Japan’s 2009 and 2012 House of Representative’s elections revisited

An Investment Theory of Party Competition analysis

Dominic Clouston [About | Email]

Volume 17, Issue 1 (Article 1 in 2017). First published in ejcjs on 23 April 2017.


The 2009 House of Representatives election was a historic moment in Japanese political history as the near one-party rule of the Liberal Democratic Party (LDP) was ended by the landslide victory of the Democratic Party of Japan (DPJ). Yet, a little over three years later, the LDP won a landslide victory of their own in the 2012 House of Representatives election. This article re-evaluates the elections of 2009 and 2012 using Thomas Ferguson’s Investment Theory of Party Competition. In short, this article argues that there is considerable support for an Investment Theory approach to the elections as both elections conform to the theory’s main principles. Moreover, there is clear evidence that influential groups, or ‘investors’ in the language of the Investment Theory, shifted support to the DPJ in 2009 and away from the party in 2012.

Keywords: DPJ, election, House of Representatives, Investment Theory, LDP, political parties, 2009, 2012.


The 2009 House of Representatives election was an unprecedented event in the history of democracy in Japan. Since its founding in 1955 no other party had ever won more seats in a House of Representatives election than the Liberal Democratic Party (LDP). Yet, not only did the Democratic Party of Japan (DPJ) win the election, it won a record 308 of the 480 seats available (Schoppa 2011: 3). The DPJ’s victory appeared to signal the emergence of a competitive two-party system in Japan, similar to that of the USA or the UK. However, just over three years later the DPJ suffered a landslide defeat, as the LDP returned to power with 294 seats to the DPJ’s paltry 57 (Reed, Scheiner, Smith and Thies 2013: 34). Worse still, the DPJ barely managed to finish ahead of the newly-formed Japan Restoration Party (JRP), which took 54 seats. Suddenly, in the aftermath of the 2012 election, the prospects of a consistently competitive two-party system in Japan seemed further away than ever.

The volatile electoral swings of 2009 and 2012 represent a challenge to observers of Japan’s political system. How was the DPJ able to win so convincingly in 2009 after such a long period of LDP rule? And, by the same token, how and why did the DPJ lose (and the LDP regain) power so overwhelmingly in 2012? This paper considers those questions using Thomas Ferguson’s (1995) Investment Theory of Party Competition (hereafter Investment Theory) as an analytical framework. In short, this paper argues that there is substantial evidence to support an Investment Theory interpretation for the results of the 2009 and 2012 House of Representatives elections.

The Investment Theory places the role of money at the heart of the political process. In this regard Japan is an ideal test case as, despite a decline in their cost, Japan’s elections continue to be among the world’s most expensive. The 2009 election saw a total expenditure of ¥139.3 billion, while that of 2012 saw a lower but still formidable expenditure of ¥110.8 billion (Kanpō 2013: 2). Yet, despite the importance of money in Japanese politics, there haven’t been any attempts to apply the Investment Theory to Japan, nor has Ferguson himself written about Japan in great detail. This paper, therefore, addresses that situation by applying the principles of the Investment Theory to Japan and by analysing the behaviour of four key groups (or ‘investors’ in the language of the Investment Theory) which shiftedin their political support in 2009 (to the DPJ) and in 2012 (away from the DPJ). While these key investor groups are not the only groups which shifted their support between 2009 and 2012, they are four of the most significant.

Previous explanations for the see-saw elections of 2009 and 2012 can be boiled down into three main strands. The first of these, the ‘median-voter’ theory, argues that voters are the main constituency for political parties. Consequently, Japan’s elections, including those of 2009 and 2012, have become increasingly volatile as a result of the increasing number of ‘floating’ or independent voters (see McElwain 2014: 2-3). The second major school of thought, based on Duverger’s law, argues that Single Member District (SMD) electoral systems foster two-party systems as voters are essentially forced to choose between the two parties or candidates most likely to be elected (see Scheiner 2013: 76). Thus, the 2009 election result can be seen as the consequence of non-LDP voters coalescing behind the DPJ as an alternative to the LDP. The final group of explanations for the elections of 2009 and 2012 focuses on the weaknesses of the incumbent party. For example, Pempel (2010) argues that the 2009 election defeat for the LDP was the culmination of unresolved contradictions within the party, while Schoppa (2012) argues that the DPJ’s defeat in 2012 was a result of disillusionment with the party’s record in government. 

However, there are problems with each of these explanations. The main weakness of the ‘median-voter’ theory is that the views of Japan’s politicians often fail to reflect the views of the Japanese public. To give just one example, in a Kyodo News survey of 454 winning politicians in the 2012 election, 66.5 percent were against Japan participating in talks for the Trans-Pacific Partnership (TPP) (Japan Economic Newswire 2012). In contrast, a November 2012 poll for the Asahi Shimbun found just 23 percent of the public against and 48 percent in favour of TPP talks (Mansfield Foundation 2012). Likewise, explanations for the elections of 2009 and 2012 based on Duverger’s law are equally problematic as the law has been a poor determiner of national election results. For instance, the LDP won five out of the six elections held between 1996, when Japan introduced its new SMD-weighted electoral system, and 2012, with Japan no nearer a competitive two-party system.

Finally, the third group of explanations, that which argues that the weakness of the incumbent party was a major factor, also has its problems. Although correct to argue that the unpopularity of the incumbent party was a major factor in the elections of 2009 and 2012, these explanations fail to provide a coherent narrative when the elections are compared. The problem with the argument that structural weaknesses led to the LDP’s 2009 loss is that in 2012 the party recorded its largest ever victory, with the political opposition, led by the DPJ, arguably weaker than at any other time in the post-war period. Similarly, the argument that the 2012 election was a vote against the DPJ, though correct, doesn’t explain why voters had opted for the party in 2009 but not before or since. Consequently, this paper turns to the Investment Theory as a way better to understand the elections of 2009 and 2012.

