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Chapter Five
Period of President Sato's Lead

Following the illness and subsequent resignation of Prime Minister Ikeda, Eisaku Sato was chosen to become the 5th President of the Liberal Democratic Party on November 9, 1964.

The Sato Cabinet based its actions on principles of "tolerance and harmony" and pursued policies whose primary goals were to further both "respect for human dignity and social development." Lasting for seven years and eight months, it was the longest administration in Japanese history and left a number of important legacies. Perhaps the most notable of these was the return of Okinawa to Japan, something that had been a cherished desire of the Japanese people for a quarter century since the end of the Second World War.

Building upon the legacies of the Ikeda administration, the Sato Cabinet was distinguished in domestic politics by its efforts to maintain high levels of economic growth and develop Japan into world's second largest "economic superpower." In addition, it was necessary for the government to formulate new policies that helped it respond to the problems of pollution, environmental destruction, overpopulation in urban areas and depopulation in rural areas, changing national values, and the proliferation of political parties that the country faced at the time. The Sato Cabinet was further charged with the difficult task of piloting the country through the turbulent international waters of the 1970s when a protracted war in Vietnam had damaged American prestige and geopolitical affairs were particularly fluid. It was also during this period of history that U.S. President Nixon shocked the world with the unexpected announcement of his visit to the People's Republic of China and his termination of the dollar's convertibility to gold.

In spite of the major challenges that these events presented, the Sato administration and the LDP were able to overcome all difficulties and make remarkably good progress in strengthening liberal democratic politics.

The Sato Cabinet's first order of business was to tackle a number of issues left unresolved by previous administrations. In just a little over one year, it passed legislation to compensate people who had been adversely affected by postwar land reform, revised domestic laws affected by the ratification of the 87th Convention of the International Labor Organization (ILO), and normalized diplomatic relations with South Korea. This last achievement was perhaps the most historically significant as the signing of the Japan-Korea Basic Treaty and the settlement of Korean claims to compensation rights for wartime suffering accomplished in one stroke the normalization of ties between the two countries. In doing so, the Sato administration managed to bring closure to an important issue from the Second World War that had remained unresolved for the previous fifteen years.

An additional challenge faced by the Sato Cabinet was the economic recession of 1965 (40 nen fukyo). Departing from the principle of balanced budgets to which successive administrations throughout the postwar period had strictly adhered, the Sato administration and the LDP took the bold step of financing part of the 1966 fiscal budget with public bonds for the first time. Fully 18 percent larger than that of the previous year, the 1966 budget targeted social development and the expansion of infrastructure. The Sato Cabinet's policies, which also included generous tax cuts, were designed to help the economy recover as soon as possible.

The success of these economic measures was extraordinary, enabling the economy not only to bounce back more quickly than had been anticipated, but also to return to a trajectory of high growth that would last until 1973 and transform Japan into the free world's "second economic superpower." With these accomplishments in mind, the Sato Cabinet undoubtedly deserves high praise for the astute policy decisions and choices that it made during this period.

Having successfully overcome the challenges it faced early in its tenure, the Sato Cabinet was now ready to begin developing other core components of it policy agenda.

In contrast to the Ikeda administration, which had placed particular emphasis on the formulation of economic policies, the Sato administration focused instead on redressing problems associated with the excesses of rapid growth. Its efforts to remaining steadfast to its principles of "respect for human dignity" and "social development" by protecting the public from illnesses related to pollution and environmental destruction were indicative of the Sato Cabinet's character.

The Sato administration's commitment in this area was demonstrated by the passage in 1968 of important legislation related to the environment including the "Air Pollution Control Law" (Taiki Osen Boshi-ho), "Noise Regulation Law" (So-on Kisei-ho), "Town Planning and Zoning Law" (Toshi Keikaku-ho), and the "Waste Disposal Facilities and Infrastructure Law" (Seiso Shisetsu Seibi-ho). Further evidence is provided by a July, 1970 cabinet decision to establish an "Environmental Pollution Prevention Headquarters" (Kogai Taisaku Honbu) within the Office of the Prime Minister.

This movement reached its peak in November, 1970 when 14 important pieces of legislation related to environmental protection were passed during the 64th Extraordinary Session of the Diet. The efforts of this "Environmental Diet" (Kogai Taisaku Kokkai) resulted in the introduction not only of punitive measures for enterprises that generate pollution injurious to public health, but the establishment of the basic principle that businesses must bear the costs of pollution prevention as well. The creation in July of 1971 of the Environment Agency to oversee these initiatives further ensured that the Sato Cabinet's work in this area of policy would long be remembered.

Finally, we must not overlook the World Exposition held in Osaka for six months beginning in March, 1970 that served as an important symbol of the Sato administration's overall political legacy. With "human progress and harmony" as its principal theme, the Exposition was one of the major events of the century. It featured 116 pavilions created by participants from 77 countries and attracted an unprecedented 64,210,000 visitors. The Exposition provided a historic opportunity for people to consider the paths that human societies should follow in the future while at the same time contributing much to the development of international understanding and friendship.

The Sato Cabinet soon faced another challenge when the "Turbulent Seventies" began with a wave of "Nixon Shocks" in the summer of 1971. President Nixon's unexpected announcement in August of changes to U.S. economic policy, including the suspension of dollar to gold convertibility and the imposition of a 10 percent surcharge on imports, prompted international markets to abandon fixed exchange rates for Japanese currency (by which the value of one U.S. dollar was set at 360 yen) and shift toward a system of floating exchange rates. In December of the same year, Japan lowered its currency's exchange rate to 308 yen to the dollar. The termination of the dollar's convertibility dramatically weakened its standing as the principal international currency and had a negative effect on the operations of the International Monetary Fund. (Note: This financial shock was preceded by a diplomatic shock in July of 1971 when U.S. President Nixon suddenly announced his intention to visit the People's Republic of China in 1972 to reestablish formal diplomatic relations.)

