North East Asia’s fragile peace is being threatened by North Korea’s planned launch between 4 and 8 April over Japanese territory of a communication satellite. The US and its allies suspect the planned satellite launch to be a long-range ballistic missile test. The prevailing uneasy peace is accentuated by the fact that both a ballistic missile and a satellite launcher operate on very similar technology. According to Dennis Blair, Director of US National Intelligence, the technology for a space launch “is indistinguishable from an intercontinental ballistic missile.” If the “three stage space-launch vehicle works,” it could technically reach the US mainland. Consequently, the reactions from the US and its allies have been strong.

There has remained a lurking suspicion that North Korea and Iran have joined together to build missiles. That Iran has made rapid strides in missile technology is an established fact. But whether the collaboration between the two countries includes warheads or other nuclear work remains shrouded in mystery. But given the behaviour of the two countries over the years, it is difficult to disbelieve that both Iran and North Korea are not cooperating in such activity.

North Korea already possesses the Taepo Dong-2 with ICBM potential (striking range of 5500 kilometres or greater). It may be recalled that Pyongyang’s August 1998 test firing of a Taepo Dong-2 into the Sea of Japan had panicked American friends and allies in East Asia. It is a different matter that the test failed 40 seconds into its launch. However, it propelled North Korean engineers to make substantial modifications in the missile’s design. The advanced version of Taepo Dong-2 is supposed to have a minimum striking range of 6,700 kilometres (4100 miles), capable of striking the US west coast.

Despite its precarious economic problems, Pyongyang has never felt shy of demonstrating its defence capabilities by upgrading its missile development systems continuously. It has built a ballistic missile arsenal capable of hitting not only Japan and South Korea but also the west coast of the US. In total, North Korea deploys around 750 ballistic missiles, including between 600-800 SCUDs, 150-200 No Dongs, 10-20 Taepo Dong-1, and a few Taepo Dong-2s.

Pyongyang has not halted its nuclear programme despite the denuclearisation deal that it struck at the Six Party talks in February 2007. It is suspected that Pyongyang is aiming to produce nuclear payloads for its ballistic missiles. It is also feared that Pyongyang’s missile development programme is projected towards developing a nuclear warhead sophisticated enough for delivery aboard a space-bound rocket. In the event of Pyongyang achieving that capability, it would be in a position to detonate a nuclear warhead in space. The electromagnetic pulse (EMP) emanating from such a detonation would have frightening repercussions, especially for unhardened satellites. A space launch would advance Pyongyang’s missile programme, enabling it to produce more accurate and powerful ballistic missiles capable of terrorizing not only Seoul and Tokyo but also Los Angeles and San Francisco.

With a view to deterring and intercepting missiles from the North, South Korea has announced its own plans to complete a missile defence system by 2012. Japan too has affirmed its commitment to acquire a multi-layered system after the US withdrew from the Anti-Ballistic Missile Treaty (ABM) in 2002 and North Korea left the NPT regime in 2003. If North Korea does not retract from its ballistic missiles test programme, the US, Japan and South Korea are likely to keep their missile defence options open.

There already exist the necessary mechanisms through international legal instruments to deter North Korea from upgrading its missile development capability. United Nations Security Council resolution 1718 (2006) prohibits Pyongyang from conducting any ballistic missile activity. North Korea is a signatory to the 1967 Outer Space Treaty, which prohibits the deployment of nuclear weapons or other weapons of mass destruction in orbit, in the moon or elsewhere in space. However, it has asserted its right to engage in a peaceful space programme. The state-run Korean Central New Agency said “preparations for launching experimental communications satellite Kwangmyongsong-2 by means of delivery rocket Unha-2 are now making brisk headway” at a launch site in Hwadae Country in the northeast. The statement called the upcoming launch “a giant stride forward” for the country’s space programme.