One of the main principles of the Investment Theory is what Ferguson calls the “campaign cost condition.” According to this principle, in order to mount effective electoral campaigns political parties need substantial amounts of money (Ferguson 1995: 384-5, 395). Of course, it is not simply the case that the party with the most money wins. Rather, money acts as a barrier to participation in the political process. Before parties can begin to campaign to voters, they must first raise funds from donors. As a result, the main constituency for political parties is not voters but large donors, as it is they who provide the financial backing for political parties to be able to compete in elections.

For their part, donors give money in order to advance their economic aims. In effect, donors make investment decisions by giving support to political parties with the expectation of a return on that support or ‘investment’ and thus can be termed ‘investors’ (Ferguson 1995: 43). As the interests of investors are likely to be diverse, like-minded investors coalesce into blocs or coalitions in order to best advance their interests. These investor blocs then compete (through political parties) in elections for control of the government (Ferguson 1995: 22). Thus, elections can be seen as competition between investors. Moreover, these investor blocs remain relatively stable as long as the economy itself remains stable. If, however, the economy falls into a depression there is likely to be some realignment or shifts in investor support as firms go bankrupt or alter their investments in order to survive (Ferguson 1995: 46-7).

At the same time, investors are not blindly partisan. For investors the selection of political parties is the same as the choice of stocks in a company. Both are rational decisions made under uncertainty since the outcome of either (elections or business investments) cannot be predicted (Ferguson 1995: 42). For the purposes of analysis here I refer to this as the “uncertainty principle.” Therefore, while it may make sense to invest in more than one political party as part of a balanced portfolio, there will be a clear preference for one party over the other(s). Moreover, while an investor may hedge its bets, it would not donate to a party that worked against its interests. Ferguson calls this “the principle of non-competition across investor blocs” (hereafter “non-competition principle”). According to this principle, there will be no party competition on issues affecting the vital interests that major investors have in common, such as property rights (Ferguson 1995: 9-10, 28). Consequently, while there is (possibly intense) competition between investors, there are essentially areas of policy that are off-limits as they have no investor support.

Finally, since investors are the main constituency for political parties, the role of voters is peripheral. In order to get the votes they need parties make very limited appeals to particular segments of the electorate (see Ferguson 1995: 27-8). Crucially, however, these appeals for voter support will not contradict the “non-competition principle.” In other words, even if there are appeals of an economic nature, such appeals will be limited. Voters, since they aren’t investors, are essentially left with only two options to express dissatisfaction with government policy: to abstain from voting or to vote negatively against the incumbent. The latter produces what Ferguson describes as a “swivel-chair” democracy, where the party or candidate changes but policy doesn’t (Ferguson 1995: 405-7).

Since the role of money is critical for the Investment Theory, political donations are an important (but by no means the only) source in gauging support for political parties. Therefore, this paper’s main sources of data are the Ministry of Internal Affairs and Communications’ Kanpō funding reports for the DPJ and the LDP and their fund management bodies, the Kokūmin Kaikaku Kyōgikai (DPJ) and Kokūmin Seiji Kyōkai (LDP) for the years 2009 and 2012 for the LDP and 2009 for the DPJ. Comparable data are not available for the DPJ in 2012 as the party stopped accepting corporate donations in 2010 (DPJ Secretariat 2014). This decision was made on the basis of a pledge the party had made in its 2009 manifesto to ban corporate donations to all political parties. At the same time, as in Ferguson’s own work, funding data are supplemented by data from other sources, primarily the LexisNexis database. From these sources it is possible to determine the key ‘investors’ for the elections of 2009 and 2012.

The funding data have been categorised by industry, with companies categorised by what appears to be their main line of business.1 Also, subsidiaries or divisions of major companies have been treated as independent financial donors if they donated separately. For example, Toyota Tsusho Corporation, although a subsidiary of Toyota Motor Corporation, operates as a trading company (for the Toyota Group). Consequently, it was classified as a ‘trading company’ rather than an ‘auto company’. Furthermore, as the focus of this paper is political donations from large donors, small donors, defined as those with donations of less than ¥1 million, have been excluded. In addition, this focus has also been on group or political group donors, not individual donors, and national funding reports, not those of local party chapters or those including prefectures.

Although this paper’s method is broadly similar to Ferguson’s, there are aspects differing in implementation. First, the Kanpō funding reports I have used here are for the entire year in question, while Ferguson uses much smaller time-frames (months/weeks). Second, I have calculated the aggregate totals for each industry and looked at which industries were the largest donors for DPJ in 2009 and what, if any, support they gave the LDP at the same time. Ferguson, on the other hand, appears to aggregate the funding data by industry, calculate the mean for each industry for each party, and then calculate the standard deviation for each industry from the overall mean (Ferguson 1994: pp38-50, 218-9). That method wasn’t implemented here as the small sample size of some industries might have produced results that couldn’t be considered representative. Nevertheless, despite these departures from Ferguson’s methods, the fundamental approach remains relatively close to Ferguson’s own.

