A Pivotal Moment in Japan's History

YUKIO Hatoyama's victory is a pivotal point in modern Japanese history.

Hatoyama and his Democratic Party of Japan promise to break down the influence of Japan's all-powerful bureaucracy and put power into the hands of politicians.

They also promise to reverse the crippling fertility decline, which has led to Japan's population starting to decrease, to seek a more independent foreign policy, to redistribute money and spending power to the consumer and most of all to normalise Japanese politics - to create a competitive two-party system. It's a grand sweep of history, to wipe away the post-war settlement under which Japan has changed government just once since the mid-1950s.

It could be as big and bold and thunderingly significant as the last two great Japanese pivots - the Meiji Restoration in the late 1800s and the post-war economic revival.

The Meiji Restoration modernised a previously feudal society. But Japan took on some of the most unpleasant aspects of modernisation - such as colonialism and militarism. The Meiji Restoration led to the industrial and military behemoth Australia fought in World War II.

The post-World War II restoration, when Japan embraced defeat and took all the opportunities an enlightened US dominance provided, was also of profound importance to Australia. Japan's economic growth in the second half of the 20th century, more than any other external factor, powered Australian economic growth.

So we have our war legends because of the Japanese, and we also have our contemporary prosperous Australian society because of the Japanese.

Japan is still Australia's largest export market. It is still the biggest Asian investor in Australia. And because the US strategic position in Asia depends utterly on Japan, Tokyo is still the most important player in regional security for Australia.

How will Hatoyama make things different?

Some of his economic populism is dangerous. Some of it opposes the market-based reforms that Japan's economic system, which has its brutally efficient parts and its astonishingly bureaucratic and inefficient parts, still needs.

In some areas, Hatoyama has not so much repudiated the ruling Liberal Democratic Party as simply made a takeover bid for some of its constituencies, offering for example the same antique protection to Japan's wildly expensive and inefficient agricultural sector as the LDP has done.

Hatoyama himself began his political career in the LDP, and one of the dangers of the new situation is that the DPJ simply inherits the LDP's patronage system of politics and perpetuates the iron triangle - of bureaucrats, business leaders and politicians scratching each other's backs.

But Japan hungers for change. Japan's last successful prime minister, the redoubtable Junichiro Koizumi, already tried to push greater power to politicians and away from the bureaucracy. This process, if Hatoyama completes it, would make Japanese politics more transparent, competitive and nimble in its responses.

But it is hard to read Hatoyama's policy pronouncements. He has softened earlier opposition to free trade agreements, such as the one Canberra is trying hard to negotiate with Tokyo.

Hatoyama will certainly never give total free access for Australian farmers to the Japanese food market, but he might be prepared to move enough to make an FTA of some kind a possibility.

Hatoyama wants a more independent foreign policy for Japan. In the past this was code for Japan seeking a more equal alliance with the US.

But the irony was that greater independence allowed Tokyo to do more things that Washington wanted, such as dispatching troops to peacekeeping operations, making the US-Japan alliance reciprocal, or supporting the US military logistically in the war on terror.

Hatoyama has opposed Japan's refuelling ships engaged in the conflict in Afghanistan.

But he won't stop the practice immediately. He will let the current arrangements run their course until early next year and simply then plans not to renew the relevant legislation.

But all this is a work in progress. It could all change. The DPJ, though it contains fundamental internal divisions on the US alliance, will not threaten the alliance fundamentally.

Hatoyama will want to get on well with the Obama administration and co-operate, especially on issues such as climate change and the shaping of the G20 summit process as the key instrument to respond, at the policy co-ordination level, to the global financial crisis.

Hatoyama will almost certainly continue close co-operation with Canberra as well.

It is instructive to examine the experience of the late Roh Moon-hyun in South Korea. Roh, whose presidency finished last year, came to office with a background in radical labour union law and was a harsh anti-American and well to the left of the Korean political spectrum. He looked much more radical than Hatoyama.

But in office he negotiated a free trade agreement with Washington and sent thousands of Korean troops to Iraq, essentially to make sure the alliance with the US stayed healthy.

Hatoyama's other big foreign policy challenge is integrating China into Asia-Pacific and regional institutions.

A centre-left leader is expected to get on well with China, but as Kevin Rudd shows, this doesn't always work out. Further, when Japan has self-confident prime ministers with strong political bases, they tend to squabble with China.

Almost everyone in Japan, and almost everyone in the world concerned with Japan, wants Hatoyama to produce key changes.

But they also want him to produce key continuities.

He may not get the balance right. He won't please everyone. But we may be witnessing another, gigantic, Japanese pivot.