I have already written one retrospective essay on 2008 in Japanese politics, but I wanted to look back in more detail at this year’s events and crystallize the year into a handful of lessons.

As 2008 enters its final days, what have we learned about the state of the Japanese political system?

First, and most importantly, the LDP cannot govern itself, let alone Japan. The dominant theme in Japanese politics since the 2007 upper house election was been Japan’s “twisted” Diet, with the LDP-Komeito coalition’s controlling the lower house (and therefore the government) and the opposition DPJ’s controlling the upper house. The DPJ has not hesitated in using its control of the upper chamber to stymie, delay, or complicate the coalition government’s agenda — the signature battle being the fight over Fukui Toshihiko’s successor as president of the Bank of Japan during the 2008 ordinary session of the Diet — but Prime Ministers Fukuda Yasuo and Aso Taro may have been more hampered by divisions within the LDP and between the LDP and Komeito. Thanks to the government’s supermajority in the lower house, the government has the ability to get its way on any issue but for matters like appointments requiring the approval of both houses (hence the BOJ fight). While the coalition government has been reluctant to use the supermajority for fear of public disapproval, would the government have to fear public backlash if the DPJ stood in the way of a government proposal that had broad public approval?

The problem has been that the governing parties have been unable to draft proposals that have broad public approval.

Not for want of good intentions: at least under Mr. Fukuda, Japan had a prime minister who was acutely aware of the colossal challenge facing his country — and that was before the global financial crisis consumed Japan. (See this post on Mr. Fukuda’s speech opening the ordinary session.) Mr. Fukuda, however, sat at the head of a party at war with itself, bitterly divided over its identity. Selected as LDP leader on the basis of a “grand coalition” of factions, throughout his tenure Mr. Fukuda resorted to a balancing act among the party’s factions and ideological tendencies, which resulted in Mr. Fukuda’s gaining a reputation for having no policy agenda to speak of — and in plummeting public approval figures throughout 2008 until Mr. Fukuda resigned the premiership in September.

And when Mr. Fukuda did decide to take a stand on an issue, he suffered for it. Central to the 2008 ordinary session of the Diet were the related questions of the extension of the “temporary” gasoline tax and the dedicated use of gasoline tax revenue for road construction. The DPJ refused to approve the extension in the first half of the Diet session, meaning that in April 2008, the start of the new fiscal year, the Japanese public received a gasoline tax cut (I didn’t hear too many complaints about that). Certain members of the LDP did not want to see the special account for road construction take a hit, so they fought hard for the reinstatement of the tax via the lower house supermajority. With petrol prices high, the Fukuda government courted a public backlash if it were to reinstate the tax. Therefore, to make the case for an extension, the government decided to argue that the tax revenue was needed, but not necessarily for road construction; Mr. Fukuda instead decided that he would push a plan to shift gasoline tax revenue earmarked for road construction into the general budget. This plan, floated as the prime minister was trying to win the DPJ’s support for extending the temporary gasoline tax, immediately threw the LDP into chaos, pitting young reformers, who backed Mr. Fukuda, against the LDP’s “road tribe,” which fought against a clear and present danger to their privileges and had broad sympathy within the LDP. Mr. Fukuda had to struggle against the party establishment, and arguably lost the battle — the road construction budget was passed as presented, and the question of the special fund postponed to the extraordinary session, at which time Mr. Fukuda was no longer even premier.

Mr. Fukuda’s preferred issues fared little better. Remember that Mr. Fukuda began the year talking about the importance of consumer affairs and “listening to the voices of the people?” 2008 in consumer affairs will be remembered mostly for further instances of tainted products. And as for listening to the public? As 2008 ends, the 2007 pensions scandal remains unresolved and the LDP has created a new mess after rolling out a controversial health care system for citizens over 75 that involves automatic deductions from pensions.

The situation has, if anything, worsened under Mr. Aso’s stewardship. In part Mr. Aso has been hindered by what he and his advisers have repeatedly called a once in a century financial crisis, as if that somehow relieves the LDP of culpability for the disastrous turn for the worse in Japan’s economic fortunes. The government is no closer to solving Japan’s fiscal crisis; the LDP is still mired in a debate over whether and when to raise the consumption tax. And as Nakagawa Shoichi, Mr. Aso’s finance minister, recently told the Financial Times, fiscal consolidation is on hold as long as Japan’s economy falters.

As the year comes to a close, it is difficult to recall what the LDP was actually able to agree on and implement. Even a new fiscal stimulus package has proven controversial within the LDP and the coalition government, and as a result has been postponed until the new year.