The elections of 2009 and 2012 and the Principles of the Investment Theory

There are five main tenets of the Investment Theory which can be applied to the elections of 2009 and 2012: the economic situation, the “campaign cost condition,” the “non-competition principle,” funding data, and the character of the elections themselves. The first of these, Japan’s economic situation, broadly supports an Investment Theory interpretation. With national income falling we would expect there to be some realignment or shifts in ‘investor’ support. For Japan, the severity of the recession prior to the 2009 election was unprecedented in the post-war era. Japan’s economy declined by over five percent in 2009 alone, while the yen rose by thirty percent in real terms, hitting exporters particularly hard (Lincoln 2011: 358). Consequently, from an Investment Theory perspective, it would be expected that (at least some) investors would shift their support away from the incumbent party (the LDP) as a result of the economic circumstances at the time.

The situation in 2012 also conforms to an Investment Theory approach. Japan’s economic situation was again poor, with the country slipping back into recession in the final quarter of 2012 (Diplomat 2012). However, the recession of 2012 was much less severe than the one of 2009, with some industries affected more than others. For instance, the continued strength of the yen badly affected export-dependent industries, such as cars and electronics (Thorbecke 2012). Thus, with national income again falling it is likely there would have been some realignment or shift in investor support in 2012, particularly among the industries most severely affected by the recession, as investors in those industries looked to survive economically. However, given the relative mildness of the recession in 2012, it is unlikely that there would have been investor realignment on the same scale as 2009.

With regard to the second aspect of the Investment Theory, the “campaign cost condition,” there is also considerable support for an Investment Theory interpretation. Table 1 shows the figures for the parties with the largest total funds in 2009. These figures include income from newspaper sales, membership, corporations, individuals and political party subsidies from the government. As can be seen from the data, the financial cost of participation in Japan’s electoral system is extremely high. Both the DPJ (¥22.85 billion) and the LDP (¥31.27 billion) had substantial funds in 2009. Even the party with the fourth-highest income, Kōmeitō, still received over ¥13 billion in just 2009. Therefore, were an individual voter, or group of voters, to attempt to form a new political party and mount an effective campaign, the cost of participation would be beyond all but the wealthiest individuals or groups. This supports the notion of the “campaign cost condition” as due to the effects of money participation in the political process is extremely limited.

Table 1: Total funds for the parties with the largest revenues in 2009
Party Total Funds 2009 Income 2009 Expenditure
LDP 31.27 19.73 29.64
Japanese Communist Party (JCP) 26.85 24.62 25.22
DPJ 22.85 16.30 18.02
Kōmeitō 22.65 13.50 14.86

Figures in yen (billions). Source: Kanpō 2010: 1-18. Compiled by author.

The issue of government subsidies, however, provides mixed support for the Investment Theory. One the one hand, government subsidies should theoretically lessen the dependence of parties on major donors. This weakens the central tenet of the “campaign cost condition,” namely that parties must first seek support from donors in order to raise funds. This suggests that parties in Japan have greater autonomy from donors (due to government subsidies) than the “campaign cost condition” states should be the case. On the other hand, however, government subsidies potentially strengthen the “campaign cost condition.” In order to receive government subsidies a party must have at least five Diet members, or have received over two percent of the vote (and elected at least one Diet member) in the previous election (Carlson 2012: 395). Since they are effectively based on the results of the previous election, the subsidies thus serve to strengthen incumbents. Consequently, political challengers are obliged to raise funds from other sources, such as large donors. Moreover, since parties are allowed to receive subsidies and still solicit and receive funds from other sources, their income is bolstered by these political subsidies, potentially making the cost of participation in the political process even higher. Nevertheless, although the issue of government subsidies is mixed, there is still general support for the “campaign cost condition.”

There is similar support for the “campaign cost condition” in the 2012 election. As can be seen in Table 2, the main parties also raised substantial funds in that year. Although the DPJ refused to accept corporate donations, due in large part to government subsidies, the party had just under ¥38 billion in funds in 2012, more than any other party. For its part, the LDP also raised significant funds. While its funds were much lower than in 2009, the party still had over ¥18 billion, a formidable sum. Furthermore, since the LDP coordinated electoral campaigns with its long-time ally Kōmeitō, the figures for the LDP in some ways understate the finances that were available to the party. Thus, in 2012 both parties had sufficient funds to mount effective electoral campaigns, the essence of the “campaign cost condition.”

Table 2: Total funds for the parties with the largest revenues in 2012
Party Total Funds 2012 Income 2012 Expenditure
DPJ 37.96 19.56 16.09
Japanese Communist Party (JCP) 22.55 23.28 23.51
Kōmeitō 19.18 13.77 13.62
LDP 18.26 15.90 16.87

Figures in yen (billions). Source: Kanpō 2013: 1-20. Compiled by author.

However, the issue of government subsidies for political parties again provides conflicting support for the “campaign cost condition.” On the one hand, the principle is weakened by the DPJ’s decision to refuse corporate donations, as the party evidently decided that it could compete politically without them. Since the “campaign cost condition” argues that parties must first seek the support of donors, the DPJ’s decision to refuse corporate donations weakens this central tenet. On the other hand, however, due to its overwhelming victory in 2009, the party had ample funds for the election in 2012, even without corporate contributions. In other words, the party could refuse corporate donations because it had already accumulated enough prior funds to enable it to do so. Nonetheless, despite the issue of party subsidies being mixed, there is still overall support for the “campaign cost condition.”

There is firm support for the third aspect of the Investment Theory, the “non-competition principle,” in the 2009 election. Although the DPJ was generally viewed as being more welfare-orientated while the LDP was considered more pro-business, neither party made any attempt to alter the overall structure or ownership of Japan’s economy. Indeed, many commentators remarked on the similarity of the two parties’ economic policies (see, for example, Schoppa and Tanaka 2011: 211-2). Of course, there were areas where the two parties disagreed. The DPJ’s commitment to a twenty-five percent reduction in CO2 emissions and its proposed ban on the use of temporary workers were two areas in which there was a sharp contrast with the LDP (see DPJ Manifesto 2009). Nevertheless, on the issue of the structure of the economy there was negligible difference between the two parties. Neither party attempted any significant change to the ownership or distribution of property or wealth. This conforms strongly to the “non-competition principle” as there was no debate between the DPJ and the LDP on these issues.

