Japan's First Virtual Prediction Market Doesn't Predict LDP Landslide

Japan’s first virtual prediction market failed to forecast the Liberal Democratic Party’s landslide victory in the Sept. 11 election, though it did as good a job as most opinion surveys, says economist Hiroshi Yamaguchi.

Between Aug. 11 and Sept. 10, Hatena, a blog-hosting company, sponsored “Hatena General Election,” an online game that allowed participants to bet and trade virtual money on political parties as if they were stocks on a stock exchange. (See JMR’s “Japan Begins Web ‘Trading’ of Political Party Stocks” for background.) During that time, 1,163 users participated in the exchange, performing a total of 15,459 trades.

There was initial concern that Hatena’s virtual election market might run up against Japan’s Public Office Election Law, which has restricted use of the Internet during election campaigns. However, trading continued as originally intended until Sept. 10.

Ultimately, Hatena users predicted that the LDP would get 50.86 percent of the vote, their coalition partner Komeito 8.37 percent, and the principal opposition party, the Democratic Party of Japan, 31.35 percent.

In the actual election, the LDP did considerably better: it won 61.67 percent, or 296 of the 480 available seats. The Komeito came closest to the game’s prediction, winning 6.46 percent (31 seats), but the DPJ did much worse, obtaining only 23.54 percent (113 seats).

One source of the discrepancy is the fact that Japan’s lower house of Parliament is composed of two kinds of districts: 300 single-seat districts in which the candidate with the most votes wins, and 180 proportional representation districts, in which seats are awarded according to the percentage of votes received by each party. Hatena’s predictions are closer when one only considers the proportional districts. The prediction for the DPJ’s total (31.35 percent) comes very close to the actual result of 33.89 percent, but the LDP forecast (50.86 percent) is considerably higher than the actual 42.78 percent of votes received.

Hiroshi Yamaguchi, chief economist for The Japan Center for International Finance and a specialist on predictive markets, said it’s too early to say how well Hatena General Elections works, based on only one election. Still, he told JMR:

“My assessment is that Hatena General Election seems to be as good a predictor as opinion polls. But it is not a replacement; it works rather as a complement … The problem lies in whether the market mechanism is truly functional or not. A major concern of us before Hatena’s attempt was that Japanese people might not be well accustomed to ‘markets,’ especially virtual-money markets. In this sense, now I am very pleased to see that Hatena General Election showed the market mechanism worked fairly well. In my opinion, the prediction market approach has good potential as a new method to predict political events (and other issues).”

Like Hatena General Election, opinion polls also underestimated the extent of the LDP’s win. On his blog, Yamaguchi names two representative opinion polls: a Sept. 4 poll taken by The Asahi Shimbun that predicted the LDP would take 53.1 percent of the seats, and a Sept. 3 prediction by Prof. Masayuki Fukuoka that the LDP would win 51.7 percent.

That may have been intentional. According to Nozomu Nakoaka, a former senior editor of the business magazine Weekly Toyo Keizai, the major newspapers may have deliberately toned down the findings of their opinion polls prior to the election. He wrote:

Just two days before the election, a small private meeting was held at the center of Tokyo, where journalists, diplomats, scholars, government officials and others attended and freely exchanged their own views about various topics. This time, naturally, the main subject was about the election. One participant, who is well acquainted with newspaper editors, said that the newspapers intentionally reported the conservative forecasts because if they report the most likely results, it would surprise the readers greatly and might influence their voting behaviors. Needless to say, the most likely outcome would be a land-slide victory for the LDP. In a sense, the opinion polls made a correct prediction. Other participants agreed with his comment and analysis.

Blogs Begin to Impact Japanese Political World

Though it’s clear that Japan’s bloggers won’t be bringing down a Japanese Dan Rather or righting alleged errors of a local Swift Boat lobbying group any time soon, there’s no question that the blogosphere is already beginning to have an impact on Japan’s political world.

Since Prime Minister Junichiro Koizumi called in early August for a general election, there has been a spirited discussion of politics in the blogosphere, attesting to the significant amount of public interest in the election. As of the writing of this entry early Saturday morning Japan time, blog search engine Technorati Japan reports that six of the top 10 terms most frequently used to search its blog directory during the last 12 hours concerned election topics. For instance, it counted some 68,700 posts that include the search words “postal privatization” (yusei mineika in Japanese), a central issue in the election. That’s 23,200 more posts than it counted Aug. 23, 16 days ago.

Yasuharu Dando , however, doesn’t believe the activity in the blogosphere amounts to much. The longtime blogger and e-mail newsletter writer calculated the reach of one of his own posts — a widely read entry summarizing a cross-section of views about the election — and observed that most of the people who read his entry came from various news readers and personal information sites, but not from other blogs. So, he concluded that the power of blogs to propagate information is today pretty minimal.

