Japan business warily reaches out to opposition

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TOKYO, Feb 12 (Reuters) - Japan’s biggest business lobby is cautiously reaching out to the main opposition party that may win power this year, amid fears of a dramatic shift in policies that some executives worry could erode Japanese competitiveness.

The willingness by Nippon Keidanren to deepen dialogue with the Democratic Party of Japan (DPJ) is a shift after decades of cosy ties between the powerful business group and the long-ruling Liberal Democratic Party (LDP).

Surveys show the 10-year-old Democrats could win an election that must be held by October, leaving the conservative Liberal Democrats out in the cold after an almost unbroken reign of more than 50 years. [ID:nT160473]

That would usher in a government analysts say may craft policies friendlier to labour unions and consumers rather than the big corporations that have worked closely with successive LDP governments to rebuild Japan from the ashes of World War Two.

Such worries are prompting the business lobby to expand contacts with the Democrats -- a mix of former LDP members, ex-socialists and younger conservatives.

“Regardless of which party wins the election, we hope that party will pursue policies to help strengthen Japan’s international competitiveness,” Mitsuo Ohashi, who is in charge of political affairs at Nippon Keidanren, told Reuters.

“It is only natural for us to change the way we treat the DPJ as chances grow for the party to win and run the government,” Ohashi said. “We will boost our dialogue with the DPJ.”

Nippon Keidanren backs its support for the LDP with cash -- the lobby’s member companies gave a total of nearly 3 billion yen ($33 million) in financial contributions to the party in 2007. The Democrats received just 83 million yen.

And long-standing ties can be hard to break.

While Ohashi addressed a Democrat convention last month, Nippon Keidanren chief Fujio Mitarai, who is also chairman of Canon Inc 7751.T, told a similar LDP gathering he hoped the ruling party would stay in power.


For most of the post-war period, Nippon Keidanren has been the voice of big business in Japan and wields substantial clout in the corridors of power. It represents more than 1,300 firms and nearly 180 industry groups.

It gave poor marks to the Democrats in its annual policy evaluation of political parties last September, saying the party’s policies lacked specifics, such as how to finance growing social welfare costs as Japan’s population rapidly ages.

"The DPJ has proposed steps that are rather temporary to attract voters as the election nears," said Ohashi, who is also chairman of the board at chemical maker Showa Denko KK 4004.T.

The Democrats have not finalised their platform for the coming election, but have pledged to overhaul the national budget and break the grip that bureaucrats have over policy.

The business lobby has expressed unhappiness at a Democrat proposal to keep Japan’s corporate tax rate at around 40 percent, one of the highest among major economies.

The lobby also advocates raising the 5 percent consumption tax to help fund Japan’s mounting debt and social welfare costs -- an idea the Democrats are cautious about, at least for now ahead of the election and in the midst of an economic crisis.

Labour union support for the DPJ has also prevented a business lobby led by managers at big Japanese corporations from getting too close to the Democrats.

That close relationship to unions has some worried.

“If the Democrats run a government that leans toward labour unions and don’t listen to firms’ requests to lower corporate tax, it will be negative for Japan’s growth rate,” said Kyohei Morita, chief Japan economist at Barclays Capital.

Political analyst Atsuo Ito, however, played down the role of labour unions, which are less powerful than those in countries such as the United States, in swaying Democratic Party policies.

“Once the DPJ wins and runs a government, financial contributions from Nippon Keidanren will likely increase. For corporations, it is very important to work well with a ruling party at the time,” he said.

Despite their cautious approach to the DPJ, the possibility the LDP could make a comeback even if it loses this time around will make many businessmen wary of burning their bridges.

“In the future, we may have a two-party system or a reorganisation of political parties,” said Nippon Keidanren’s Ohashi. “Thus, it is important for Nippon Keidanren as well as the business community to make sure the economy won’t be dragged down by any political mess.” ($1=90.35 Yen) (Editing by Dean Yates)