Japan's Crisis of Competence

Japan's Prime Minister Yukio Hatoyama

For all of Yukio Hatoyama's flaws as prime minister, he can count one significant achievement: His Democratic Party of Japan brought an end to the Liberal Democratic Party's 55-year stranglehold on Japanese politics. Now, with Mr. Hatoyama's resignation Wednesday after barely 10 months in office, his party appears in danger of squandering its opportunity to lead a realignment of Japanese politics.

The immediate reason for Mr. Hatoyama's exit is public anger at his botched handling of negotiations with the United States over moving a Marine air base on Okinawa. By needlessly reopening talks on relocating the Futenma Marine Air Base, Mr. Hatoyama stirred anti-American passions at home. He managed to call into question Japan's 50-year alliance with America at the precise moment tensions on the Korean peninsula have escalated to their highest point in years and China's budding navy is growing more assertive.

Mr. Hatoyama's far bigger problem was the fundamental crisis of competence the public saw whenever it looked at his government. Voters lost patience with the DPJ's economic management, which—to put it kindly—lacks a clear vision for how to lift Japan out of its chronic deflation and export dependence. Mr. Hatoyama and Ichiro Ozawa, the DPJ's elderly leader who also resigned yesterday, were perpetually embroiled in campaign fundraising scandals that undermined their good-governance promises. The Futenma controversy simply confirmed the suspicion the DPJ wasn't ready for prime time.

It will fall to Mr. Hatoyama's successor—most likely Finance Minister Naoto Kan—to tackle the concern in Japan and overseas over the DPJ's fitness to govern. Assuming he does step into the top job, Mr. Kan may be more successful at appearing competent than Mr. Hatoyama was. Mr. Kan has a reputation for holding more defined policy views than did Mr. Hatoyama. Mr. Kan also boasts a more impressive leadership resume, having served as a cabinet minister twice, albeit for brief stints.

But even if Mr. Kan proves he's a better leader than Mr. Hatoyama, the question will remain: leadership skills in the service of which ideas? On national security, his views on Futenma remain a black box. He declined Mr. Hatoyama's request to handle the issue last year and has avoided commenting on it since. Although the Futenma issue appears settled again for now, it could flare up unpredictably as the deal is implemented, threatening Mr. Hatoyama's successors with periodic eruptions in U.S.-Japan relations.

Meanwhile, Mr. Kan's economic instincts are better known but not encouraging. As finance minister, his main strategy for combating deflation has been to browbeat the Bank of Japan into loosening an already free-and-easy monetary policy. He has no apparent plan for making structural reforms that would unleash Japan's animal spirits and create demand for all the cheap yen that currently sit unused on corporate balance sheets. He has sat idly while Mr. Hatoyama's government scotched plans to privatize the postal savings bank. He recently proposed an increase to the sales tax to combat Japan's fiscal deficit, at the risk of further deterring consumption amid deflation.

The danger is that without more radical action the world's second-largest economy will meander instead of galloping into recovery. Slack demand at home will limit Japan's ability to contribute to a global upturn as the economy at home risks sinking further into deflation. Japan will continue to depend on exports to fuel growth, leaving it vulnerable to slowdowns and double-dips elsewhere.

To be fair, the failure of vision extends beyond the DPJ. Mr. Hatoyama is the fourth consecutive prime minister to last for a year or less. The last long-term prime minister was Junichiro Koizumi. Not coincidentally, he was famous for clear economic and security strategies that he pursued with respectable consistency. Voters have been hoping for that kind of leadership again. Neither major party is delivering. The LDP is fracturing instead of using its time in opposition to formulate a compelling platform with which to win back power.

The most optimistic interpretation of Mr. Hatoyama's fall is that its surprising speed in less than a year means a political realignment is happening faster than anyone had expected. The big winners from next month's upper house election may be smaller parties that have broken from the LDP and DPJ and have coherent policy views (some smart, others not).

Such a realignment is long overdue, but it will take time and it's happening at a dangerous time for national and regional security, and for the economy. Mr. Hatoyama was the wrong prime minister to meet these challenges, despite his success in ousting the LDP. The sooner a candidate with ideas rises to take his seat, the better.