Politicians Take Notice

More important perhaps than the actual numbers of bloggers or blog posts is the fact that politicians are starting to take notice of the whole phenomenon. As many as 93 politicians who are running in the election have created their own Web logs, including 29 LDP candidates (not including Livedoor’s Takafumi Horie, who is technically running as an independent) and 46 Democratic Party candidates. All their addresses are collected on a comprehensive election information Web site called “ele-log,” sponsored by Nichiei Intec, a manufacturer, and i-Hive Co., a Web design and application developer.

To their credit, the Liberal Democrats made initial overtures to the blogging community during the campaign. The party issued invitations (a copy can be viewed here) to a select group of 33 “credible” bloggers and e-mail newsletter (“mail magazine”) writers to attend an Aug. 25 discussion with Chief Cabinet Secretary Tsutomu Takabe and Hiroshige Seko, acting chief of the LDP’s public relations department. Ironically, the LDP even invited blogger Yasuharu Dando, not realizing perhaps that his day job is with The Asahi Shimbun. That was curious because the LDP has said it will respond to reporting inquiries from Asahi reporters until it accounts for a recent leak of interview notes from a controversial report alleging media censorship by the LDP. (For background, see JMR’s “LDP Leaders Shut Out Asahi”).

Some bloggers such as “Brother Jin” criticized the party’s arbitrary choice of attendees and suggested that it was seeking support within the blogging community rather than to engage bloggers as citizen reporters. However, former journalist and marketing specialist R-30 argues that the LDP’s action is “epoch-making.” Noting that at the discussion the LDP’s Seko was quoted as saying “blogs are a form of media that we can no longer afford to ignore,” R-30 writes:

“If the LDP wins this election … there is no doubt that they’ll see their ‘blogger strategy’ as a contributing factor. And that will mean the end of an era of ‘one-way’ communication in which it was good enough just to have a Net strategy, that is, to upload their own pronouncements as well as the party’s on their homepage. So in the future, those responsible for devising election strategy will have to figure out a way to respond to Net media in which countless numbers of people are involved in deep, two-way discussions. So it’s not an exaggeration to say that a new form of media different from the mass media ’emerged’ in this election whose influence can’t be ignored.”

Election Law Limits

Still, few are predicting that in the near term, Japanese blogs will have anything near the impact blogs did in the 2004 American presidential election, or Internet users did in Korea’s presidential 2002 election, where efforts to mobilize online voters is said to have affected the outcome.

In part, their lack of influence is due to the restrictions placed on Internet use during the campaign by Japanese election law. Written in 1950, the Public Office Election Law limits the distribution of text and images for use in campaigns to postcards and pamphlets so as to reduce the need for campaign financing. The law has been interpreted to mean that Web pages cannot be created or updated during the official campaign season, which runs for only 12 days before the actual election.

Consequently, much of the online information that might have proved most useful to voters is off limits. For all of Japan’s high-tech prowess, none of the parties have been allowed to update their Web sites, send out e-mail newsletters, or post new material on their blogs once the campaign began Sept. 30. They’re not even permitted to announce when candidates will be giving a speech or upload their party platforms.

Even Takafumi Horie, the brash Internet entrepreneur who is pitting himself against the prominent rebel LDP lawmaker Shizuka Kamei, stopped blogging Aug. 16 around the time he declared his own candidacy. Ironically, “the Net guru-turned-candidate has to depend very much on physical stumping and lots of handshaking,” noted the Nihon Keizai Shimbun.

By contrast, there are no limits on campaign use of voice and sound, so anachronistic sound trucks can bombard neighborhoods with political messages.

Fear of violating the restrictions has also frozen some of the interchange that might have occurred online. Horie’s company Livedoor, which hosts many blogs, announced that it would remove comments on individual candidates and parties from its Web servers. Moreover, the popular “goo” portal hosted by NTT Resonant stopped enabling comments or “trackbacks” on political Web postings.

Writes the Nikkei’s Waichi Sekiguchi in an analysis,

“In an age when election battles in many countries are waged fiercely online, campaign tactics in Japan may appear quaint. But because of the 1950 election law, the potential of the Internet as medium for connecting with voters – especially the young – is voided.”

Mobilizing the Young

Nevertheless, some are actively trying to change that situation. On Aug. 2, even before the election had been called, a group of 157 entrepreneurs founded a group called the “Yes! Project” aimed at encouraging young people to vote. They immediately set up a blog and a social networking site so participants can converse among themselves so as to encourage political participation.

According to journalist and blogger Tsuruaki Yukawa, reaching out to young people is the most likely way the Net will change politics, and efforts like the Yes! Project could even impact the current election.