Applying the “non-competition principle” to the election of 2012, produces equally comprehensive support for the Investment Theory. As in 2009, neither of the two parties advocated any fundamental change in the structure or ownership of the economy. In fact, the DPJ was significantly more pro-business in 2012 than it had been in 2009. For example, the party strongly advocated for Japan to participate in talks for a wide-ranging free-trade agreement, the Trans-Pacific Partnership (TPP). The LDP, on the other hand, adopted a far more equivocal stance on the TPP, stating that it would only accept the TPP as long as there were exceptions for agriculture and other industries (AP 2012). Nevertheless, both parties remained committed to maintaining the then current economic structure, the essence of the “non-competition principle.”

However, it would be inaccurate to characterise the positions of the DPJ and the LDP as identical. While the “non-competition principle” was maintained, as neither party proposed fundamental changes in the structure or ownership of the economy, there were still disagreements between the two parties over economic policy. The DPJ’s economic policy was essentially more of the same: continued deficit spending with the medium-term goal of balancing the fiscal budget, while maintaining an inflation target but with limited involvement by the Bank of Japan (BOJ). In contrast, the LDP offered a relatively radical, though decidedly pro-business, economic program. Under its new leader Abe Shinzō, the LDP promised an aggressive reflationary fiscal and monetary economic policy, which included a commitment to spend ¥200 trillion over ten years on public works (Tiberghien 2013: 197-8). Therefore, although the “non-competition principle” was maintained, there were still notable differences between the DPJ and LDP in economic policy.

The fourth aspect of the Investment Theory, the donations of major investors, shows clear evidence of a shift to the DPJ in 2009. To be sure, major investors overwhelmingly preferred the LDP to the DPJ. The ¥2.5 billion the party received from major ‘investors’ in 2009 dwarfed the ¥128.82 million received by the DPJ (Kanpō 2010: 3-6 15-18, 61-77). However, these figures still show a notable shift toward the DPJ. The ¥128.82 million the party received in 2009 was considerably higher than the ¥89.58 million it had received in the previous election year of 2005 (Kanpō 2006: 18-21, 61). In contrast, the LDP received ¥2.83 billion in 2005, making 2009 a significant decrease (Kanpō 2006: 3-6, 66-79). Moreover, whereas the LDP received donations from a wide range of businesses and industries, the DPJ received donations from a much narrower range. For example, almost forty percent of donations to the DPJ came from just two industries: the pharmaceutical industry and the auto industry. Therefore, the overall impression created by the funding data is one where the LDP was essentially the default party of business, while the DPJ was able to secure significant, though minority, support from a section of the business community.

In 2012, however, investors appeared to shift their support back toward the LDP. Although the ¥1.42 billion in donations from major investors in 2012 was a sharp drop compared to 2009, other sources suggest that there was broad, and increasing, support for the LDP from industry groups (Kanpō 2013: 3-5, 54-66). The Yomiuri Shimbun reported that, prior to the election, a number of industry groups were shifting support back to the LDP (Yomiuri 2012a). Indeed, in a briefing session in late November 2012, the LDP hosted delegates from seven hundred industry groups, many of which pledged their strong support for the party’s election campaign (Jiji Press 2012b). In contrast, there was no evidence of industries shifting their support to the DPJ, while the party’s decision to refuse corporate donations lead to the party receiving no donations from investors. It therefore appears that major investors were overwhelmingly in favour of the LDP in 2012, even more so than in 2009; and that the investor support the DPJ had managed to capture in 2009 had deserted the party by 2012.

Last, the character of the elections of 2009 and 2012 also conforms to the Investment Theory, specifically its notion of ‘swivel-chair’ democracy. At first glance, the DPJ scored a stunning victory in the election of 2009, receiving 47.4 percent of the SMD vote and 42.2 percent of the Proportional Representation (PR) vote (Reed et al 2013: 37). However, closer analysis suggests that enthusiasm for a DPJ-led government was over-estimated. A poll by the Yomiuri Shimbun shortly after the election found only 10 percent of respondents credited the DPJ’s victory as due to the party’s policies, while 46 percent cited dissatisfaction with the LDP government (Pekkanen and Reed 2013: 9). This conforms remarkably to Ferguson’s notion of a ‘swivel-chair’ democracy. Since voters aren’t investors, and thus have no control over the political process, they can only express dissatisfaction with the political process by abstaining from voting or by voting against the incumbent party. In 2009 a large portion of voters chose the latter, from which the DPJ benefited greatly.

There is similarly firm evidence for the Investment Theory’s notion of ‘swivel chair’ democracy in the nature of the LDP’s victory in 2012. Unlike 2009, when a large portion of voters voted against the incumbent party (the LDP), in 2012 a large number of voters simply abstained from voting. Voter turnout declined dramatically, from 69 percent in 2009 to 59.3 percent in 2012 (Reed et al 2013: 36). Thus, the LDP won the election despite receiving two million fewer SMD votes than in 2009 (Reed et al 2013: 36). Indeed, there was general agreement among observers of Japanese politics that the election was a vote against the DPJ rather than a vote for the LDP, with Reed at al describing the election as the LDP winning ‘by default’ (Reed et al 2013: 34).

