ensure no repeat of the global economic crisis, and vowed government handouts would not push the country toward socialism.

Yukio Hatoyama’s Democratic Party of Japan won a landslide victory in last week’s elections making it the largest party in the lower house of parliament. He is expected to be formally voted in as prime minister on Sept 16 and to name his cabinet in the days that follow.

Hatoyama told a World Economic Forum symposium that while financial regulation was necessary, it should not be excessive or hinder growth and healthy competition.

“One of the reasons for last year’s global financial crisis is that there was not enough regulation of derivative products,” Hatoyama said. “We cannot just leave everything to the markets. We need to have a balance between government regulations and free market activities.”

His speech Friday was one of the first glimpses since polling day that Japan has had into the direction Hatoyama will take on the economy, which is in its worst slump since World War II and is facing the threats of rising unemployment and deflation.

Hatoyama did not go into a detailed plan of what he intends to do, but his party has promised to expand the social safety net with handouts for farmers and families with children, do away with toll-free highways and raise the minimum wage.

He insisted Friday that Japan was not becoming a socialist state because of promised lavish government handouts. Rather, Hatoyama said his reforms are aimed at directly and quickly improving nation’s lives.

“I am not turning to socialism,” he said. “I just want to improve Japanese people’s livelihood.”

Some free-market advocates are worried that the party may step away from deregulating the economy, a process that began during the 2001-2006 rule of Prime Minister Junichiro Koizumi. Critics argue that deregulation is needed to foster economic growth and encourage foreign investment.

The retail and auto export industries are heavily regulated.

He will still need to disprove arguments that his party’s economic programs were mainly designed to woo voters and fall short of mapping out a road to growth or tackling deeper issues such as Japan’s aging, shrinking population and its ballooning national debt.

Speculation meanwhile grew as to who would be named to Hatoyama’s first cabinet. A key member of his left-of center Democratic Party of Japan, former ruling party baron Ichiro Ozawa, was tipped to take a central role in policy decisions.

Media reported that Ozawa would probably be given a key post making him a central figure in the party ahead of upper house elections next year.

Katsuya Okada, the party No. 2, was expected to be awarded a cabinet post in either finance or foreign affairs, according to Asahi, a major newspaper.

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Latest 15 of 20 Total Comments Show All

smithinjapan at 12:52 PM JST - 5th September

People really need to stop buying into the fear-mongering of Right-wing American politicians and look up the word 'socialism'. Next to 'democracy' and 'freedom' it's one of the most used, abused, and now distorted words in English. Dictionaries of the future are going to have to add pages (in the case of paper, of course) and multiple entries to fit everyone's changing definitions.
seijichuudo9sha at 01:14 PM JST - 5th September

SmithinJapan, I don't think that many Japanese really listen to the Right wing in America. You are giving America too large a role in the everyday affairs of ordinary Japanese people.I've noticed a lot of American expatriates do this.It's a bad habit you should work on.
Richardson at 01:21 PM JST - 5th September

One wonders how doing away with toll-free highways is going to help...or is this a typo?
roomtemperature at 02:26 PM JST - 5th September

"Classic! Socialism is not acceptable, but fascism is."

So, some poster calls Japan fascist? Now, THAT'S classic! Anyway, look in the dictionary before you try to post something "classic".
cow76 at 02:27 PM JST - 5th September

Smithinjapan has a good point. Most countries don't fear socialism. The SDP had power in 1993 and their name was the Socialist Party at that time. Fundamentally capitalism is where money rules (= the rich have all the power) and socialism is when the people control the means of production, thereby creating a more equal society. If Mr Hatoyama becomes a raving Marxist it's fine by me.
adm_kenshin at 06:30 PM JST - 5th September

Bamboohat: Actually you are wrong here. Redistribution of wealth is a necessity to keep the economy going. This is because the purchasing power of the consumers is drained, as money is funneled into savings and corporate profit. This money was traditionally invested into new factories, but nowadays we have enough factories so it is instead invested into financial systems, and so the money does not create new jobs.

With few new jobs, there is a reduction in consumer spending and while there is an abundance of goods on the market, the consumers cannot afford to buy it all. Demand is reduced, which leads to a recession, and as more people are laid off, a depression.