“According to the 80-20 rule [for a definition, see this entry on Wikipedia], the mass media can send information to only 80 percent of the population, because of space and time constraints. Accordingly, that leaves 20 percent of the population’s information needs unmet. However, the Net can reach that 20 percent – that’s the Net’s particular strength…

The important thing, then, is how critical is this 20 percent of the population. In other words, are the rival parties competing fiercely enough that the 20 percent hold the critical deciding votes? … If they are, then discussion on the Net will have critical importance. If activities like the Yes! Project are able get usually indifferent young people to go out and vote and influence the course of the election, then I think it’s fair to call this election ‘a blog election.'”

A New Star Emerges: Housewife-Turned-Journalist Ai Izumi

Ironically, it may turn out that the Sept. 11 election may impact bloggers themselves more than they will specifically impact the election. One result has been the emergence of a new “star” blogger, thanks to her intrepid election reporting. A former housewife and divorcee, the 38-year-old Ai Izumi decided she wanted to create a new life as reporter after suffering a bout of breast cancer. In contrast to most of Japan’s bloggers who provide mostly opinion, Izumi pounds the pavement and posts long transcripts of original interviews. She was one of the few to attend the LDP meeting for bloggers, not because she was originally invited, but because of her tireless entreaties to interview LDP officials.

She has also attracted a slew of compliments from other bloggers, including those with many years more experience. Commented The Dancing Newspaperman”, an experienced reporter of 10 years:

“Without a reputation or an organization to back her up, I think it’s awesome that this former housewife has scored interviews with the top leaders of the main political parties. To this reporter, who has grown used to so-called
‘objective newsgathering,’ her reports are stimulating and original.”

Says another journalist, Hokkaido Shimbun’s Masayuki Takada, she has become the pioneer for a new kind of journalist in Japan. “I think she proves that anyone can become a reporter, so long as you have a platform for transmitting information (in this case, a blog), as well as enthusiasm, fighting ability and some measure of skill.”

Izumi authored a two-part series describing her own transformation into a Net journalist that can be found at goo’s election portal, “Blog Election Portal: Lower House Election 2005”.

LDP, DPJ Both Warned Against Putting Campaign Literature Online

A spat between Prime Minister Junichiro Koizumi’s Liberal Democratic Party (LDP) and the opposition Democratic Party of Japan (DPJ) over putting campaign literature online has resulted in both parties being warned of possible election law violations.

Last Tuesday, the Ministry of Internal Affairs and Communications notified the DPJ that its posting online of the comments of party leader Katsuya Okada’s first speech following the official start of campaigning for the Sept. 11 general election was “problematic.” It asked the party to take “appropriate measures,” according to press reports.

That night the DPJ removed the offending material.

However, on Thursday, Hiroshige Seko, the acting chief of the LDP’s public relations department and a one-time PR section head at NTT, stepped up the criticism of the DPJ. He said that not only had the rival DPJ had posted Okada’s speech on its homepage, but it had also distributed a “mail magazine” (an e-mail newsletter) Thursday comparing its party platform with the LDP’s and listing a schedule of campaign speeches.

Seko claimed that those actions were not permitted by Japan’s Public Office Election Law. “As an officially sanctioned party, it needs to obey the rules,” he told the Nihon Keizai Shimbun.

The Public Office Election Law rigidly defines the period during which election campaigning is permitted and the types of campaign materials that candidates can distribute. As Internet campaigning was not listed in the 55–year-old law, the government has held that creating Web sites and posting new material on them during election campaigns is illegal.

In response, the DPJ submitted an inquiry to the Ministry (a copy of the inquiry appears here), asking whether there had been any policy change, since both the DPJ and the LDP had posted similar campaign material online during the April lower house special election and the July election for the Tokyo Prefectural Assembly but had received no guidance from the Ministry either time. Moreover, it noted that the LDP’s Seko, among others, had posted entries concerning Koizumi speeches on his personal blog, and asked whether those were in violation or not.

“So long as clear guidelines and standards are not established and legal interpretations change each time there is an election, the principal of fair elections will not be upheld,” the DPJ said in an accompanying statement to the media, according to an Asahi Shimbun report.

On Friday, the Ministry responded. In a letter to the Democratic Party signed by the director general of the Election Department, the Ministry said it was not changing its position that political parties could not post new material online after the official start of campaigning. And it said the entries on Seko’s blog quoting speeches by Koizumi also likely violate election law as well, and said that it had informed the LDP.

A copy of the Ministry’s response appears on a blog authored by Shinji Miyadai, a sociology professor at Tokyo Metropolitan University who has lobbied the government on revising election law.

Miyadai, who described the whole incident as “laughable,” notes that the government came close to revising the archaic election law ahead of last year’s upper house elections. However, in the wake of Roh Moo-hyun’s victory in Korea’s 2003 presidential election, which many attribute to his success mobilizing voters online, a few fearful politicians put the issue on hold, he says.

According to an analysis in the Nihon Keizai Shimbun,

“Japan is about the only industrialized nation that prohibits by law online campaign activity. The country’s high-speed communications infrastructure — among the most advanced in the world — remains untapped because of technophobic politicians’ reluctance to revise the election law.”