Discussion about turmoil within the Hatoyama cabinet or the role of DPJ secretary-general Ozawa Ichiro in the government ignores the obvious conclusion that disagreements within the cabinet actually matter under the DPJ — and that it is the influence of one party official that is being debated and not the veritable army of subcommittee chairmen who wielded influence under the LDP. The bureaucracy, far from sabotaging the Hatoyama government, has largely acquiesced to ‘political leadership’. The transformation of Japanese governance that is well underway is significant and overdue.

The question, however, is what the DPJ-led government is doing with its newfound capabilities. When it comes to policy, the evidence of change is mixed. It is far too early in the new government’s tenure to draw definitive conclusions about its successes and failures, but in both economic and foreign policy it is possible to sketch the Hatoyama government’s achievements and consider the extent to which the new government has parted ways with the LDP.

Foreign policy: I will start with foreign policy because it is foreign policy that has grabbed the headlines for most of the past three months.

In foreign policy, it certainly looks like the DPJ is taking Japan in a new direction. Washington certainly thinks that the Hatoyama government is doing so — an recent article in the Washington Post by John Pomfret says that U.S. officials see Hatoyama Yukio as ‘mercurial’, ‘befuddling’ analysts, who wonder whether the prime minister is engineering a ‘significant policy shift’ away from the U.S.

There are two questions to consider here. First, is the DPJ shifting from the U.S., and if so, how (and how is its foreign policy approach different from the LDP’s)?

I would answer the first question with a ‘yes, but’. Talk of a shift implies that there are but two choices for Japan in Asia: siding with the U.S. or siding with China. The reality, however, is that Japan is choosing both (or neither). The DPJ’s foreign policy approach, which will continue to evolve in the New Year, is grounded in the recognition that Japan cannot afford to be overly dependent on either the U.S. or China. Japan is hedging, against the U.S. by ensuring that the country enjoys a constructive political relationship with China, against China by continuing to stress that the U.S.-Japan alliance is, in the words of Kan Naoto, the deputy prime minister, ‘the most important relationship’ for stability in the region and the world. The Futenma question is entangled with this shift. As power within Japan shifts from bureaucrats to politicians — and as Japan shifts from a US-centered foreign policy to a more flexible foreign policy — it is hardly surprising that the new government has raised objections to an agreement foisted on the public by alliance managers. It is unclear to me why Washington is so surprised that the Hatoyama government is doing precisely what the DPJ said it would do: push for a revision of the 2006 agreement. (It is also unclear to me why the DPJ should be more concerned about breaking promises to Washington — if that it is indeed what the Hatoyama government is doing — than about breaking promises made to the Japanese people) The DPJ is showing that its new realism means that it will make decisions on the basis of Japan’s national interests. It will not simply accept decisions made by previous governments or embrace the U.S. line, no matter how strenuously US government officials, senior military officers, and former government officials bemoan the ‘befuddling’ actions of the new government.

‘New realism’: perhaps the ‘new’ is not necessary, because the DPJ is following in the footsteps of Meiji oligarchs and Yoshida Shigeru in trying to maximize Japan’s foreign policy options and limit the degree to which it is dependent on others. It is also, incidentally, following in the footsteps of the LDP prime ministers who succeeded Koizumi Junichiro. After Koizumi attempted to center Japan’s foreign policy on the US-Japan alliance, even conservative successors like Abe Shinzo and Aso Taro recognized that they could not afford to alienate China in the way that Koizumi did for the duration of his premiership. Fukuda Yasuo went further than both his predecessor and his successor to acknowledge that in the evolving Asian order Japan could do treat the US-Japan alliance and Japanese foreign policy as interchangeable, but the three prime ministers were consistent in recognizing that Japan needs to expand its freedom of actions in the region.

In this sense, the Hatoyama government is building upon the work of its predecessors. Hatoyama, with his talk of an East Asian Community, may be more enthusiastic in this pursuit than LDP prime ministers, but the thrust is the same: Japan needs to build new relationships and modify its relationship with the US, making it less about security cooperation and more about other forms of cooperation. Regarding the former, while most observers view the Hatoyama government has focused on forging a closer relationship with China, I think we should see its actions as driven by a desire to avoid having to choose between the US and China. Much like other countries in the region that have strong ties with both great powers, the Hatoyama government is trying to develop a ‘third way’ composed of multilateral cooperation among all countries and bilateral ties with countries in the region other than the US and China.