To sum up, the Investment Theory’s key principles can be successfully applied to the elections of 2009 and 2012. In 2009, the economy was poor and the incumbent (LDP) government unpopular, while the DPJ had the funds to mount an effective campaign, but one which crucially didn’t threaten the fundamental interests of major investors. Likewise, in 2012 the economic situation was again poor, although not as poor as 2009, while the incumbent (DPJ) government was again unpopular. The LDP, as the DPJ had done in 2009, had the financial resources to mount an electoral campaign, but one which also didn’t violate the “non-competition principle.” The one caveat in support for the Investment Theory is the issue of government subsidies. Yet, even here, the subsidies don’t undermine the “campaign cost condition,” but rather suggest that political parties in Japan have greater autonomy than the Investment Theory suggests should be the case.

Analysis of Key Investor Groups

Four key investor groups are analysed in this section: the pharmaceutical industry, the construction industry, doctors, and Japan’s farmers. These groups were selected because each demonstrated some shift in support toward the DPJ in 2009 and away from the party in 2012. The importance of the first group, the pharmaceutical industry, lies in the size of the industry. Japan’s drug market was worth an estimated $85.8 billion in 2008, making it the world’s second largest market at the time (BMI 2009a). The industry’s size was reflected in the financial contributions it gave to the DPJ and the LDP. Major investors from this industry donated a total of ¥109.56 million to the LDP and DPJ in 2009, making the industry a key group of investors. Yet, despite the importance of this industry, there has been little consideration of its role in the elections of 2009 and 2012 thus far.

From the funding data there is clear evidence of a shift in support toward the DPJ in 2009. In the previous election year of 2005, the DPJ received just ¥2.1 million in donations from investors from the pharmaceutical industry, while the LDP received ¥116.87 million (Kanpō 2006: 3-6, 18-21, 61, 66-79). In 2009, however, donations to the DPJ surged to ¥24.12 million, while those to the LDP declined to ¥85.44 million (Kanpō 2010: 3-6, 15-18, 61-77). Although the industry still preferred the LDP to the DPJ (no investor donated more to the latter than it did to the former), donations from the industry reveal a pattern of increasing minority support for the DPJ in 2009. A typical example of which was Chugai Pharmaceutical Ltd, one of Japan’s largest drug companies. In 2009 this company gave the LDP ¥4.87 million and the DPJ ¥2.65 million (Kanpō 2010: 62, 68). Therefore, from an Investment Theory perspective, while these investors preferred the LDP, they were also increasingly prepared to support (or at least accept) the DPJ as an alternative investment.

As this is an unexplored area, the reasons for the increase in support for the DPJ from pharmaceutical industry investors necessitate a certain degree of speculation. Nevertheless, while there are other possible motivations why investors would support the DPJ, one of the party’s policies in particular stands out. The DPJ’s pledge to reverse the ¥220 billion in social security cuts introduced by the LDP (DPJ Manifesto 2009: 14) would likely have been attractive to the industry. The Japanese government is by far the biggest customer of pharmaceutical products, with the public sector accounting for 81 percent of total health spending in 2008 (BMI 2009a). As social security spending included health spending, it is reasonable to assume that at least some pharmaceutical companies would have found this policy attractive since, in effect, it would have expanded the pharmaceutical market. There was, therefore, a strong economic incentive for investors in the pharmaceutical industry to give the DPJ at least some support in 2009.

However, in 2012 the DPJ received no perceptible support from investors within the pharmaceutical industry. Due to the its refusal to accept corporate donations, the DPJ didn’t receive any financial support from the industry. Moreover, searches of LexisNexis failed to yield evidence of any other direct or indirect support (such as endorsements) for the DPJ. The LDP, meanwhile, continued to receive substantial funding from the industry. Although there was a pronounced drop in donations compared to 2009, investors from the pharmaceutical industry still donated ¥56.52 million to the LDP in 2012 (Kanpō 2013: 3-5, 54-66). Moreover, the then newly-elected LDP leader, Abe Shinzō, had a long history of being supportive of the pharmaceutical industry (Japan Economic Newswire 2006). The evidence, therefore, suggests a shift in support away from the DPJ as, unlike 2009, the party didn’t receive any noteworthy support from the pharmaceutical industry.

Looking at the policies of the two parties provides possible insight into the perspectives of the industry. Arguably the biggest policy difference between the two parties was with regard to the TPP. While there were benefits to participation for the pharmaceutical industry, such as patent protection, the treaty in its then form would have likely forced Japan to open its domestic drug market to foreign (specifically US) penetration (IHS Global Insight 2013). Indeed, it was for this reason that many Japanese pharmaceutical companies opposed the TPP as it was then proposed (AFP 2012). Consequently, it is unlikely that the industry would have supported the DPJ’s almost unequivocal support for the TPP as it would have exposed Japanese pharmaceutical companies to greater (foreign) competition. More likely, the industry would have preferred the LDP’s more equivocal position on the TPP. Therefore, from a pharmaceutical industry perspective the LDP was a more (and the DPJ a less) attractive investment in 2012 than it had been in 2009.

The next investor group is the construction industry. Two factors mark this industry as important. The first is its economic size and reach. Although the industry had long been in decline, in 2009 it was still estimated to be worth around ¥42.2 trillion (RICE 2010: 2). Moreover, the industry is spread throughout electoral districts across the country, with strong influence in rural areas. The second factor is the political organisation of the industry. The industry had long been aligned with the LDP and had consistently mobilised votes for the party in elections. Indeed, alongside Japan’s farmers and doctors, construction companies have traditionally been considered “vote-gathering machines” for the LDP (Jiji Press 2012b). It is for these reasons that the construction industry can be considered a key group of investors.

