Japan’s Prime Minister has resigned and this is be portrayed in the west as a repudiation of his FDR like economic reforms sighting the Mt Fuji of debt that Japan has on the books. Their debt is huge but it is as completely different as comparing Tokyo sushi to the dead fish stinking up Washington (Americans can’t tell the difference, but that‘s the point). In Japan the government debt consists almost entirely of retirement savings accounts and not the result of politicians covering up an out of control trade deficit and the tax dodging of transnational corporations as in it is in the US.
In short, nobody in Japan is worried about debt much, they are worried about homeless people living in the park, something most Japanese who were born since the War have never seen. The conservatives in Japan were adopting the throw the middle class under the bus philosophy of the Chicago School of Economics. The Ayn Rand devotees always hold up Japan as a failed nanny state because they have for decades provided full employment rather than maintaining a certain level of worker insecurity, as Rand follower Allan Greenspan saw as his primary role at the Federal Reserve. (He was concerned about “wage inflation”, actual price inflation, falling real incomes for the middle class and the complete theft of their wealth were not problems, those were “good“ things.)
So why did Yukio Hatoyama resign? Back to the war, many Japanese voted for the first change of the ruling party since the war because they thought it would finally bring an end to the US occupation. But Yukio got caught misreading the military realities of east Asia and presence of the United States. He had campaigned on moving the US Marines off Okinawa to the US island of Guam. Obama has budgeted improvements to the Marine base on Guam for this purpose but Obama also went ahead with massive weapons sales to Taiwan. China has used that as an excuse to continue to increase its military forces and is considering the building off shore bases for the first time. Now Korea is on the verge a new war and on and on. Faced with these realities, Mr Yukio has been waffling on his promise to the voters to kick the US out and with Geo Bush like popularity numbers, it’s time to bring out the ritual sword before the upper house elections.
Since the PM’s party still controls the lower house that selected him and with an overwhelming margin they will choose his successor. The likely choice is Finance Minister Naoto Kan, who is a former grassroots civic activist who now pushes for raising taxes to balance the budget. He’s nicknamed "Irritable Kan" for his fiery temperament and he is also a populist that is influential in the center-left party he helped create about ten years ago with the outgoing Prime Minister.
So what does this mean? Japan will continue to embrace social democracy but the Marines will stay unless the pacifists get an unexpected boost in the elections. President Obama has put Japan in the middle of a complex chess game with China over arming Taiwan on one square and trying to revalue the Yuan on another. Revaluing the Yuan would be great for the Yen but increased military tensions make them uneasy. Japan doesn’t have a big military but many Japanese want one instead of US troops. You can expect Japan to continue to employ fewer people in the US and favoring jobs at home in Japan and they will do more trade with China as they see that as the future (they’ve seen the pictures of Detroit).