As 2008 ends, divisions within the LDP are more pronounced, the party’s ability to govern more questionable, and, as a result, Japan’s future grows ever darker.

Accordingly, the Koizumi revolution is a distant memory. It is hard to believe that little over two years ago the foreign press could write of a confident new Japan under the leadership of its youngest postwar prime minister, booming thanks to the efforts of outgoing Prime Minister Koizumi Junichiro.

What changed?

What became clear over the course of 2008 is that Mr. Koizumi achieved less than it seemed at the time. Corporate Japan boomed, but all too little progress was made in strengthening stagnant regions (despite the “Trinity” reforms), wages failed to rise along with economic growth, and the government made little headway in figuring out how to pay for the social safety net desired by the bulk of the aging Japanese public. Mr. Koizumi was much more effective in destroying the old LDP — see above — than in remaking the Japanese economy. As has become clear in midst of the global financial crisis, Japan remained all too dependent on trade with the US and China. Far from revolutionizing the Japanese economy, under Mr. Koizumi Japan’s economy may have become even more of a “dual” economy, divided between efficient, global exporters and stagnant domestic sectors still dependent on government protection. At the same time, microeconomic reforms led to more use of temporary and part-time workers who do not receive the same benefits as regular workers — saving money in good times and, as we’re seeing today, provided a stock of laborers who can be laid off in bad times.

Whether or not this makes for good economics is one question; whether it makes for good politics (for the LDP) is another. The LDP has been tarred with neglecting the wellbeing of the Japanese people: of the elderly, who fear for their economic security in retirement; of the young, many of whom are now relegated to the pool of irregular laborers, perhaps for life; and of rural citizens, who wonder how they will make their livings. At the same time, the LDP has also been criticized for abandoning Koizumi-ism. Its young reformists, concentrated largely in urban districts, fear that they will pay the price for the party’s having shuffled off the legacy of Mr. Koizumi.

The former prime minister’s followers are now a marginalized group within the LDP, and their continued future within the party is increasingly in doubt. In 2008 it became clear just how powerless the Koizumians are. They failed in their battle against the “road tribe,” succeeded in passing some form of administrative reform over the objections of LDP reactionaries thanks only to a compromise with the DPJ and the work of crusading adminstrative reform minister Watanabe Yoshimi. Little wonder that by the end of 2008 Mr. Watanabe was speaking openly about overthrowing the Aso government, going so far as to vote with the DPJ when it proposed a resolution calling for an immediate dissolution of the lower house and general election.

Mr. Koizumi’s legacy, it seems, was reducing the LDP to warring camps, bringing the party to the verge of collapse.

At the same time, the DPJ, while still a relatively unknown quantity, is far from being the rabble the LDP insists it is.

2008 showed that a DPJ-led government is increasingly conceivable, a finding confirmed in recent public opinion polls. For example, a Yomiuri poll taken in early December found that sixty-five percent of respondents are willing to give the DPJ a chance to govern. Despite the LDP’s efforts to paint the DPJ as dangerously irresponsible, too divided, and led by the too dictatorial Ozawa Ichiro, the public is increasingly receptive to the leading opposition party and its mercurial leader.

The DPJ has been remarkably disciplined over the course of 2008. In part the DPJ’s task has been simple. The party has had to stay reasonably united while the LDP struggled to find a consensus on issue after issue. On policy questions, it has been opportunistic, but what opposition party in a democracy isn’t opportunistic? It largely succeeded in being trapped by the government on any given policy issue, adjusting its tactics as the political situation changed.

In the meantime, the party bolstered its policy credentials — see Mr. Ozawa’s rebuttal to Mr. Aso’s maiden policy address — and continued its work at the grassroots level, the pet project of Mr. Ozawa.

In fact, the unreported political story of 2008 may be how remarkably competent the DPJ was. It could have gone differently: the party came under fire from the LDP and big media for the uncontested reelection of Mr. Ozawa as party leader in September, and in the months leading up to the election, Mr. Ozawa’s leadership was criticized by various DPJ young turks, but Mr. Ozawa emerged unscathed from the leadership fight and is now amazingly polling higher than Mr. Aso. If the LDP hoped to run the next general election campaign as a personal campaign against Mr. Ozawa as opposed to a campaign against the DPJ’s ideas, that option may now be futile (if it ever stood a chance of success in the first place). Meanwhile, the DPJ set the policy agenda for 2008. From the beginning of the year, the LDP has been forced to battle the DPJ on the opposition party’s terms, the issues that won the DPJ the 2007 upper house election. The discussion has focused on pensions, health care, budgetary waste, the gasoline tax and road construction, and administrative reform, issues which for the most part the public sees as DPJ strengths (see this recent Yomiuri poll). While at times DPJ members have grumbled about Mr. Ozawa’s tactics, he has ably kept the DPJ’s ideological divisions from undermining the party at critical moments in its battles with the LDP.