North Korea finds fault with the US and Japan, claiming that these two countries have already launched their own satellites and therefore have no moral right to prevent it from doing the same. It further warns Washington and Tokyo that if they deny Pyongyang the right to use space for peaceful purposes, it would not only be discriminatory but also not in keeping with ‘spirit of mutual respect and equality’ of the 2005 disarmament pact. Pyongyang further warns that any sanctions that the UN, US and its allies might impose on it would “deprive the Six-Party talks of any ground to exist or their meaning.” Meanwhile, North Korea has asserted that it would regard any attempt to shoot down its rocket as an unprovoked Act of War and retaliate with prompt strikes on the US mainland, Japan and South Korea.

The international community is aghast at Pyongyang’s obduracy. Japan has decided to call for an emergency meeting of the UNSC if the launch takes place. In the event of the North’s missile firing, Japan will urge the UNSC to take immediate action regardless of how other UN members would react, as it would be directly exposed to an immediate missile threat. Japan has warned that it will shoot down a missile or any debris if it threatens to hit Japanese territory.

Japan debated between two possible options in response to a missile launch by North Korea: to ask the cabinet to take an instant decision after a missile launch or to give military approval in advance to shoot it down, and finally decided to exercise the second option by issuing an advanced order to the Self Defence Forces on March 27 to use the Patriot missile defence system to destroy any missile or debris that shows signs of falling toward Japan. Japan, however, does not want to strike a North Korean rocket unless it appears to pose a direct threat, in the event of a mishap that could send an errant missile or debris flying toward the country.

Japanese Prime Minister Taro Aso has already obtained the support of British Prime Minister Gordon Brown. Both Japan and Britain have agreed to take the issue to the UNSC to discuss possible punitive action if Pyongyang goes ahead with the launch. As a pre-emptive measure, Japan has deployed three Aegis destroyers, two of which are fitted with anti-missile missiles, around Japan and Patriot guided-missile units at select locations in Japan. The US Seventh Fleet has been deployed around Japan. US cruisers and destroyers based at Yokosuka also reportedly have the capability to launch guided missiles against ballistic missiles. Five Aegis destroyers of the US Navy modified for ballistic missile defence have already left Yokosuka and other Japanese ports on March 30. They are expected to detect and track the North Korean rocket passing over northeastern Japan if the launch goes according to plan.

South Korea is worried over the heightened tensions on the Peninsula and President Lee Dang-hee has appealed for restraint. Seoul has also alleged that Pyongyang’s long-range rocket launch clearly violates UNSC resolution 1718. It has described Pyongyang’s planned rocket launch as a ‘serious challenge and provocation’ to regional security. North Korea, however, has ramped up its anti-Lee rhetoric, warning that the Koreas are headed for a military clash.

Russia too has joined the chorus of nations expressing concern over the upcoming launch. Russian Deputy Foreign Minister Alexei Borodavkin said that the launch would lead to increased tensions in the region and urged Pyongyang to refrain from it. As regards China, a traditional ally and a major donor for impoverished North Korea and UNSC permanent member, it has not publicly urged Pyongyang to halt the launch. However, both China and Russia have notified the Obama administration that North Korea has a legitimate right to launch a satellite. The perceived tacit support from China and Russia might embolden North Korea not to rethink its planned space satellite launch.

It appears that the uneasy peace in the North East Asian region stemming from Pyongyang’s intransigence is likely to continue for some more time to come. If North Korea is to be trusted about its intentions for the communication satellite launch programme, it would serve the interests of the country. If, however, Pyongyang has other covert intentions, it will have to face the reactions from its neighbours and the US.

There has been a major shift in China’s foreign policy towards Nepal since the Maoist ascendance to power. China had earlier adopted a policy of ‘non-intervention’ in the internal matters of Nepal and largely stayed out of Nepalese internal politics. However, the demise of the monarchy and the ascendance of political parties have forced China to reshape its Nepal policy. Moreover, frequent protests by Tibetans in recent months alerted the Chinese to the possibility of the China-Tibet border being misused. Consequently, China has sought to engage Nepalese political actors at all levels, primarily to secure the border with Nepal. With the Maoists in power, China also hopes to use its ideological commonalities to suppress the Tibetan movement in Nepal.

