Japanese Elections Add to Uncertainty for U.S. Beef Exports

Japanese Elections Add to Uncertainty for U.S. Beef Exports

The Democratic Party of Japan (DPJ) scored an overwhelming victory in Japan’s elections Sunday, capturing an even larger majority than expected in the lower house of the Diet. The Liberal Democratic Party (LDP) not only lost its long-standing majority, but also saw several of its most influential leaders defeated in their bids for reelection.

The election results leave the lower house with the following makeup:

• DPJ                                           308
• LDP                                           119
• Komeito                                      21
• Communist                                   9
• Socialist Democratic                     7
• People's New National                   3
• Other                                          13

This outcome gives the DPJ a majority in both the upper and lower houses of the Diet and has fueled the belief that resolving agricultural trade issues between the United States and Japan will be more challenging, especially given the tone of the DPJ manifesto. Of particular concern is the fact that the DPJ, in its role as the primary opposition party in recent years, has taken a relatively harder line against expanded access for beef imports from the United States.

“Politically, Japan is a whole different world than it was three days ago,” said USMEF President and CEO Philip Seng. “For the past half-century, the cozy relationship enjoyed by elected officials, government bureaucracy and business has contributed to Japan’s economic success. But it remains to be seen if that relationship can be maintained or how it will be affected. There are many key bureaucrats who have been involved in managing U.S.-Japan trade relations who remain in their positions, but they will be under much more intense scrutiny from elected officials and operating in an entirely new political climate.”

The United States has been working for several years to expand the supply of U.S. beef eligible for export to Japan. Currently, exports are limited to beef from cattle less than 21 months of age. While beef exports to Japan have been on the rise, this restriction has hindered U.S. efforts to retain market share in what once was the No. 1 foreign market for U.S. beef.

“It’s important for the U.S. government to engage with the new Japanese government as soon as possible to foster a cooperative atmosphere for future U.S. beef negotiations,” Seng said. “At the same time, USMEF will work with the industry and its contacts in Japan to try to determine the optimal approach to a beef trade protocol that will follow a scientifically sound approach and, ultimately, lead to expanded access for U.S. beef there.”  

“We have seen these signs of change on the horizon in Japan for some time, and certainly this change in power in Japan signals a new political climate,” said Seng. “If we are not sensitive to these new realities, it certainly will lead to new tensions in the U.S.-Japan relationship. For USMEF, it is important that we understand these new realities, reflect them to our constituents, and help the industry work to find a common ground for moving forward.”

A political change two decades in the making

The dramatic swing in Japan’s political landscape signaled by Sunday’s election traces its roots back nearly two decades, according to Seng. The LDP was the political party responsible for the business success of the past 50 years in Japan. However, the populace has had a growing disenchantment with the party that goes back as far as the early 1990s, culminating with the LDP’s inability to lead the nation through the recent economic crisis.

“The LDP has been viewed as always coming down on the side of business and has not been seen as actively representing consumers,” Seng said. “Confidence in the LDP eroded in the 1990s when it was in power while Japan suffered through a prolonged economic slump.”

A watershed event for the LDP occurred in 2005 when former Prime Minister Koizumi took Japan through an extensive privatization process that alienated the farmers in their political base.

“And over the years, the leadership has been involved in repeated scandals and public situations that have been embarrassing for the party. The rising unemployment rate was confirmation for many that the LDP was unable to lead the country through the current economic crisis and stripped the party of much of its remaining support,” Seng said.

While the response may have been more of a vote against the LDP than a vote for the DPJ, the question to be answered is how true to its manifesto will the DPJ be.

For the near term, Seng expects all major public decisions in Japan will be examined based on how they affect consumers and families.

“The DPJ has declared that consumers are No. 1,” he said. “As evidence, the new government already has put in place a new consumer protection agency, and it has made specific promises of cash stipends to families.”

There are a number of questions that remain to be answered for the United States in the aftermath of the election. For example, the DPJ’s manifesto calls for Japan to branch out economically to further develop new trading and economic partners, such as China. President Obama and Japan’s new prime minister will be meeting later this month, and this topic will certainly be on their agenda.

“Many key people were swept out of power,” said Seng. “It’s uncertain at this point who will take leadership in the party. In the near term, it is important for the U.S. to earnestly engage with the new government as new assignments are made.”

Certainly for the U.S. beef industry, there is added uncertainty now how the new government will respond to existing U.S. beef trade dynamics, such as how violations of the current U.S. beef import protocol are handled. We know that the DPJ has called for added transparency and strict scrutiny over all food imports from all sources.

The U.S. beef industry will face an additional challenge if Canada is successful in its negotiations to gain expanded access for its beef in Japan. The Province of Alberta – Canada’s largest beef producer – currently has a delegation in Japan exploring parameters for moving beef exports beyond 20 months of age. Earlier this year, Japan expressed interest in participating in these discussions with both Canada and the United States, in order to move forward on such a protocol.

Seng is currently traveling in China with USMEF’s officers and will be attending the World Pork Conference in Qingdao. They will travel to South Korea to appraise the climate for U.S. beef exports, followed by a stop in Japan next week to continue the assessment of the impact of Japan’s national election.

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The U.S. Meat Export Federation (www.USMEF.org) is the trade association responsible for developing international markets for the U.S. red meat industry and is funded by USDA, exporting companies, and the beef, pork, corn and soybean checkoff programs.

For more information, contact Jim Herlihy at jherlihy@usmef.org.

USMEF complies with all equal opportunity, non-discrimination and affirmative action measures applicable to it by contract, government rule or regulation or as otherwise provided by law.

