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Chapter Eight
Period of President Fukuda's Leadership

Following the resignation of the Miki Cabinet, Takeo Fukuda was chosen as the 8th LDP President on December 23, 1976 and formed his cabinet in the midst of high public expectations for the Party's revitalization and the country's economic recovery.

The two-year period of the Fukuda administration was a tumultuous one in Japanese politics. The nation's governance was greatly complicated by the rough parity of strength between ruling and opposition parties in both chambers of the Diet. At the same time, a growing awareness of the finite nature of the world's natural resources and a worsening global recession intensified international competition for these resources and aggravated trade frictions. These domestic and international challenges, when coupled with the disappointing results obtained by the LDP in the election held at the end of 1975, created a sense of crisis within the Party more serious than had been experienced at any other point in the Party's history and made Prime Minister Fukuda's work to implement fundamental Party reforms even more difficult.

In response to this state of affairs, the Fukuda Cabinet adopted "cooperation and unity" as its basic political philosophy. It further committed itself to "buoying the economy" and "stabilizing employment" at home while at the same time working to establish a "pivotal role for Japan in global affairs" through active international cooperation. Finally, the Fukuda administration made substantial progress in reforming and revitalizing the Party.

Of all the many accomplishments of the Fukuda Cabinet in domestic policy, perhaps the most noteworthy were those that came as a result of extremely aggressive fiscal initiatives designed to bring about an early economic recovery and eliminate fears concerning employment. Successful efforts to complete the unfinished projects of previous administrations were also of special importance. In order to accomplish these and other tasks, Prime Minister Fukuda carefully reflected on the damage that had been done to politics during the previous administration by the Lockheed Incident and called upon people both within and outside of the Party to "work together" actively to solve the nation's problems.

Because of his expertise in economics, Prime Minister Fukuda was able to make especially notable progress in boosting economic growth and promoting employment. This was accomplished in large part through the bold implementation of temporary fiscal stimulus measures contained in budgets for 1977 and 1978 that had bond dependencies of 30 percent and 37 percent respectively. These massive budgets and the aggressive priming measures that accompanied them were designed to help the economy achieve real growth rates of 6.7 and 7.7 percent. In addition, the Fukuda administration expanded plans for public investment and public works projects that included 28.5 trillion yen for a new five-year plan to construct roads, generous provisions to improve housing policies, and various other efforts to accelerate budget allocation to and actual work on public works of every kind. The Fukuda Cabinet was determined to use every possible means available in a massive, all-out push to get the stalled economy moving again.

These policies were highly successful. Japan's rate of economic growth during this period was the highest of any advanced industrialized country and its volume of trade increased dramatically as well. In addition, consumer prices were the most stable of any major economy in the world. They rose a mere 3.8 percent in 1978 - the smallest change in the previous 15 years.

At the same time, however, an unforeseen rapid rise in exports coupled with a large expansion of Japan's international trade surplus aggravated relations with many of the country's major trading partners. The increase of the U.S. trade deficit with Japan placed upward pressure on the yen and eventually made it impossible for the Japanese economy to reach growth rate targets originally set for it. Despite these difficulties, however, the government's continued efforts to stimulate the economy boosted domestic demand more than expected beginning in the latter half of fiscal 1978 and spurred a significant rise in corporate earnings as well. The successes of the Fukuda Cabinet in putting the Japanese economy firmly on the path to recovery for the first time in five years since the Oil Crisis and in finally bringing inflation under control are indeed deserving of special recognition.

In addition, the Fukuda administration successfully completed revisions to the Antimonopoly Law that had been on the government's agenda since the Miki Cabinet. It also raised benefit payments for social security pensions, welfare pensions, contribution-based national pensions, public pensions, and compensatory payments to relatives of soldiers killed in wartime. In light of similar moves around the world to extend geographic boundaries for national fishing rights to 200 nautical miles, the Fukuda Cabinet enacted the "Law Governing Territorial Waters within 12 Nautical Miles of Shore" (Juni Kairi Ryokai-ho) and the "Law Governing a Fishing Zone of 200 Nautical Miles from Shore" (Nihyaku Kairi Gyogyo Suiiki-ho). A path-breaking "Law to Adjust the Business Activities of Small and Medium-Sized Business Enterprises" (Chusho Kigyo Jigyo Bunya Chosei-ho) was also implemented to improve coordination among the business operations of large, medium, and small firms in a variety of areas. Further, the Fukuda Cabinet was successful in securing ratification of the "Continental Shelf Agreement between Japan and the Republic of Korea" (Nikkan Tairiku Dana Kyotei) after five years of deliberations and passed several domestic laws related to it. The government was also finally able to open the new Narita International Airport after 13 years of preparations.

The Fukuda Cabinet also enjoyed considerable success in foreign policy. Firmly believing that in a world of limited natural resources it is essential for people everywhere to unite and cooperate with one another, Prime Minister Fukuda set out to complete an ambitious diplomatic agenda. In March of 1977, he traveled to Washington, D.C. for a meeting with U.S. President Carter. This trip was followed by others to represent Japan at summit meetings attended by leaders of the world's industrialized nations held in London in May of the same year and in Bonn in July of 1978. In light of the fact that Japan had become the free world's second-ranked economic superpower and was producing unparalleled rates of growth in the post-Oil Shock era, Prime Minister Fukuda felt that it was the country's responsibility to take on a primary leadership role in guiding the way to economic recovery. His bold statements to this effect deeply impressed people around the world.