Hatoyama’s recent trip to India is particularly revealing in this regard. Building upon initiatives developed by Abe and Aso, Hatoyama met with Indian Prime Minister Manmohan Singh to discuss developing the Indo-Japanese global partnership, deepening cooperation on security, and promoting Japanese investment in India. The difference between Hatoyama and Abe, for example, who in 2007 visited India to promote security cooperation with India in the context of a quadrilateral that included the US and Australia, is that Hatoyama is promoting a strictly bilateral relationship. Unlike the Abe government, the Hatoyama government’s approach does not look like the encirclement of China by a ‘league of democracies’. It is not robed with the rhetoric of ‘universal values’ but rather appears to be driven by the Hatoyama government’s desire to expand its freedom of action. By the same token, the agreement to create an Indo-Japanese two-plus-two by which Indian and Japanese foreign and defense sub-cabinet officials can meet regularly looks different when it is not accompanied by rhetorical volleys aimed at China and is not linked to a wider network of security cooperation among democracies.

The same desire to forge relationships independent of the US and China drives the new government’s approaches to South Korea, ASEAN, Russia, Australia, and others.

Of course, the Hatoyama government — or the DPJ, considering Ozawa’s giant mission to China in December and Ozawa’s leaning on the Imperial Household Agency to arrange an audience with the Emperor for Chinese President Hu Jintao’s likely successor — has symbolically focused attention on the relationship with China that contrasts with the friction in the relationship with the US. But it is worth noting that the Hatoyama government has not moved beyond symbolic gestures in the Sino-Japanese relationship, while focusing on concrete cooperation with other countries in Asia. And as for the US, if US officials were not so short sighted they might recognize that there will likely be benefits for US-Japanese cooperation in the medium and long runs from the Futenma dispute. The DPJ is airing grievances about the alliance that had been muffled around the LDP: that while the US will bear the lion’s share of the burden in the (unlikely) event of war, the Japanese people bear the more immediate costs of hosting US forces in peacetime and that the central government in Tokyo has in turn shifted an unreasonable share of the burden of hosting US forces onto Okinawa. Meanwhile, given that the Hatoyama government is even more determined than the Obama administration to forge a realignment agreement that balances security concerns with the environmental and social concerns of the citizens of Okinawa and Japan more broadly, as well as the DPJ and its coalition partners, it may be worth waiting the extra five months that the Hatoyama government will spend devising an alternative. Furthermore, by saying no to the US, the Hatoyama government may have done more to force a discussion on the form and functions of the alliance than years of LDP rule.

The Japanese people seem to prefer some sort of ‘Goldilocks consensus’ in Japan’s foreign policy. Unease with the Hatoyama government’s handling of US-Japan relations suggests that citizens do not want the government to go too far in saying no to the US, but growing satisfaction with the state of Sino-Japanese relations also suggests that citizens do not want the government to antagonize China. In this year’s Cabinet survey of foreign policy attitudes, the proportion of respondents who view the Sino-Japanese relationship as ‘satisfactory’ rose to 38.5 per cent from 23.7 per cent, while the proportion of respondents who view the relationship as unsatisfactory fell to 55.2 per cent from 71.9 per cent. I think there is value in looking at this improvement in light of a poll conducted by the Ministry of Foreign Affairs in the waning months of the Koizumi government, in which 77.9 per cent of respondents desired improvement in the relationship. 47.7 per cent of respondents said that cooperation should focus on forging a generally cordial relationship with an eye on the big picture, compared with 20 per cent who thought it should focus on regional and global matters and only 10 per cent who felt it should focus on Japanese sovereign rights. There is little desire to return to the ice age of the Koizumi years.

Despite the impression of US officials, the DPJ-led government, far from being radically out of line with the Japanese public, is virtually at the center of the Japanese political spectrum on foreign policy. That could be a problem for those who believe in a security-centered US-Japan relationship rooted in shared values and implicitly directed at a rising China, but it need not be a problem for US-Japan cooperation as a whole.

Incidentally, the reason we can have this discussion about the DPJ’s foreign policy changes is due to the nature of foreign policy, which is largely interpretive and rooted in symbols and language. Doctrines and declarations, the stuff of foreign policy, can signify change without actually changing anything in reality — which should serve as a note of caution that for all the doctrinal changes associated with the Hatoyama government, the US and Japan still enjoy a close partnership with a durable foundation and very much unlike the relationships between the US and China and Japan and China. Japan’s foreign policy may change perceptibly under the DPJ, but it would be wise for the US to not overreact to change that is in any event driven by forces larger than who governs in Tokyo — and it would behoove the Hatoyama government to be more insistent about reminding the Obama administration about the ways the relationship is not changing (even if the Obama administration is reluctant to listen).