On the surface, it would appear that there was little support from this industry for the DPJ in 2009. Investors from the construction industry gave the LDP ¥148.67 million and the DPJ nothing in 2009 (Kanpō 2010: 3-6, 15-18, 61-77). However, there is evidence that, while the construction industry didn’t provide the DPJ with any financial support, there was some support for the party. The LDP was only endorsed in 34 out of 47 prefectures, with many prefectures giving their members a free-vote (Kabashima and Steel 2010: 148; Reed, Scheiner, and Thies 2009). This indicates that the DPJ was able to secure crucial (albeit minority) support from this previously staunch LDP group of investors. Moreover, the ¥148.67 million the LDP received in donations in 2009 was less than half the figure (¥349.12 million) that the party had received in 2005 (Kanpō 2006: 3-6, 66-79). These factors suggest that a minority of investors from the industry were relatively comfortable with the prospect of a DPJ government.

At first glance it would appear implausible that even a minority of the construction industry would support the DPJ in 2009 as the party was committed to cutting public works spending. However, there are several reasons to believe that support for the DPJ was entirely rational. First, the DPJ’s proposals were in some ways a continuation (albeit a more radical version) of the policies of previous LDP-led governments. Although there was an increase in 2009, successive LDP governments had repeatedly cut the public works budget (MOF 2010: 47). Second, even after the DPJ’s proposed cuts, government spending on public works was still forecast to be ¥6.6 trillion (DPJ Manifesto 2009: 10). The logic of the “uncertainty principle” would lead at least a minority of construction companies to try to gain access to that budget. This is especially the case as the DPJ’s then secretary-general (and de-facto deputy leader) was Ozawa Ichirō, a man with strong ties to the construction industry and a history of doling out public works projects to favoured construction companies (see Mulgan 2015: 200-3). Therefore, despite the party appearing to offer the industry very little, there were strong, economically rational reasons for some construction companies to support the DPJ.

In 2012, in contrast, investors from the construction industry exhibited a shift away from the DPJ toward the LDP. As in 2009, the industry donated heavily to the LDP in 2012. Donations to the party from major investors, although significantly down on 2009, still totalled ¥76.69 million, making the industry the LDP’s sixth largest donor group. On the other hand, the minority support the DPJ had received in 2009 was absent in 2012. Searches of LexisNexis revealed no support for the DPJ from this industry. Unlike in 2009, there was no evidence of any construction industry groups offering its members a free-vote. Indeed, among the industry there was widespread support for a return of the LDP, with the head of the Japan Federation of Construction Contractors signalling his support for an LDP victory prior to the 2012 election (Jiji Press 2012a). Thus, the minority support the DPJ had received in 2009 disappeared in 2012 as investors switched back to the LDP.

This shift in support appears to be the direct result of the policies offered by the two parties. In 2009, the LDP had increased public works spending after years of budget cuts in what appeared to be a short-term measure. In 2012, however, the party committed to a radical programme of public works spending (200 trillion yen) over the medium term (10 years) (Tiberghien 2013: 197-8). This policy demonstrated a much stronger commitment to public works spending in 2012 than the party had shown in 2009. The DPJ, on the other hand, were dismissive of the LDP’s proposals, with DPJ Prime Minster Noda likening increased construction industry spending to pouring water into a bamboo basket (Yomiuri 2012b). From an investor perspective the contrast was stark: support a party that promised to expand the industry or support a party which planned to let the industry contract. The overwhelming majority of investors from the industry subsequently chose the LDP based, it seems, on these economic factors.

Japan’s doctors comprise the third key group of investors which shifted their support between 2009 and 2012. Japan’s doctors, represented by the Japan Medical Association (JMA) and its political arm the Japan Medical Federation (Nihon Ishi Renmei—JMF), are important for two reasons. First, doctors in Japan enjoy a privileged and influential place in many communities. Due to the nature of Japan’s healthcare system, many doctors are employed in private practices, often small clinics. As such, particularly in rural areas, doctors often act as community leaders; hence the term LDP “vote-gathering machine.” Second, the degree of financial support the JMF provides makes the group a key investor. In just 2009, the JMF donated ¥200 million to the LDP, making it the party’s single largest donor (Kanpō 2010: 63-77). It is therefore no exaggeration to describe Japan’s doctors as a key group of investors.

Nevertheless, in 2009 the DPJ managed to secure important minority support from this key, previously steadfast LDP-supporting group. At the national level, the JMA continued strongly to back the LDP. The ¥200 million the JMF gave the LDP dwarfed the ¥5 million it gave to the DPJ (Kanpō 2010: 3-6, 15-18, 61-77). However, while the JMA’s national leadership declared its support for the LDP, many prefectural medical associations refused to do so. While 23 prefectural associations backed the LDP, 22 gave their members a free-vote, one didn’t make any decision, and one, Ibaraki Prefecture, endorsed the DPJ (Nakamura and Hrebenar 2014: 123). Indeed, in the election of 2009 the DPJ won five of the seven SMD seats in Ibaraki, a traditional LDP stronghold (The Nikkei Weekly 2009a).

The main reason given by doctors for supporting the DPJ was opposition to the LDP’s introduction of a new national insurance system for people aged 75 or older (The Nikkei Weekly 2009b). The aim of this policy was to discourage repeated hospital visits by patients over 75. While doctors might have opposed this policy for ideological reasons, viewing it as undermining Japan’s health system, there were also economic grounds for opposition. Since the majority of Japan’s doctors worked in private clinics in 2010 (Sugimoto 2010: 239), this policy could have been seen as a threat to their income, as fewer patient visits meant less revenue. The DPJ, however, promised to reverse this policy, as well as reversing the ¥220 billion in social security cuts. Therefore, from an Investment Theory perspective the DPJ was able to win support from Japan’s doctors as it offered policies that (at least a minority of) doctors found appealing.