When the Maoists emerged victorious in the April 2008 elections, China adopted a wait and watch policy because it was unsure of their intentions. After all, the Maoists were backed by India and were catapulted to the political centre stage only after a comprehensive peace agreement in which India had played a substantial behind the scenes role. However, media reports reveal that after several interactions with Maoists leaders, China has begun to feel quite comfortable with the Maoist-led government. The Maoists’ ideological linkages with China and their keenness to neutralize India’s influence in the region have also made them an obvious choice for engagement.

It has been reported that in interactions with Chinese the Maoist leaders gave the impression that the future of democracy in Nepal could be guided by the example of the Communist Party of China. Indeed, there are many in Nepal who argue that persistence with the Maoist tag in the party name despite joining competitive politics indicates that the party may work towards a single party system in the future, given that dictatorship of the proletariat has prime of place in the Maoist lexicon. In fact, some hardline leaders of the party have suggested a people’s republic similar to that of China on a number of occasions even after Maoists joined the political mainstream. These ideas might have encouraged China to attempt to consolidate its position in Nepal by continuously engaging the Maoists at the political, economic, military and social levels, and thus secure its strategic interests in the region.

In fact, twelve high-level Chinese delegations, including two military teams, visited Nepal in the course of 2008-2009. During these visits, China has repeatedly assured economic, technological and military aid to Nepal. The Maoist-led government was also asked to adopt a ‘One-China’ policy, not to allow Nepalese land for anti-China activities, take strong action against Tibetan refugees and grant special facilities for Chinese investments in strategic sectors. Beijing has also initiated Track-II diplomacy with Nepal and invited Nepalese scholars to undertake visits to Chinese think tanks.

Some of the important visits from China to Nepal were:

• 25 February 2009: Assistant Chinese Foreign Minister Hu Zhengyue led a 14-member delegation.
• 19 February 2009: Liu Hongcai, Vice Minister of the International Department of the central committee of the CPC led a delegation to take part in the inaugural ceremony of the 8th convention of the UML in Butwal.
• 10 February 2009: A high level Peoples’ Liberation Army (PLA) delegation, one of the largest delegations in two months, arrived in Nepal.
• 06 December 2008: Lieutenant General Ma Xiaotian, deputy chief of General Staff of the PLA headed a ten-member delegation. China agreed to provide US $2.61 million worth of security assistance to Nepal.
• 01 December 2008: China’s Foreign Minister Yang Jiechi visited Nepal.
• 24 July 2008: Chinese Vice-Minister for Foreign Affairs, Wu Dawei, visited Nepal. He pledged a grant assistance of 100 million yuan as economic and technical cooperation.
• 04 March 2008: Assistant Minister for Foreign Affairs of China, He Yafei, undertook a three-day visit to Nepal.

Nepal’s engagements with China have also increased manifold with the visit of delegations both at State and non-state levels. Apart from visits at the official levels, private visits by political leaders, journalists and academicians are also sponsored by China as part of public diplomacy. During these visits Chinese authorities have reportedly assured all kinds of support to the Maoist government in its efforts aimed at laying the foundation for a ‘New Nepal’. For the Nepalese Maoists, growing Chinese engagement is a win-win situation in line with their ‘policy of equidistance’, which has been deliberately adopted to counter-balance India’s influence in Nepal.

The increasing level of bilateral engagement also indicates that China is wooing Nepal as a new strategic partner. This has been confirmed by the statements made by various Chinese officials. For example, on 16 February 2009, Chinese Foreign Minister Yang Jiechi said in Beijing that China would prefer to work with Nepal on the basis of a strategic partnership. In fact, Vice Minister of International Department of the Central Committee of Communist Party of China, Liu Hongcai said in Kathmandu in February 2009 that “we oppose any move to interfere in the internal affairs of Nepal by any force.” Similarly, on November 04, 2008, Liu Hong Chai, International Bureau Chief of the Chinese Communist Party, stated that “China will not tolerate any meddling from any other country in the internal affairs of Nepal- our traditional and ancient neighbour.”