In August of 1977 Prime Minister Fukuda paid official visits to five ASEAN (Association of South East Asian Nations) countries and Burma. While in Manila, he announced a path-breaking revision of Japan's foreign policy objectives in the region. The "Fukuda Doctrine" expressed the conviction that "Relations between Japan and Southeast Asian countries should not be based solely upon material bonds of mutual dependency. Japan must also seek to establish strong spiritual bonds of friendship and cooperation in the region and contribute to its development, security, and prosperity." This dramatic policy shift charted a new course for future Japanese diplomacy in Southeast Asia.

Despite serious international tensions sparked by recent moves around the world to extend national fishing zones to 200 nautical miles from shore, Prime Minister Fukuda was also successful in negotiating and securing a provisional agreement with the Soviet Union concerning the fishing rights of both countries. Even more impressive than this accomplishment, however, was the signing of the Treaty of Peace and Friendship between Japan and the People's Republic of China in August of 1978. In October of the same year, Chinese Deputy Prime Minister Deng Tsiao-ping traveled to Japan in person to exchange the ratification instruments. This historic agreement finally brought to a successful conclusion a six-year process of reestablishing and strengthening diplomatic relations between the two countries that had begun with the signing of the Japan-China Joint Communiqu_ in 1972. When its importance not only for the friendship and prosperity of these two countries, but for the maintenance of security in Asia and peace in the entire world as well is fully taken into account, it is clear that this treaty was truly of great historic significance.

In addition to these notable accomplishments in both international and domestic affairs, Prime Minister Fukuda's work to rebuild the Party added an important chapter to the history of the Liberal Democratic Party's development.

Prime Minister Fukuda's most important contribution in this area was undoubtedly the leadership he provided the Party during an enormously successful string of election campaigns beginning with a victory in the House of Councillors election in July of 1977. Since the disappointing defeat in the 1976 general election, the Fukuda Cabinet and others in the LDP had been keenly aware of the need to rebuild and revitalize the Party and had worked diligently towards that end. As part of an effort to reduce divisiveness within the Party, the LDP leadership decided that "national summer seminars" (Zenkoku Kaki Kenshu Kai) should be organized to replace similar sessions that had up until that time been held separately by individual factions.

These reforms and others proved highly successful. Despite popular predictions that the LDP would be ousted from power in the July, 1977 House of Councillors election, the Party instead increased its number of seats from 65 to 66 and in doing so made further progress towards establishing a stable administration. In regional and local elections, the Party was also successful in recapturing many key gubernatorial and mayoral posts it had previously lost to reformist opposition parties. LDP candidates were victorious in all 7 gubernatorial elections held in 1977. In the same year, the Party won 108 out of 127 mayoral races. In 1978, this winning streak continued with LDP victories in 9 out of 10 gubernatorial and 161 out of 192 mayoral contests. Perhaps the Party's most impressive victories were those in Kyoto and Okinawa in which LDP candidates captured governorships in areas long controlled by progressive parties.

Prime Minister Fukuda's second major accomplishment was the remarkable progress he made in Party reform. The sharp decrease in levels of public trust in politics as evidenced by the Party's poor performance in the 1976 general election and the gradual decline of its strength over time prompted members of the LDP to be more harshly critical of themselves than they had ever been before. During the Party Convention in January of 1977 and the Extraordinary Party Convention in April of the same year, serious discussions were held concerning party reform that resulted in the formulation of a proposal to create a more "open, popular party" that was subsequently announced to the public. The main components of this proposal were the following - (1) the introduction of a new election system through which the Party President is elected by all the members of the Party (toin) and its fraternal members (toyu); (2) the creation of a "Liberal National Congress" (Jiyu Kokumin Kaigi) to strengthen the Party organization and its finances; (3) increased efforts to eliminate factionalism within the Party and improve the LDP's public relations activities.

For the next two years, the Party worked tirelessly to fulfill the public promises it had made to reform itself. Finally, in November of 1978, 1.5 million LDP members and fraternal members participated in a preliminary election for the Party Presidency, a grand undertaking the likes of which had never been attempted in the history of Japanese politics.

As a result of these positive changes, public confidence and trust in the Party quickly returned. At the end of December, 1978, the Party's membership stood at 1,405,995 individuals with an additional 190,165 fraternal members in the Liberal National Congress. This was the strongest that the organizational substructure supporting the LDP had been in the Party's 23-year history. In light of this and other accomplishments, it became undeniably clear that the Party had made impressive progress towards its goal of becoming a truly "open, popular" political party.

In spite of Prime Minister Fukuda's many important achievements in domestic politics, foreign affairs, party reform, and party revitalization, Masayoshi Ohira received the largest number of votes from Party members and fraternal members in the primary election for the Party's Presidential contest. Because of his strong devotion to the Party, Prime Minister Fukuda readily accepted this outcome and immediately announced his decision to withdraw from the LDP Presidential election and step down from his post as Party President and Prime Minister on November 27, 1978.

Prime Minister Fukuda will long be remembered not only for the numerous achievements of his cabinet, but also for the gracious manner in which he departed from office.

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