But in 2012 Japan’s doctors also noticeably shifted support back to the LDP. Although the JMF dramatically reduced its contributions to the LDP (from ¥200 million in 2009 to ¥50 million in 2012), it still remained a major contributor to the party (Kanpō 2013: 3-5, 54-66). At the same time, the DPJ (due to its ban on receiving donations) received nothing from the JMF. Furthermore, in spite of the drop in donations to the LDP, data from other sources suggests that doctors switched their support from the DPJ to the LDP. Prior to the 2012 House of Representatives election, the JMA elected Yokokura Yoshitake as the new head of the organisation. Yokokura was considered to be more pro-LDP than the previous incumbent, indicating a shift in support toward the LDP (Yomiuri 2012a). Similarly, in Ibaraki Prefecture, which had provided crucial support to the DPJ in 2009, there was increasing dissatisfaction with the party (Japan Press Weekly 2011b). Taken together, these factors indicate that there was a shift in support from the DPJ to the LDP among this investor group.

Two reasons stand out as the cause for doctors changing their support from the DPJ to the LDP. The first is the DPJ’s decision to support Japan’s participation in the TPP. For Japan’s doctors the TPP was an assault on the country’s national health insurance system (Japan Press Weekly 2011a). Therefore, the LDP’s more nuanced approach to the TPP would have been more attractive than the DPJ’s position. Moreover, while the DPJ had won support from doctors with its promise to abolish the health insurance system for over-75s, the party failed to implement that policy while in government (Kushida and Lipscy 2013: 23). Consequently, for Japan’s doctors the DPJ’s policies were less (and the LDP’s more) attractive in 2012 than they had been in 2009, leading to a shift in support toward the LDP and away from the DPJ.

The final group of ‘investors’, Japan’s farmers, are represented by Japan Agriculture (JA) and its political arm the National League of Farmers’ Agricultural Policy Campaign Organisations (Zenkoku Nōgyōsha Nōsei Undō Soshiki Renmei—NFAPCO). Ferguson suggests that Japanese industry coddles agriculture in order to maintain an electoral (in effect LDP) majority (Ferguson 1995: 387). However, this is not necessarily the case. Despite being a small percentage of the overall economy, agriculture in Japan is big business. While most farmers are small-scale and/or part-time, JA is a formidable entity. As Mulgan explains, through its banking and insurance businesses, JA had deposits of almost ¥86 trillion in 2010, which made it second only to Bank of Tokyo-Mitsubishi UFJ, Japan’s largest bank at the time (Mulgan 2011a: 110). Therefore, rather than being a proxy for big business as Ferguson implies, Japan’s farmers, through JA, are important investors in their own right.

Despite its financial strength, however, it is JA’s ability to mobilise votes and activists which makes it an important investor group. For example, in 2010 JA had 4.83 million farming members and almost as many non-farming members (Mulgan 2011a: 110). Therefore, although during this period neither of the two parties received any significant financial backing, they did receive support in other forms. Moreover, the pattern of support mirrored that of the other three groups considered above. Although the LDP received the majority of support, the DPJ also received crucial minority support from this previously only LDP-supporting group. On the national level, the NFAPCO almost universally recommended LDP candidates for the 2009 election (Mulgan 2013: 217). However, in a striking break with established practice, some prefectural farmers’ political leagues refused to follow the NFAPCO’s recommendations. As Mulgan explains, since many members wanted to vote for the DPJ, only 33 out of 47 prefectures resolved to support the LDP, while 11 of the remaining prefectures adopted different strategies based on the electoral district (Mulgan 2013: 217). Thus, as in other groups, there was a shift in support toward the DPJ and away from the LDP in 2009.

The reason for this shift in support can be attributed to the DPJ’s agricultural policy.  According to Mulgan, it was the party’s promise to provide direct income subsidies to farmers that was the decisive factor in gaining their support in 2009 (Mulgan 2013: 217-8). Moreover, Mulgan also explains that this policy was motivated not by ideological or policy concerns, but specifically the DPJ’s desire to win votes (Mulgan 2011b: 25). This corresponds markedly to an Investment Theory perspective as the DPJ secured crucial support from a key investor group by offering policies that were based on the economic interests of that investor group.

However, while the DPJ had received vital support from this group in 2009, in 2012 the party failed to receive any significant support. On the national level, the NFAPCO mobilised strongly for LDP candidates, with 92% of the candidates it recommended in SMDs coming from the LDP (Mulgan 2013: 217). In contrast to 2009, however, there was no deviation or dissent by prefectural farmers’ political leagues to the NFAPCO’s endorsement of LDP candidates. The lack of support for the DPJ from prefectural farmers’ political leagues was due to the marked decline in support for the party among farmers (Mulgan 2013: 215). Thus, in 2012 the support of Japan’s farmers swung decisively back toward the LDP.

The principle reason for the DPJ’s loss in support among farmers was the party’s decision to participate in TTP talks. According to Mulgan, JA and Japan’s farmers reverted back to their traditional support for the LDP as that party refused unequivocally to support the TPP (Mulgan 2013: 213). Indeed, it is difficult to overestimate the negative economic effects the TPP would likely have had on Japan’s farmers in general and JA in particular. Japan’s farmers have long relied on high tariffs to protect them from cheaper imports. If these had been removed entirely, the overwhelming majority of farmers would have been unable to compete. Similarly, JA relies on farmers for a portion of its revenue as it takes a percentage of the sale prices of agricultural products (Mulgan 2011b: 27). Therefore, the TPP in its then form would have been a threat to the very foundation of JA. Consequently, it was for these economic reasons that Japan’s farmers withdrew their support for the DPJ in 2012.

