Decision-making, Factionalism, and Government Relations in Japan

Decision-making, Factionalism, and Government Relations in Japan

January 2024

This article is part of Sandpiper’s Public Affairs Tracker content series on government relations in Asia-Pacific. Here, our Public Affairs team takes an in-depth look at Japan – its unique political culture, intra-party factionalism, and the key non-governmental actors shaping economic policy.

Overview – Japan’s vibrant democracy

From the post-war period onwards, Japan has emerged as a vibrant parliamentary democracy with a robust constitutional framework that has remained unchanged for over 70 years. Executive authority is explicitly vested in the Cabinet, headed by a prime minister who is nominated by the elected legislature – the National Diet – and formally appointed by the emperor. With a few rare exceptions, prime ministers have almost always been leaders of the parliamentary majority party. Decision-making is borne out of a relatively transparent and multidimensional process, which bridges the interests of government, stakeholders, and civil society.

One intriguing aspect of Japan’s political system over several decades has been the persistent centrality of the Liberal Democratic Party (LDP). Since its founding in 1955, the LDP has cumulatively held power for more than half a century, with only a few years of intermission. Currently, the LDP occupies 48 per cent of seats in the (upper) House of Councillors and a 56 per cent majority in the (lower) House of Representatives. This way, the LDP is able to hold onto the major cabinet ministries most consequential to business and commerce, including the Ministry of Foreign Affairs, Ministry of Finance, and the Ministry of Economy, Trade and Industry, among others.

Factional turbulence under the surface

That said, Japan’s economic and trade policies have been far from consistent. This has partly been due to the party’s own organisational framework, which has several distinct factions – a phenomenon unique to Japan. Factions may have visibly different political views and are often headed by prominent leaders with long-standing pedigree in Japanese politics. Depending on the political environment, factions may fight or collaborate with one another to form a cabinet that favours their ideological visions for the country’s future.

For example, the late former Prime Minister Abe Shinzo maintained close ties with – and ultimately came to lead – the Seiwakai, a national-conservative faction previously led by his father. While Abe became Japan’s longest-serving premier, his erstwhile LDP leadership rival and Shikōkai faction chief Asō Tarō enjoyed a prolonged tenure as Deputy Prime Minister and Minister of Finance, concurrently – an exercise in strategic factional compromise. 

In the absence of party alternation, internal disruption within the LDP can drastically shift the centre of political gravity at the heights of Japan’s government, which in turn can have a decisive impact on the direction of economic policies. Multinationals operating in Japan should keep a keen eye on these dynamics – and now is precisely the time to pay close attention.

Earlier in January, Prime Minister Kishida Fumio announced that he would dissolve his Kōchikai faction, prompting the leaders of two other major factions to do the same. This is a radical move aimed at restoring public trust in the wake of a recent high-profile “slush fund” scandal over campaign financing. There is speculation that Kishida may even try to dismiss – or at least restructure – all factions within the LDP, potentially overhauling the party’s decision-making mechanisms entirely. Still, dispelling factions on the surface is not going to extinguish deep-rooted factional dynamics.

In this shifting political landscape, businesses would do well to focus on monitoring and issues intelligence, not only for policies, but also personnel reshuffles, factional struggles, and fundamental realignments at the heart of government. 

Managing interest groups

As in any established democracy, there is a vast ecosystem of competing stakeholder interests and engagement efforts that exists outside the structures of government and party-politics. Industry associations play an integral role in advising on policy, initiating discourse, and providing input on the government’s legislative agenda.

There are three main organisations worth noting that represent business. The most conservative of these is the Japan Business Federation (Keidanren) – with over 1,500 corporate members, it is essentially the voice of “big business”. The Japan Association of Corporate Executives (Keizai Doyukai) is known for espousing a more progressive, reformist stance on economic governance, with a long-standing emphasis on promoting corporate social responsibility. Finally, the Japan Chamber of Commerce and Industry (JCCI) is a much broader network, representing over 1.2 million members nationwide and encompassing everything from large corporations all the way down to sole proprietors.

Together, these organisations make up a multi-layered matrix of interests and priorities through which businesses can help shape policy. While corporate government relations efforts often aim to engage stakeholders at the legislative level, it’s worth noting that the executive branch has its own avenues for soliciting external expertise as well. Specialist deliberative councils and advisory commissions (shingikai) exist within Cabinet ministries and are designed to bring together voices from academia, civil society, trade unions, and enterprise – both Japanese and international. These councils offer some of the most direct avenues for private sector actors and foreign business representatives to lend their voices in helping shape government policy.

Engaging decision-makers

Japanese decision-makers expect engagement from commercial stakeholders and welcome the diversity of perspectives offered by international expertise. Still, because of the perceived unfamiliarity of Japan’s political and policy-making landscape, historically, overseas companies have often failed to make full use of these opportunities.

Especially in Japan, a society that places immense value on professionalism, reputation, connections, and hierarchy, government relations can be a highly structured and ritualised endeavour, where avenues of access are carefully curated through long-established social norms. To cultivate trust and foster sustainable relations, multinationals need to play the long game and commit to understanding Japan’s unique cultural landscape.

In an environment where domestic competitors have an inherent edge, finding help in making sense of local traditions and protocol is essential. While building in-house government relations capacity is crucial to long-term success, complementing your overall business vision with a tailor-made, country-specific public affairs strategy and specialist external counsel could be key to navigating unexpected obstacles and unlocking your potential in a new, unfamiliar market.

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