Modern Japan is still an economy roughly double the size of China with a technological ability second only to the United States. This is a consequence of the winning equation that has ruled the country since the end of World War II. If the recent general election makes it to the history books it will be because it seems to have marked the end of this equation: the ‘iron triangle’ between the Liberal Democratic Party (LDP), Japanese big business and the bureaucracy. It is because this triangle has floundered since the 1980s economic collapse that a group as motley as the Democratic Party of Japan (DPJ) has come to power.
The question is not merely how far the DPJ will deviate from policies associated with Tokyo for over half a century but whether it will be able to find a winning equation of its own. The new prime minister, Yukio Hatoyama, plans to eviscerate the country’s all-powerful bureaucracy. He has said he will loosen his country’s foreign policy from the coattails of the US. However, the DPJ’s vaguely leftwing economic platform seems an unlikely solution to the structural problems that bedevil Japan, such as its hidebound service sectors. But the election has also left a rump LDP, whose core includes many market-friendly reformers. If Hatomaya fails to spark his country’s revival, they will be waiting their turn.
India has a stake in events in Tokyo. Successive LDP regimes committed themselves to increasing Japanese investment in India, largely to dilute an addiction to China. The initial part of this strategy has been about modernising India’s shoddy infrastructure through direct assistance from Tokyo. The planned $90 billion Delhi-Mumbai industrial corridor is the most ambitious part of this strategy. There is evidence that the DPJ will retain this stance towards India, but the motivation for pushing forward this strategy will be different. Investing in India would be less about hedging against China and even less about maintaining an Asian balance of power. It would simply be about making hard-nosed economic decisions. Hatoyama’s campaign promised change. But his platform’s lack of clarity means that the best fallout of his election for Asia would be change in incremental and relatively conservative ways.