Taken together the behaviour of the four groups considered here showed a consistent pattern. In 2009 there was a movement toward the DPJ from each of the four groups. Although the majority of investors in each group still supported the LDP in 2009, the DPJ was able to capture crucial (albeit minority) support from each group. The party was able to do so on the basis of the policies it offered. However, in 2012 this situation was reversed. In 2012 there was a consistent movement away from the DPJ and back to the LDP as each of the four groups shifted their support back to the LDP. This was also a direct consequence of the policies of the two parties.


This paper has shown that an Investment Theory approach is an effective framework from which to analyse the 2009 and 2012 elections. Both elections satisfy the main principles of the Investment Theory. National income was falling (dramatically in 2009, less so in 2012), both parties had the funds to mount an effective campaign and neither party threatened radically to alter the fundamental structure of the economy. In addition, in both elections the ability of voters to influence the political process was negligible. Both the 2009 and 2012 election were characterised by voter dissatisfaction with the incumbent party rather than support for the winning party. In 2009 large numbers voted against the incumbent party while in 2012 large numbers simply didn’t vote. Moreover, the changes in investor support closely mirrored the results of the two elections: a shift toward the DPJ by a minority of investors in 2009 and a shift away from that party to the LDP in 2012.

Viewed using an Investment Theory perspective the 2009 election can be characterised as follows. The DPJ were able to win the election so convincingly because several factors, consistent with the Investment Theory, were in the party’s favour. The party had sufficient funds to mount an effective campaign and the incumbent (LDP) government was unpopular. At the same time, a minority of important investors, prompted by Japan’s economic recession and/or lured by economic promises from the DPJ, shifted their support from the LDP to the DPJ. The support of these key investors, coupled with the party’s existing support, thus helped to bring about the party’s overwhelming electoral victory in 2009.

Similarly, the DPJ lost so convincingly in 2012 in large part because the party lost the support of these key investor groups. Not only did the party refuse to accept corporate donations of any kind, it also actively disappointed key investors. The party enthusiastically championed participation in the TPP, despite key investors such as farmers and doctors being strongly opposed to the trade treaty. Due to a large extent to the actions of the DPJ, each of the four groups which had given the party support in 2009 shifted their support to the LDP in 2012, in most cases completely so. This dramatic loss of investor support was a key factor in the party’s heavy defeat in 2012.

This paper’s findings suggest broader implications for both democracy in Japan and the Investment Theory. For the former, the main implication is that Japan’s elections are best viewed as being decided by the support, or shifts in support, of key investors. Therefore, a political party in Japan cannot win elections without (at least minority) investor support. The failure of a competitive two-party system to emerge can thus be attributed to the lack of investor support for parties other than the LDP. Until 2009, almost all major investors (industry, farmers, doctors, etc.) had supported the LDP, while the only investor group which consistently supported the DPJ was organised labour. It was only when cracks appeared in the investor support for the LDP, and some of those investors switched their support to the DPJ, that the DPJ was able to win an election.

For the Investment Theory the issue of political party subsidies has profound implications. Although the subsidies don’t negate the “campaign cost condition,” they complicate it to some degree. In contrast to Ferguson’s work on parties in the US, it appears that Japan’s political parties are not necessarily as beholden to donors as their US counterparts. For instance, the DPJ was able and willing to disappoint key investors, such as farmers, in 2012. The party was able to do so partly as a result of the political subsidies it received from the government. This suggests that political subsidies provided the DPJ, and Japan’s political parties in general, with the ability to operate with a degree of autonomy which isn’t available for their counterparts in the US. Nevertheless, it is important not to over-state the degree of autonomy government subsidies may provide. The DPJ’s decision to disappoint key investors was electorally disastrous as the party suffered a landslide defeat in the subsequent election. Moreover, the party was able to make this decision after receiving substantial government subsidies through being in government, raising the prospect of whether the party would have been able to take this course of action without those subsidies.

Moving forward, the implications of this paper suggest that the prospects of a competitive two-party system emerging in Japan are slim as long as the DPJ (following a recent merger, now called the Democratic Party—DP) continues to be indifferent toward investors. In contrast to its behaviour in the run-up to its 2009 election victory, where the party assiduously courted investors, the DPJ’s actions both in government and since it lost power have been politically suicidal from an Investment Theory perspective. Unless the party can successfully court investors in the future, or turn itself into a mass-based party large enough to compete without the support of investors, the prospects for the party, and a competitive two-party system in Japan, remain distinctly limited. 


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[1] Where possible the company’s own website was used for industry categorisation. Also, if the nature of a company’s operations was explicit (for example, ‘Okinawa Ham’) that sample was categorised accordingly. In cases where categorisation was unclear or unknown, Reuters Finance (web), Bloomberg (web) or Google Finance (web) were referred to for categorisation. However, in cases where no categorisation was possible that source was not categorised.

About the Author

Dominic Clouston graduated with a BA in Politics from Lancaster University in the UK, before obtaining an MA in Asia-Pacific Studies from Leeds University in 2015. He is an English language teacher currently living in Japan, and is broadly interested in Japanese, British and US politics, particularly the similarities and contrasts between the political processes in these different systems. His research interests focus on how economic factors and cleavages affect the political process in an attempt further to understand electoral results in these countries.

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