1. Shifts in Japan’s Political Economy Regime
Adjustments and changes

2. Conservative dominance (’60s)
Power and influence of conservatives rose
at the expense of the political left
conservative supporters benefited
prosperity and peace
side payments
successes in economy and in politics reinforced each other
favorable international environment

3. Challenges (1970s and 1980s) Socioeconomic bases of support
new political parties, independent movements, and changes in voter patterns
divisions within regime supporters superseded earlier left-right divisions
central concern of regime continuity

4. Socioeconomic challenges

5. Socioeconomic challenges

6. Socioeconomic Challenges
Small
businesses
Service sector firms
Agriculture sector
Large
and more sophisticated industries
Shrinking
bases of the conservative regime’s electoral coalition

7. Challenge 2: aging population

8. Challenge 3: labor shortage
Economic success
rising demand for labor
expanding influx of labor after WWII
low-cost, young, highly-skilled
changing age profile of the population
bargaining power shift from management to labor

9. Challenges to LDP Urbanization and rise of middle class
Socioeconomic base of conservative support shrank
Mobilization capabilities of LDP supporters declined
People identified with party independents increased
outnumbered LDP supporters in 1974

10. Challenges to LDP Increased voter option in 1960s and 1970s
formation of new parties
transformation of existing parties
in both conservative & the political left
threatened both LDP and JSP
threatened conservative electoral and legislative hegemony

11. LDP responses (1970s & ’80s) Attract new electoral support
shore up conservative support
draw away organized labor from DSP & JSP
attract the new middle class
non-voters and non-partisan voters
LDP dilemma between traditional supporters and new appeal

13. LDP responses Adjustments in policy or institutions
less tightly linked policy profile
firm-level cooperation with labor
substantial deficit finance for political target
fiscal austerity and privatization
manufacturing firms became multinational
defense and security policies

14. LDP electoral recovery

15. Economic recovery (1980s)

16. Bubble burst

17. Stock market

18. United States versus Japan
Emphasis on total demand vs. total supply
Corporate emphasis on maximization of profits versus market share and growth
Shareholders>Customers>Employees vs. Employees>Customers>Shareholders
Individual emphasis on consumption and leisure versus saving and work ethic
Individualism versus communitarianism

19. International challenge
External conditions
challenged conservative policies
threatened conservative socioeconomic support
challenges to exchange rate policies
Bretton Woods monetary system broke down
In 1973 Yen began to float freely against US$
In 1985 G5 countries signed the Plaza Accord

20. International challenge
international price of raw materials
Japan’s dependency on imported oil (99%)
inflation
balance of payments
domestic productivity

21. International challenge
Increasing pressure from US and Europe
reductions in Japanese tariffs, import quotas, and non-tariff barriers
voluntary export restraints
open Japanese market (rice tariff ¥442/kg)
Japanese military spending (1% of GDP)
challenges to vital aspects of Japan’s conservative economic policy profile