As Japan has been an export country, most of the industrial production was bought and thus we didn't have these problems. However, in the US the consumer had been living on credit for a long time, and as more and more of their salaries are tied up with servicing loans, they can buy less Japanese imports. Especially if their main asset, their houses, would decrease in value...

Now US consumers cannot buy all of Japans industrial production, and thus Japan is entering a depression. The solution the Japanese politicians have suggested is to increase consumption by Japanese consumers. The only way to do this atm is to increase their purchasing power. That means redistributing wealth.

1) Redistribute wealth from the future (ie deficit spending, to be paid by future tax payers). This is at most a temporary solution, and it will have repercussions in the future. 2) Redistribute wealth from the industries to the consumers by raising wages. This would work, as all those profits aren't doing anything good for the economy anyway. However, prices might increase, as the owners of industry would like to keep their profits, or they might move the industries abroad. 3) Expropriate money invested in financial instruments, and use it to finance government deficit spending. This would work too, until civil war broke out that is ^^. Furthermore, the old would be in trouble since their savings are in the same financial instruments.

As you see, all three methods are painful and success is not guaranteed. I therefore suggest that working within the economic system might not be optimal. However, if the DPJ tried to change the economic system the result might be as in No 3, ie there would be resistance by the wealthy.
Shumatsu_Samurai at 07:52 PM JST - 5th September

Japan’s next prime minister said Friday the financial sector must be regulated to foster healthy growth

Is he mad?! The Japanese financial sector is already too heavily regulated! That's one of the reasons why the economy is so reliant on exports - the services sector is too weak.

If he follows through on this he's just going to make the economy worse not better.
spudman at 08:00 PM JST - 5th September

Hurry up with the road tolls, have a long trip planned.
buddha4brains at 10:12 AM JST - 6th September

Capitalism is not the be all and end all of political economy. Wall St. almost bankrupted America and most of the world economy. The pro-capitalists often sound as rabid as the far left in their denouncements and delusions. Whether Japan veers towards socialism or capitalism is less of a concern as whether of not the people are being well served.
GJDailleult at 01:24 PM JST - 6th September

The capitalism vs. socialism argument misses the point. There is no capitalism in the world anymore, and there hasn't been for years. There is only bubbleism, which doesn't create wealth, it only transfers it. Whether or not Hatoyama's policies work, they have nothing to do with either capitalism or socialism. They are attempts to deal with a non-capitalist world after the bubble bursts.
adm_kenshin at 05:09 PM JST - 6th September

GJ: His policies, as far as I can see, is only temporary measures at best. As you say, Capitalism (in the US) ended with the great depression, for reasons that anyone even remotely knowledgeable about supply and demand should be able to figure out.

Japans 'exportism' is dependent on the export market being capable to buy all the produce of the factories. If this is true, then wages will increase with productivity, and unemployment stay low. However, this stopped working in the 1980's. The physical characteristics of the world economy changed when South Korea and China became capable of advanced industrial production, thus there is NO way to return to the past.

This does not mean that Japan is screwed however, just that we need to rethink our economic plan. In the 50’ｓ, the new Japanese government let the technocrats in MITI run stuff. Thus, they looked scientifically at the world situation and developed a plan to make Japan powerful and rich. This plan succeeded quite well, but it was never supposed to go on forever. The plan had a limit of 50 years or so, after which a new plan had to be devised.

By the 1980's, when it was time to change to the next plan, MITI was no longer in power. The Japanese technocracy had changed into a bureaucracy, which goal was to maintain the status quo, not improve the nation. Additionally, bureaucrats does not use science to determine the best method, but they use their own policies. The result should astonish no one.. The politicians themselves, when they did make decisions, made them in favor of big business.

Exportism no longer works, this is evident. Japan needs a new tool.
onewrldoneppl at 05:44 PM JST - 6th September

he he he ... he said the "S" word.
TheMarion at 04:04 AM JST - 7th September

Patience - wait - know the proof of the pudding is in the eating. This man won the election, now he is entitled to show his wares.
Monoflow at 08:58 PM JST - 7th September

My hair stands on end if I hear the words Capitalism and Socialism, both worn-out-systems. It's a good chance now for the Japanese Government to create a future for the country, so I wish Hatoyama will act like it's party name is saying: democracy = for the people...
adm_kenshin at 11:04 PM JST - 7th September

Monoflow, I agree with you, but what do you suggest to use instead? Democracy is not an economic system, as you know.