Due to the fact that one-third of all Japanese exports during this period were sent to the United States and almost all of the contracts for these transactions were concluded in dollars, the appreciation of the yen's value had an especially dramatic impact on Japan's economy.

These events prompted the LDP in September of 1971 to establish a "Dollar Policy Headquarters for Small and Medium-sized Enterprises" (Chusho Kigyo Doru Taisaku Honbu) under the direct supervision of the Party President. This body immediately began deliberations and later submitted a package of emergency recommendations to the government including plans for the relaxation of controls on foreign exchange, and special measures for the finance and tax systems. During the 67th Extraordinary Session of the Diet in the fall of the same year, the government passed "Temporary Measures Law to Assist Small and Medium-sized Enterprises in Adjusting to International Economic Change" (Kokusai Keizai Jo no Chosei Sochi no Jisshi ni Tomonau Chusho Kigyo ni Taisuru Rinji Sochi-ho) and compiled a large supplementary budget to help the country overcome economic problems created by the Nixon Shocks. The enormous success of these and other aggressive government measures and policies contributed much to the rapid recovery of the Japanese economy.

Despite the importance of the Sato Cabinet's numerous achievements in domestic policy, its foreign policy accomplishments were even more historically significant. In addition to the previously mentioned normalization of diplomatic relations with South Korea, in 1965 Japan became a non-permanent member of the United Nations Security Council. This occurred during a period in which much of the world's attention was focused on problems in Asia, especially the war in Vietnam. And as Japan's economy continued to grow, the nation's status in the international community rapidly improved as well.

In the midst of these historic changes, Prime Minister Sato visited the United States five times and made numerous trips to countries in Southeast Asia and the Pacific in order to further strengthen Japan's financial and technological cooperation with developing societies there. In addition, the Sato administration gained approval in 1970 for the automatic renewal of the Japan-U.S. Security Treaty.

However, the most enduring of the Sato Cabinet's legacies was the fulfillment of an aspiration held by the Japanese people since the end of the Second World War - the reversion to Japan of the islands of Okinawa and Ogasawara. In doing so, it accomplished the unprecedented feat of obtaining through peaceful negotiations the return of territory lost in war.

From the time that he first assumed office, Prime Minister Sato had made the reversion of these territories his top priority. In his first official visit to Okinawa, he stated unequivocally that the "postwar period" would not end until this territory had been returned to Japan ("Okinawa no sokoku fukki nashi ni wa sengo wa owaranai"). After a series of direct negotiations with Presidents Johnson and Nixon, he finally secured the return of the islands of Ogasawara in 1968 and those of Okinawa in May of 1972. These notable achievements, which will undoubtedly be remembered throughout history, would not have been possible without the sincere and persistent negotiation efforts of Prime Minister Sato over the course of his seven years and eight months in office.

Prime Minister Sato's basic political philosophy was "love of freedom and devotion to peace" (Jiyu o ai shi, heiwa ni tessuru). In a speech delivered in October of 1970 to the General Assembly of the United Nations on the occasion of this organization's 25th anniversary, he expressed these convictions and stressed both the importance of Japan's three non-nuclear principles and its special mission as a pacifist nation. His declaration made a lasting impression on people throughout the world.

In 1960, the Japan Democratic Socialist Party was formed. When this was followed by the creation of the Komeito (Clean Government Party) in 1962, it was clear that a true, "multi-party" political system was developing in Japan. In light of this, and taking into consideration the fact that popular attitudes towards existing economic public policies were changing as a result of environmental and public health problems associated with high growth, the Party realized that a new approach was necessary.

In the 1967 Unified Local Elections, the LDP lost a bitter contest for the Tokyo governorship. In addition, the effects of the new multi-party system reduced the Party's share of total votes cast in prefectural assembly races from the 50.7 percent it had received in 1963 to 48.5 percent. Later in elections for the House of Councillors held in July of 1968, the LDP managed to maintain an absolute majority by securing a total of 72 seats (21 in the nationwide race and 51 in regional district races). Despite this achievement, however, the Party's loss of electoral support in large cities had become a cause for some concern.

In response to this, the Party formulated a "General Outline for Urban Policy" (Toshi Seisaku Taiko) that provided the framework for a number of path-breaking initiatives concerning the improvement and redevelopment of urban areas. A Bureau of Urban Policy was also created within the LDP in order to increase the Party's activities in this area.

These ambitious efforts bore fruit in the Tokyo assembly election held in July of 1969 when the LDP increased its seat total from 35 to 54 and regained its place as the dominant party in this body. In the general election held in December of the same year, the Socialist Party saw its seat count fall sharply from 140 to 90 while that of the LDP increased to 303. With this impressive victory, the Party was further able to consolidate its political base.

The Ikeda and Sato Cabinets accomplished many great things as they guided the Party through a glorious period of its history. It was indeed sad, then, when Prime Minister Sato, despite numerous calls for him to stay, expressed his intention to retire from office and from his position as President of the LDP following the ceremony to commemorate the return of Okinawa and the closing of the 68th Ordinary Session of the Diet on June 17, 1972. In doing so, he brought to an end an administration that had endured for a record seven years and eight months.

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