China has also submitted to Kathmandu a draft Sino-Nepal friendship treaty. The draft states that China will not attack Nepal and would respect Nepal’s sovereignty and territorial integrity. Nepal would recognize ‘One China’ policy and not allow its territory to be used for “anti-China” activities. The draft treaty in fact looks more like a strategic one that is tilted highly in favour of Chinese security concerns. China needs this agreement because it does not have confidence in the democratic arrangements and future governments in Nepal, and wishes to consolidate its position while the Maoists are in power.

China has penetrated the Nepalese political system by gaining the confidence of hardline communist leaders both in the CPN-UML and the CPN-Maoist. China is also known to have played a major role in facilitating the alliance between the CPN-UML and the Maoists. Prior to Jhala Nath Khanal becoming UML Chief, a four-member Chinese delegation visited Kathmandu on May 10, 2008 and met Khanal and other Maoist leaders. A senior delegation from the Communist Party of China led by vice Minister Liu Hongcai was also in Kathmandu in February 2009 to attend the inaugural ceremony of the 8th national convention of the UML. The victory of Khanal as chairman of the UML, who is close to Prime Minister Prachanda, has been crucial for the survival of the Maoist-led coalition government.

The nature of Chinese engagements in Nepal goes beyond the political domain. They might also be aimed at influencing the process of drafting of the new constitution to ensure that China’s long-term interests are served, particularly in hydropower and other strategically important projects. China has also assured Nepal help in the modernization and integration of registered Maoist guerrillas into the Nepal Army.

Considering the strategic and economic interests Beijing has in Nepal, in terms of energy from hydro projects and as a transit country between China and India, China may expand its state level engagements by entering into long-term agreements at various levels. The proposed new friendship treaty marks the beginning of this process. Moreover, the treaty may enhance the bargaining power of the Maoist government vis-à-vis India to resolve some of the long standing disputes between the two countries.

Any foreign presence in Nepal is a concern for India. Given the centuries-old socio-cultural and economic ties between India and Nepal, recent Chinese insistence on closing the Indo-Nepal open border is a matter of concern for both countries. The Indo-Nepal relationship was acknowledged as “unassailable” during the official visit of Nepalese Prime Minister, Puspa Kamal Dahal to New Delhi in September 2008. But an ‘equidistance policy’ can only come at the expense of India-Nepal relations.

In its efforts to check the piracy menace, Japan deployed two Maritime Self Defense Force (MSDF) destroyers - Sazanami and Samidare - on March 14, 2009 in the Gulf of Aden, off the coast of Somalia, on a four-month long anti-piracy mission. Japanese law mandates that that the destroyers can only escort Japanese merchant ships through this piracy-prone area without the authority to use weapons. 2,595 Japan-linked commercial ships have already registered their requests to be escorted.

Article 82 of the SDF law allows the SDF to take necessary action at sea to protect Japanese lives and property in situations that exceed the capacity of the Japan Coast Guard (JCG). Under this ‘maritime police action,’ however, the SDF is authorized to use weapons only in legitimate self-defence or to counter imminent dangers. Japan’s attempt to legalize MSDF deployment outside Japan’s sea border has created domestic controversy.

The growing incidence of sea piracy is a matter of concern for Japan as Japanese trade must pass through the Straits of Malacca and Singapore. Japan is alert to this reality and has taken various initiatives in cooperation with regional powers to address the issue of piracy. The JCG has conducted joint training exercises with six Southeast Asian states. Japan’s aid programmes also offer training and equip forces in all of the coastal states. Since the mid-1990s, Japan has become increasingly concerned about piracy as a direct threat to its comprehensive security. The importance of maritime security as an integral part of Japanese foreign policy can be determined from the fact that Japan imports around 99 per cent of its petroleum and 70 per cent of its food by sea. Similarly, almost 99 per cent of the total goods exported by Japan to Europe, Australia, Middle East and Africa is carried by sea. At present, among all the sea lanes vital for Japanese trade, it is the sea lanes of Southeast Asia (through which Japan imports most of its strategic items, such as, petroleum, coal, uranium, grain, and iron ore) – the second most piracy prone area – that play a significant role in Japan’s maritime security policy. Despite Japan’s growing emphasis on maritime security around Southeast Asian sea-lanes, for long, it abstained from securitizing the maritime piracy threat.

