This is really a bleak year-end for the nation.
Just one year and four months since the Democratic Party of Japan came to power in a historic regime change, Japanese politics is in an unimaginable and distressing shambles.
Amid the prolonged economic malaise, the nation faces a deepening fiscal crisis, a rapidly aging population and an alarmingly low birthrate.
While many industrialized nations are struggling to recover from the global recession, emerging countries have returned to the growth track.
The security environment around Japan is beginning to change significantly. But the politics in this nation is failing to address these serious policy challenges. The political paralysis is spreading the strong sense of hopelessness among the people.
A historically bad situation
What should be done to dig the nation out of its hole? We can't expect much from our politicians, who appear rudderless and adrift.
The fate of this nation rides on whether it can deal effectively with two key challenges: integrated wholesale reform of the tax and social security systems and the promotion of free trade agreements (FTAs) with major partners.
Although Japan's overall population began to trend down in 2005, the working-age population had already started shrinking in the mid-1990s.
The steady decline in the number of Japanese who work, pay taxes and spend money is at the root of the lengthy economic stagnation.
Meanwhile, the number of retirees is growing fast. According to demographic calculations, there are currently slightly less than three working-age people for every retired person. Two decades down the road, there will be less than two. By that time, the working-age population will have contracted by more than 14 million.
Such a harsh demographic situation is probably unprecedented in human history.
Japan's public pension and health-care insurance systems were basically designed during the era of high economic growth, when young people of postwar generations led by baby-boomers kept joining the national work force every year.
Now, the nation's economy is sputtering as the labor force shrinks, meaning the burden on generations still working is getting heavier.
An unbiased, straightforward look at the nation's economic and demographic realities, which are totally different from those in the high-growth era, makes it glaringly obvious that the social security system cannot be maintained without a major overhaul.
State finances at breaking point
Adding to the nation's woes is the colossal budget deficit, the largest as a percentage of gross domestic product among industrialized nations.
The dire state of state finances is a result of decades of financing social security and public works expenditures with debt in the form of government bonds. The government finances are on the brink of collapse.
It is necessary to rein in growth in the budget deficit while raising new money to finance social security programs and fix the system. This is a formidable challenge that requires the public to brace for a significant increase in their burden.
Revving up the FTA strategy is vital for the fate of Japan, which depends on trade for its economic well-being.
China and other Asian nations are marching vigorously toward a wealthier future. The robust economic growth of these countries offers a great economic opportunity for Japan by increasing the number of potential customers for Japanese businesses in the region.
Japan has every reason to try to capitalize on the economic vigor of these neighboring countries by eliminating its barriers to trade.
Prime Minister Naoto Kan has decided to consider Japan's participation in the Trans-Pacific Partnership agreement.
However, the Kan administration is waffling on the issue in the face of strong opposition from the farm lobby, which warns that the step would "destroy Japanese agriculture."
But the government should take this opportunity to shift its policy and focus on making Japanese agriculture competitive enough in the international market to thrive on exports.
Japan is not alone in struggling with thorny problems. One challenge common to industrialized nations is how to maintain social security benefits and economic growth in a matured society.
Over the decades, European nations have built up a high-welfare, high-burden society through a trial and error process.
Many European countries are now wavering over whether to lower the level of welfare benefits in the face of a fiscal crisis.
In reality, though, there aren't many plausible policy options available despite high-profile public debate on these issues. There is no magic solution to the woes.
Still, political parties tend to exaggerate and play up the differences of their policy agendas from those of their rivals during election campaigns. That's because they cannot hope to win elections unless they convince voters that they have different plans to solve the problems.
But this strategy raises unwarranted expectations among the public, which inevitably turn into disillusionment. The evils of election politics are a common problem for industrialized nations.
And Japan is no exception.
The DPJ came to power by making many alluring promises to voters, claiming the money to finance its policy proposals could be raised easily by eliminating wasteful government expenditures and reforming the budget.
It is no longer possible for the ruling party to deny that its financing plan was not based on reality.
Bold compromise possible?
The ideas of integrated reform of the tax and social security systems and promotion of free trade agreements were once explored by the government of the Liberal Democratic Party.
The LDP kept dragging its feet on these ideas because it feared these proposals would cause it to lose elections.
The proposals now being considered by the DPJ-led government are not that different from the LDP's ideas.
Both initiatives represent long-term reforms requiring 10 or so years of political efforts. If so, the only way forward for Japanese politics is cooperation between the two major parties with the ability to win a public mandate on these reforms.
The LDP is bent on forcing the DPJ-led government to dissolve the Lower House for a snap election as early as possible. But public support for the LDP shows no signs of rising.
If the nation faces a general election under the current political situation, a huge number of voters will not know what to do with their ballots because there is no party they want to support. Such a prospect raises grave concerns.
Even if the LDP regained control of government, it would not be able to implement effective reform without gaining the cooperation of the opposition parties.
If Kan is truly seeking deliberations with the opposition parties, he should be prepared to take major steps toward compromise that would be required of both the ruling and opposition parties by, for example, returning the party's campaign promises to a clean slate and proposing a drastic rewriting of the budget proposal.
Japan's export potential is still very strong. Japan's technology and brand appeal still receive high praise. Even as the economy stagnates, Japanese society has maintained stability and it is also blessed with abundant nature. If politicians can only make the effort to resolve the various issues facing the nation, the fog that clouds the future will surely be swept away.
During these New Year's holidays, there will likely be many occasions when family members and relatives who live far away can again gather together. We hope this occasion can be used to think about what can be done in the future to stop placing a further burden on our children and grandchildren as well as how to preserve a prosperous Japan.
Source: http://www.asahi.com
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