Japanese Elections Add to Uncertainty for U.S. Beef Exports

The Democratic Party of Japan (DPJ) scored an overwhelming victory in Japan’s elections Sunday, capturing an even larger majority than expected in the lower house of the Diet. The Liberal Democratic Party (LDP) not only lost its long-standing majority, but also saw several of its most influential leaders defeated in their bids for reelection.

The election results leave the lower house with the following makeup:

• DPJ                                           308
• LDP                                           119
• Komeito                                      21
• Communist                                   9
• Socialist Democratic                     7
• People's New National                   3
• Other                                          13

This outcome gives the DPJ a majority in both the upper and lower houses of the Diet and has fueled the belief that resolving agricultural trade issues between the United States and Japan will be more challenging, especially given the tone of the DPJ manifesto. Of particular concern is the fact that the DPJ, in its role as the primary opposition party in recent years, has taken a relatively harder line against expanded access for beef imports from the United States.

“Politically, Japan is a whole different world than it was three days ago,” said USMEF President and CEO Philip Seng. “For the past half-century, the cozy relationship enjoyed by elected officials, government bureaucracy and business has contributed to Japan’s economic success. But it remains to be seen if that relationship can be maintained or how it will be affected. There are many key bureaucrats who have been involved in managing U.S.-Japan trade relations who remain in their positions, but they will be under much more intense scrutiny from elected officials and operating in an entirely new political climate.”

The United States has been working for several years to expand the supply of U.S. beef eligible for export to Japan. Currently, exports are limited to beef from cattle less than 21 months of age. While beef exports to Japan have been on the rise, this restriction has hindered U.S. efforts to retain market share in what once was the No. 1 foreign market for U.S. beef.

“It’s important for the U.S. government to engage with the new Japanese government as soon as possible to foster a cooperative atmosphere for future U.S. beef negotiations,” Seng said. “At the same time, USMEF will work with the industry and its contacts in Japan to try to determine the optimal approach to a beef trade protocol that will follow a scientifically sound approach and, ultimately, lead to expanded access for U.S. beef there.”  

“We have seen these signs of change on the horizon in Japan for some time, and certainly this change in power in Japan signals a new political climate,” said Seng. “If we are not sensitive to these new realities, it certainly will lead to new tensions in the U.S.-Japan relationship. For USMEF, it is important that we understand these new realities, reflect them to our constituents, and help the industry work to find a common ground for moving forward.”

A political change two decades in the making

The dramatic swing in Japan’s political landscape signaled by Sunday’s election traces its roots back nearly two decades, according to Seng. The LDP was the political party responsible for the business success of the past 50 years in Japan. However, the populace has had a growing disenchantment with the party that goes back as far as the early 1990s, culminating with the LDP’s inability to lead the nation through the recent economic crisis.

“The LDP has been viewed as always coming down on the side of business and has not been seen as actively representing consumers,” Seng said. “Confidence in the LDP eroded in the 1990s when it was in power while Japan suffered through a prolonged economic slump.”

A watershed event for the LDP occurred in 2005 when former Prime Minister Koizumi took Japan through an extensive privatization process that alienated the farmers in their political base.

“And over the years, the leadership has been involved in repeated scandals and public situations that have been embarrassing for the party. The rising unemployment rate was confirmation for many that the LDP was unable to lead the country through the current economic crisis and stripped the party of much of its remaining support,” Seng said.

While the response may have been more of a vote against the LDP than a vote for the DPJ, the question to be answered is how true to its manifesto will the DPJ be.

For the near term, Seng expects all major public decisions in Japan will be examined based on how they affect consumers and families.

“The DPJ has declared that consumers are No. 1,” he said. “As evidence, the new government already has put in place a new consumer protection agency, and it has made specific promises of cash stipends to families.”

There are a number of questions that remain to be answered for the United States in the aftermath of the election. For example, the DPJ’s manifesto calls for Japan to branch out economically to further develop new trading and economic partners, such as China. President Obama and Japan’s new prime minister will be meeting later this month, and this topic will certainly be on their agenda.

“Many key people were swept out of power,” said Seng. “It’s uncertain at this point who will take leadership in the party. In the near term, it is important for the U.S. to earnestly engage with the new government as new assignments are made.”

Certainly for the U.S. beef industry, there is added uncertainty now how the new government will respond to existing U.S. beef trade dynamics, such as how violations of the current U.S. beef import protocol are handled. We know that the DPJ has called for added transparency and strict scrutiny over all food imports from all sources.

The U.S. beef industry will face an additional challenge if Canada is successful in its negotiations to gain expanded access for its beef in Japan. The Province of Alberta – Canada’s largest beef producer – currently has a delegation in Japan exploring parameters for moving beef exports beyond 20 months of age. Earlier this year, Japan expressed interest in participating in these discussions with both Canada and the United States, in order to move forward on such a protocol.

Seng is currently traveling in China with USMEF’s officers and will be attending the World Pork Conference in Qingdao. They will travel to South Korea to appraise the climate for U.S. beef exports, followed by a stop in Japan next week to continue the assessment of the impact of Japan’s national election.

# # #

The U.S. Meat Export Federation (www.USMEF.org) is the trade association responsible for developing international markets for the U.S. red meat industry and is funded by USDA, exporting companies, and the beef, pork, corn and soybean checkoff programs.

For more information, contact Jim Herlihy at jherlihy@usmef.org.

USMEF complies with all equal opportunity, non-discrimination and affirmative action measures applicable to it by contract, government rule or regulation or as otherwise provided by law.