A number of high profile cases, such as the hijacking of ships belonging to Japan – Alondra Rainbow (1999), Tenyu (1998), Global Mars (2000) and Arbey Jaya (2001) – particularly sensitized the Japanese public and policymakers to the growing threat of piracy. Soon, issues like the idea of a UN Coast Guard, the involvement of Japanese SDF in multilateral enforcement operations, etc., started to be discussed and debated within Japan. Former Prime Minister Obuchi Keizo announced the first major anti-piracy cooperation proposal. The JCG, the MSDF, along with political groupings favouring ‘normalization’ of Japan and expansion of Japan’s international security role, also triggered Japanese involvement in countering Southeast Asian piracy. As part of such efforts, the initiative popularly known as the Ocean Peace Keeping (OPK) soon came into existence. The concept of OPK argues that the safeguarding of oceans against piracy and other non-traditional threats should not be prevented by sovereignty barriers. Instead, states should take the initiative to create a standing body of combined forces to provide comprehensive maritime security both in national and international waters. Although the concept seemed to be quite ‘ideal’ to protect sea-lanes, the OPK was rejected by both the Japanese government as well as the international community since it would be contrary to international law and would mean an unconstitutional use of the Japanese SDF.

Despite the failure of the OPK initiative, Japan took up the piracy issue and called for extraordinary measures to counter this threat at the November 1999 ASEAN+3 Summit at Manila. There, Japan announced its desire to confer on the JCG vessels the responsibility for conducting joint patrols with Southeast Asian states. In 2000, Tokyo hosted two international anti-piracy conferences. In his address at one of the conferences, Prime Minister Yoshiro Mori expressed his support for Obuchi’s programme. The issue of joint patrol was mooted. In the same year, Japan reached bilateral arrangements with the Philippines, Malaysia, Singapore and Indonesia. Under those arrangements, the JCG conducted anti-piracy training with India and Malaysia in November 2000; with the Philippines, India, and Thailand in 2001; with Brunei, Indonesia, and India in 2002; with the Philippines and Singapore in 2003; with Thailand in 2004. Today, JCG vessels and aircraft regularly visit Southeast Asia for exercises with their regional counterparts and for joint anti-piracy patrols. During the premiership of Junichiro Koizumi too, the necessity of resolving the piracy threat around the Southeast Asian region was emphasized. His proposal led to negotiations for a ‘Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia’ (ReCAPP) among representatives of ASEAN states though there has not been much progress.

More recently, piracy off Somalia has emerged as a great cause of concern not only to Japan but also to the international community. According to Foreign Ministry sources, the number of piracy incidents in this area has jumped from 44 in 2007 to 111 in 2008. As of March 5, 2009, there have been 25 attacks by pirates in the Gulf of Aden. Although no Japanese ship has been taken hostage by pirates yet, the latter have fired at three Japanese vessels in separate incidents. In April 2008, Takayama, a Japanese oil tanker was attacked by Somalian pirates of the coast of Yemen. The attackers reportedly left bullet holes in the ship’s hull. In another incident, in November, 2008, a chemical tanker owned by a Japanese company was attacked and crew members taken hostage for two months. Calling the Gulf of Aden as a pivotal area whose safety could “deeply affect the economy and the lives of Japanese citizens,” the Japan Ship Owners’ Association handed a report to Defence Minister Yasukazu Hamada in December 2008 which suggested that escorting of ships by destroyers would ‘likely have an affect against pirates’.