Economic policy: Unlike foreign policy, however, in which a speech or a summit can serve as evidence of change, economic policy is more complicated. For starters, economic policy failures are more immediately felt by citizens — and have more immediate consequences for governments. The costs for getting economic policy wrong are (usually) much more noticeable for citizens than the costs of foreign policy blunders. Inheriting an economy in recession, the Hatoyama government has been particularly sensitive to the need to get economic policy right. After all, as of November Japan’s unemployment rate was 5.2 per cent, only a slight improvement over July’s record 5.7 per cent unemployment.

While it is far too soon to grade the Hatoyama government on its macroeconomic record, the government has provided the latest guide to its economic policy approach in a new economic strategy approved by the cabinet on Wednesday. Readers will recall that during the campaign that DPJ struggled with economic strategy: given the weakness of its proposals in its manifesto, the party was compelled to issue a clarification that attempted to outline the DPJ’s growth strategy.

The basis of the DPJ’s campaign rhetoric — repeated in the introduction to the latest strategy — is that Japan has to shift from a producer-centered economic growth model to a consumer-centered growth model. In other words, it is essential for the government to stimulate consumer spending on foreign and domestic goods and services, providing a better quality of life for Japanese citizens.

The new strategy states that the goal is to create a ‘problem-solving-style state’ that will tackle climate change and the problem of Japan’s aging, shrinking society by promoting ‘green innovation’ and ‘life innovation’, in the process making Japan into a ‘model country’. While there are a number of laudable proposals in this strategy — the focus on trade and investment within the Asia-Pacific is particularly noteworthy — the document reads like so many LDP economic strategies before it, flighty rhetoric and ambitious goals without clear proposals for how to achieve them (and like the Abe government, a clear penchant for katakana buzzwords). Similarly, the very idea of a growth strategy suggests that the government can plan the transition from producer-centered to consumer- and innovation-centered growth. I do not see how, with the return of deflation, the government will convince households to spend the cash they have been hoarding, or how the government will promote greater risk-taking and entrepreneurship among young Japanese, in the process remaking the labor market so that workers who fail to secure regular employment upon finishing school are not forever condemned to irregular employment. For that matter, there is little sense of the tradeoffs facing the Hatoyama government. How will it balance the goal of restoring fiscal normalcy with the goal of building a social safety net with the goal of promoting green innovation and other measures to promote economic growth?

The DPJ-led government will have to surmount these challenges in large part because its predecessors failed to do so. It will clearly take time, which, again, is not the DPJ’s fault seeing as how the LDP did little to shift Japan’s economic model after the bubble burst.

Perhaps the one saving grace of the new growth strategy is its focus on Asia. In this sense the division between foreign and economic policy is artificial: like Japan’s governments at other critical turning points, the Hatoyama government recognizes the centrality of economic policy for achieving the country’s foreign policy goals. Without being more open to trade and investment within the region, there is no way that Japan will be able to expand its influence in the region as China continues to grow. That competition need not be zero-sum — but even to reap positive-sum gains Japan will actually have to enter the competition for influence. Bilateral EPAs concluded within the region in recent years are a start, but Japan has more work to do.

As we look ahead to 2010, we should see how this process of reorienting Japan to an Asia that is increasingly the center of the international system. In doing so, the DPJ will not necessarily be forging a new path but will instead be taking bigger steps along a path that the LDP had already started down, a path laid by the changing regional order. The US will remain an important player in Asia, but no longer will it be the region’s indispensable nation. Indeed, the Hatoyama government’s policies should put pressure on the Obama administration to follow through on President Obama’s claim that his is the first ‘Asia-Pacific’ presidency. In 2010 the two allies will have to consider the meaning of their alliance even as they celebrate its fiftieth anniversary. They should not shrink from this task.

There are big changes afoot. While the DPJ and its leader are responsible for some of the content of Japan’s new policies, it is likely that similar debates would have occurred even had the LDP been able to retain power.

There is no guarantee that the DPJ will succeed in either smoothly transitioning to a more independent foreign policy without alienating the US, China, or both, or build a new economic growth model without bankrupting the country or simply failing to promote new industries. But by the end of 2010 we should have a better sense of whether the Hatoyama government will succeed in its bid to return Japan to Asia.