In short, while the party has certainly benefited from the LDP’s disarray, Mr. Ozawa and the other DPJ leaders deserve credit for their grace under pressure and the deftness with which they have checked the DPJ’s tendency towards disarray of its own.

None of this is to say that a DPJ government would be a panacea for an ailing country. If the DPJ manages to win the 2009 general election and form a government, it will be no less hampered by events than its LDP-Komeito predecessors. It will still have to balance reforms that ease the insecurities of citizens left behind by Mr. Koizumi’s reforms, while forging ahead with the structural transformation of the Japanese economy and solving the fiscal crisis — all in the midst of an economic crisis that shows no signs of abating in the coming year. Nevertheless, a DPJ-led government would be a welcome change from the decrepit LDP-led governments that have ruled in recent years. Regime change would contain the possibility of a genuine break with the recent past; whether the DPJ fulfills the potential of regime change would depend on the abilities of its leaders and the response of the public to the new government.

Finally, 2008 had lessons for Japanese foreign policy, namely the US and Japan cannot live with or without each other. As Japan prepares for the Obama administration, it is clear that the US-Japan alliance is not healthy. The biggest change in 2008 was that the Bush administration provided Japanese elites with a new reason to be unhappy with Washington when it removed North Korea from the state sponsors of terrorism list. The Japanese establishment reacted with “shock” when the decision to delist was announced in June. Combined with the impact of the global financial crisis, as 2008 ends Japanese leaders are left wondering whether they can continue to rely on the US as an ally. They will be watching the Obama administration’s every move for clues.

At the same time, however, Japan has little choice but to continue to work as a loyal ally of the US. Japan will grumble about Washington — and grumble louder if the DPJ takes power — but it is not prepared to break with the US in any significant way. Japan has no alternative in the near term to the alliance. Japan may have inched closer to China over the course of 2008, sending an MSDF vessel on a port visit, holding an upbeat summit when Hu Jintao visited Japan in May, and concluding a minor agreement concerning the East China Sea EEZ, Japan’s leaders still face a tightrope walk in Japan’s relations with China. In my first post of 2008, I insisted that the China hawks are “bankrupt,” and I remain no less convinced today that this is the case. Developments in 2008 illustrated that there is little public support for a more belligerent approach to China. What we learned in 2008, however, is that the Japanese people want their government to be more assertive in negotiations with China (see this post). But a desire for greater assertiveness does not translate a support for remilitarization, constitution revision, and the rest of the conservative agenda.

The public is not ready to break with the US and is not prepared to bandwagon with China. The government is left trying to find a middle path between the region’s two superpowers, not unlike other countries in East Asia.

All of which suggests that Japan’s global presence is diminishing. Despite presiding over the G8 in 2008, despite launching a successful bid for one of the rotating Security Council seats, despite the ambitions of its prime ministers, Japan’s voice is fading internationally. Given Japan’s economic woes, this trend is unlikely to reverse itself in 2009. While Japan’s leaders had plenty to say about their country’s role in 2009 — for my part I was impressed with Mr. Fukuda’s foreign policy vision — they had fewer ideas about how to act on their ideas. Japan still does not know how it can act as a regional and global leader in the coming decades as its power wanes relative to China (provided China weathers the economic crisis with minimal domestic disorder). Its economy faltering, its people insecure, its armed forces constrained by law, budgets, and values, it is unclear what basis Japan will have for claiming a leadership role in the region. Mr. Aso has tried to make the case for a soft power basis for Japanese leadership, but Mr. Aso and other advocates of soft power have failed to explain how the popularity of manga, anime, and J-Pop will translate into political affinity for Japan and will enable the Japanese government to achieve its goals.

In short, 2008 was a hard year for Japan, a year of uncertainty for its leaders and hardship for many of its people. Japan’s ancien regime is exhausted — we clearly are witnessing a second bakumatsu — but it is unclear whether a restoration waits in the wings, or whether this will be a bakumatsu without end.