As mentioned, the JCG is the authorized force to provide protection against pirates for Japanese vessels in the territorial waters around Japan. It has the experience of escorting a plutonium nuclear-fuel carrying ship from Europe to Japan and sinking a suspicious North Korean boat in Japanese territorial waters. But it has certain limitations due to constitutional constraints. Acknowledging this fact, the Japanese government has opted for the MSDF to offer support in anti-piracy missions. Accordingly, under a cross-service arrangement, it was decided that JCG personnel with authority to make arrests will man MSDF ships during the anti-piracy mission. This step has been taken especially because the SDF is officially not authorized to make arrests. The arrested pirates, however, will be handed over to the countries concerned or prosecuted within Japan.

The Japanese government’s decision to send MSDF has generated a mixed response within Japan. According to Satoshi Morimoto, security expert in Takushoku University’s Institute of World Studies, considering that the sea environment has become drastically unsafe in the past couple of years, it should not be hard for Aso to gain public support for a MSDF anti-piracy escort dispatch if the government states its case clearly as to why Japan had to take such a dramatic measure. However, Morimoto’s optimism does not seem to be shared by many within MSDF itself. They seem to be quite doubtful about the effectiveness of the MSDF in dealing with the growing piracy threat on the Somalia coast, particularly because of the constitutional constraints, limited expertise in the concerned area, limits on the MSDF’s use of weapons as well as the range of ships it can escort.

As regards constitutional constraints, the Japanese government has finally decided to take some concrete measures in this regard. Just after the decision to dispatch MSDF to Somalia on an interim basis, the Cabinet has also sent a bill which will bring a durable solution to the constitutional constraints over MSDF functioning at sea. Interestingly, this new bill proposes to assign to the Japanese government the authority to send MSDF units on anti-piracy missions anywhere in the world without Diet approval. It also allows the MSDF to protect all ships, including those from foreign countries, anywhere in the world. The bill further proposes that the JCG and MSDF be tasked to tackle piracy, with the latter being called upon when the former fails to perform its task. However, instead of offering unrestricted authority to the JMSDF, the bill proposes to utilize it just as a deterrent. Also, while relaxing conditions surrounding the use of weapons against pirates, the new bill proposes to incorporate a provision that will allow MSDF personnel to use weapons in cases of self defence or during emergency. If implemented, all these provisions in the proposed bill will definitely bring about revolutionary changes both in Japan’s internal as well as external policies.

Ichiro Ozawa, leader of the opposition Democratic Party of Japan and projected to be the man most likely to become Japan’s next prime minister, has become dangerously entangled in an illegal political funds investigation. The resulting damage to the DPJ appears to be severe. It was believed to have had a strong chance to win the coming general elections, scheduled anytime before September 2009. The scandal has injected a new dimension to the already volatile political situation that has evolved in Japan since 1992, when the Liberal Democratic Party lost power for the first time.

Takanori Okubo, 47, secretary to Ozawa and chief accountant of his fund-raising organization Rikuzankai, was arrested on March 2, 2009 on suspicion of accepting illegal political donations from Nishimatsu Construction Co. for Rikuzankai. Though Okubo denied the allegations, he stands accused of violating the Political Funds Control Law, which prohibits companies from making donations except for political parties and their political funds management organizations. It also bans political donations in the name of others. Although investigations are on to determine whether Okubo deserves indictment, regrettably his arrest has further deepened people’s distrust of politics at a time when the nation is experiencing an economic crisis and people’s support for Prime Minister Taro Aso’s Cabinet has dropped to an extremely low level.

Okubo is suspected to have received 1 million yen in donations for Rikuzankai sometime in October 2006 from a political organization established by former Nishimatsu employees, although the money itself was from the construction company. He is supposed to have reported to the authorities that Rikuzankai received 2 million yen in donations between 2003 and 2006 from the Nishimatsu-related political organization and another similar Nishimatsu-related political organization, though the money was from Nishimatsu itself. It is believed that the two political organizations headed by Nishimatsu retirees – Shin-Seiji Kenkyu-kai and Mirai Sangyo Kenkyu-kai, both of which were disbanded in 2006, ostensibly made donations out of membership fees paid by Nishimatsu employees. In reality, the company added the membership fees to the bonuses for employees and the two bodies served as dummies to provide political donations to politicians. It is believed that the company decided on the destinations of donations.

