Japan monthly review: December 2008 is best forgotten

By David Azócar

A prime minister with low approval ratings, a corporate bailout plan and the arrival of the nation’s first whale meat imports from Iceland and Norway were three of Japan’s top stories during the final month of 2008.

December ended one of the worst years yet for the world’s stock markets. Japan was no exception, ending 2008 with a weak fourth quarter. In political news, the LDP's loss has affected an already unpopular prime minister, Taro Aso, who after his third month in office had an even lower approval rating than his two predecessors on the day they resigned.

Though best forgotten, December 2008 will be remembered for the fruition of structural problems in Japanese politics which led to four prime ministers in just three years. The issues have resulted in a leader, Taro Aso, arriving at a ridiculously low 21% approval rating.

The reasons for this decline in the polls are manifold, but one of the most important is the LDP’s failure to legitimize its government plan. The LDP, which is Japan’s ruling party, has also met with stiff opposition across the floor in the Upper House.

Following the departure of Yasuo Fukuda (Aso’s predecessor) in the third quarter of 2008, there was a great deal of discussion about the need for early elections. Aso ruled out the possibility of snap elections, on Christmas Eve, explaining that his government needed to focus on combating the country's economic difficulties. His strategy earned him the disapproval of a large segment of the population.

Japanese foreign policy, however, had its ups and downs. The prime ministers of China and Japan, and the president of South Korea, met to discuss the financial crisis in the city of Fukuoka in southern Japan. The main conclusion of the meeting was the commitment of the leaders to avoid creating any new trade barriers over the next 12 months and to support efforts to form a foreign currency exchange network.

More good news for Japanese diplomacy was that the Japan and Vietnam signed a trade agreement on December 25, which will reduce tariffs by nearly 90% on goods and services traded between the two nations. The major gain for the Japanese market is that it can make duty free shipments of auto parts, steel and electronic goods destined for assembly in Vietnam.

On the black side of foreign policy, two events marred December’s passing. The first relates to a statement by North Korea in which it announced that it did not recognize Japan as a member of the Six-Party Talks. The forum, which includes China, South Korea, North Korea, Russia, Japan and the US, is slated to discuss the denuclearization of the Korean peninsula.

The statement was released after Japan refused to provide humanitarian assistance in exchange for North Korean disarmament, as per the Six-Party Talks.

A second impasse occurred on December 22, following the declassification of Japanese Foreign Ministry documents indicating that former Prime Minister Eisaku Sato called on the United States to prepare for a nuclear attack on China in the event of a war between the Asian rivals.

This news caused shock given Sato’s 1974 Nobel Peace Prize, awarded due to his strong anti-nuclear weapons stance. In fact, he drafted Japan’s anti-nuclear policy, which stipulates that it will neither produce, nor possess, nor even allow nuclear weapons within its territory. The policy still remains in effect, in fact.

In economic news, Japan was on par with other developed countries and the word “recession” made its imprint on the collective imagination of the Japanese. The good news, however, came from the harmonious implementation of anti-cyclical policies such as the launch of a market initiative to boost capital, given the close of the fiscal year in March, when demand for capital was scarce.

It should be added that on December 20 the Japanese parliament approved an additional spending package of additional of $54 billion, designed to reduce taxes on property owners, provide loans to small businesses and help the unemployed.

The Bank of Japan decided to keep interest rates at 0.3% and revealed a new credit initiative which allows corporate institutions to have a BBB rating; very different from the previous A rating, or above, restrictions.

Lastly, Japan gave the green light to whale meat imports from Iceland and Norway on Dec 5. The trade in whale meat is legal and these imports are the first to arrive in the last 20 years. This is because these three countries have adopted exceptions to the rules that prohibit international trade in whale products.

The shipment consisted of 65 tons of Fin Whale from Iceland, and five tons of Minke Whale from Norway.