The question that arises is: did Okubo know that the donations were from Nishimatsu? Ozawa defends Okubo by saying that his secretary was ignorant that the donations were from Nishimatsu and that Okubo perceived that the donations were from the two political organizations and he properly reported this as required by the Political Funds Control Law. Ozawa said that had Okubo known that the donations were from Nishimatsu, he would have made a DPJ branch receive them, which is legal. Though Ozawa claimed that Okubo did not ask the people or organizations making donations where their money came from out of courtesy, it is difficult for people to believe such a claim since the money involved was large and for an extended period of time.

The timing of Okubo’s arrest has raised some tricky questions. The arrest came the day before the Opposition-controlled Upper House voted down a bill to finance the second fiscal 2008 supplementary budget – which included the controversial 2 trillion cash handouts for all households – and the Lower House enacted it with the support of a two-third majority held by ruling forces.

It is reported that Nishimatsu created a slush fund of more than 2 billion yen and that the two Nishimatsu-related political organizations spent about 480 million yen to donate to, and buy fund-raising party tickets for, both ruling and opposition politicians. It is, therefore, necessary that the public prosecutors carry out the investigations in a fair and strict manner. For its part, the DPJ has to wake up to the possibility of Okubo’s indictment and employ every possible means, including a strict internal probe by Ozawa, to clear the suspicions. It is believed that Nishimatsu Construction Co. provided Ozawa’s office with about 25 million yen in donations a year since around 1995 for a total of about 300 million over more than 10 years. It is also reported that two ex-Nishimatsu officials who were arrested along with Okubo told investigators that the contractor made the donations to Ozawa’s office in an attempt to win contracts for public works projects in the Tohoku region, Ozawa’s political base and stronghold. Besides Okubo, former Nishimatsu President Mikio Kunisawa and former senior Nishimatsu official Akifumi Okazaki were also questioned. Kunisawa was arrested for allegedly organizing slush funds used for bribing Thai officials and for Japanese political donations. In this case, it is believed that Kunisawa took the leading role in deciding on the amount of donations and where they were made.

It is common knowledge that there are some companies known to be scandal-tainted and that they fund political parties through dubious channels to buy business favours. The two bodies in question headed by ex-officials of Nishimatsu were said to be dummy groups created by the firm to funnel donations to politicians, possibly in exchange for political favours. As noted earlier, under the law, a company can make donations only to political parties, not to individual politicians or their fund-raising organizations.

Politicians who have accepted donations from the two political organizations linked to the scandal-hit Nishimatsu Construction Co. are at a loss about how to return the money as both bodies have already disbanded. According to Internal Affairs and Communication Ministry, these politicians are legally allowed to return the money to Nishimatsu. However, this would mean admitting to receiving the donations from the general contractor, rather than the two organizations. Though the law prohibits individual politicians and their fund-raising organizations from accepting political donations from companies, there is no provision on how exactly political donations should be returned to their donors. They are commonly entered as refunds in the “miscellaneous expenses” section of their political fund reports. Since the two bodies were already disbanded at the end of 2006, politicians have no choice but to return the funds to Nishimatsu. However, the company is unlikely to accept the money. The money cannot be put into government coffers either as the law does not allow such a practice.

Ozawa defended Okubo, saying that his secretary dealt with the funds in accordance with law and expected his secretary to be exonerated. He blasted the criminal probe into his political donations as an “unfair exercise of investigative power, politically and legally”, in the run-up to the general election. In fact, illegal funding allegations against the Ozawa machine – and apparently against members of the governing LDP – appear to have arisen from a criminal investigation into Nishimatsu’s alleged bribery of Thai officials in 2003 to win a Bangkok city government contract.

Ozawa’s assertion that the probe is politically motivated drew angry responses from the ruling Liberal Democratic Party. LDP parliamentary affairs chief Tadamori Oshima said that “The investigation has the approval of the court. Ozawa’s remarks are extremely regrettable as they deny the rules of democracy.” Prime Minister Aso expressed concern that this might lead to public mistrust in politics.

Some elements of the DPJ are alleged to have been pressing for Ozawa’s resignation. But DPJ general secretary Yukio Hatoyama claimed that Ozawa had demonstrated his accountability and the absence of illegality. It may be remembered that Ozawa led the DPJ to the verge of power by unexpectedly winning control of the Upper House from the LDP in July 2007 and has been using that leverage to test the government and blocking its legislation at every opportunity. The DPJ now routinely outpolls the LDP as the preferred party to govern.

Despite Ozawa’s strong political posturing, his political fortune seems to be nose-diving. In an opinion poll conducted by Kyodo News after the fundraising scandal surfaced, more than 50 per cent of survey respondents said that Ozawa should step down. The Asahi Shimbun said 57 per cent of those surveyed in its weekend opinion poll called for Ozawa’s resignation, with 77 per cent calling Ozawa’s explanations about the incident unconvincing. The Yomiuri Shimbun said 53 per cent of the respondents in its weekend survey also preferred that Ozawa step down, with 81 per cent saying Ozawa’s explanations are unacceptable. Asked how they would vote if a general election were held now, only 36 per cent of the respondents to the Asahi poll said they would vote for DPJ candidates for lower house proportional representation seats, down from 42 per cent in a February 2009 poll. In the Yomiuri survey, only 35 per cent said Ozawa is appropriate to lead Japan, down from 40 per cent in the previous poll, and 26 per cent said they prefer Prime Minister Taro Aso, up from 24 per cent, while 38 per cent said they find neither appropriate for the duty. Ozawa has refused to resign.

Japan seems to be passing through a period of political turmoil. Despite the slight upswing in Aso’s popularity rating following the fund-raising scandal involving Okubo, the approval rating for Aso’s Cabinet is hovering at as low as 11 per cent. The ruling coalition politicians’ focus has shifted to whether Aso should stay in power, and the political confusion is contributing to the economic crisis. Manoeuvring within the LDP is intensifying. Some politicians in the party are trying to pressure Aso to step down, while others are urging him to reshuffle his flagging Cabinet in order to try and prolong its life. If Aso decides to carry on managing the government through simple inertia, it will only prolong what is widely regarded as the current political vacuum. The only way to cope with the political crisis is to dissolve the Lower House. Both the LDP-New Komeito coalition and the DPJ are engaged in mud-slinging tactics as the next Lower House elections draw nearer and there has not been much in the way of substantial policy debate. The administration has shown signs of self-destruction. There is confusion over Aso’s remarks on a possible review of postal privatization. The disgraceful behaviour of his former finance minister Shoichi Nakagawa, leading to his resignation triggered by his famously “groggy” news conference has further led to the erosion of public confidence in the Aso government.

If Aso succeeds in passing the bill to implement the 2 trillion yen cash handout program into law, dissent within the LDP clamouring for dissolution of the Lower House may be muted. Nevertheless, calls are intensifying within the LDP for the prime minister to be replaced sometime between the approval of the budget and the general election. Others are calling for a Cabinet reshuffle, allowing Aso to stay in power. Election of a fourth prime minister without a general election would obviously invite bitter criticism from the public. Aso has rejected the idea of dissolving the Lower House as he wants to focus on boosting the economy and improving the difficult employment situation. The fiscal 2009 budget is now expected to be enacted in late March 2009 and related bills to be passed sometime in late April. Political pundits speculate that Aso may dissolve the Lower House around May. With DPJ’s popularity trajectory moving downward following the fundraising scandal, Aso may demonstrate his political maturity and take political advantage of the situation by dissolving the Lower House and advance general elections, which are otherwise due only in September 2009. But given Aso’s style of politics that seems unlikely. One could probably see another India-Japan Prime Ministerial summit taking place around August 2009 before Aso goes for polls.