FOCUS: Kan has no time for a breather as election looms+

TOKYO, June 4 Kyodo -
Naoto Kan, who was voted in as Japan's new prime minister Friday, has no time
to bask in the afterglow of reaching the pinnacle of political power, as he
faces a number of urgent tasks left unresolved by his predecessor Yukio
Hatoyama ahead of an upper house election expected next month.
Kan says he will seek ''clean'' politics, placing priority on the restoration
of public confidence after the image of his Democratic Party of Japan was
tainted by funding scandals involving Hatoyama and its outgoing Secretary
General Ichiro Ozawa. The focus is on whether Kan will be able to convince
voters that he is not under the influence of Ozawa, the ruling party's kingpin.
Ozawa should ''stay quiet at least for a while,'' Kan told reporters on
Thursday in an apparent attempt to distance himself from Ozawa. But it may
sound unrealistic, given that Kan, who was also elected DPJ president on
Friday, will need help in managing his party from Ozawa, who has around 150
party lawmakers under his wing, the biggest group within the party.
While the House of Councillors election is expected on July 11, observers say
Ozawa is certain to play a leading role in fighting the election even though he
has stepped down as party secretary general.
While finance minister in the Hatoyama Cabinet, Kan stressed the government
must first cut public spending, rejecting the possibility of raising the
consumption tax, an idea universally unpopular among voters.
Facing sharply falling tax revenues amid the global economic slowdown, however,
Kan is widely believed to be close to reversing his earlier position. ''The
economy would recover if (the government) uses money appropriately'' even with
higher consumption tax rates, he said last month.
On Friday, Kan declined to make any specific comments on whether to raise the
consumption tax rate from the current 5 percent.
''The new government will be keenly watched regarding whether it can introduce
solid austerity measures,'' said Hiromichi Shirakawa, chief economist at Credit
Suisse in Japan, referring to possible tax hikes as well as a reduction in the
nation's gross public sector debt, which is at the worst level among major
industrialized economies.
But increasing the burden on households could run counter to Hatoyama's basic
principle of ''protecting people's lives,'' which apparently reflects the view
of Ozawa, the election master.
The DPJ promised not to raise consumption tax for several years after it took
power following the general election last August.
''If (Kan) breaks the promise and presses for higher tax, it could trigger
protests from within the party,'' Shirakawa said.
Kan is also expected to seek further cooperation from the Bank of Japan in
fighting deflation. He earlier expressed his preference for a weaker yen in a
rare public comment on the currency market by a Japanese minister. A weaker yen
would help boost Japanese exports.
Market participants believe the central bank will come under additional
pressure from the new government led by Kan to ease monetary policy and weaken
the yen against other major currencies.
The BOJ has already taken some unorthodox measures, after being pressed by the
government, including emergency lending facilities. But experts say the bank
may counter the government by urging Kan to restore state finances and boost
domestic demand instead of depending on exports.
Hatoyama resigned to take responsibility for the political wrangling over the
planned relocation of a U.S. military base within Okinawa Prefecture, which
resulted in the departure of a coalition partner, the Social Democratic Party.
Kan must take over the tangled issue and, considering the possible negative
effect on the upcoming election, handle with care the opposition in Okinawa to
the plan to keep the U.S. Marine air station in the island prefecture.
Amid speculation that the base issue has undermined Japan's relations with the
United States, Kan may also have to handle pressure from Washington to ensure
the bilateral agreement is respected.
But Yuji Suzuki, professor of international relations at Hosei University, said
it is impossible for Kan to reach a conclusion that satisfies the demands of
both Okinawa and Washington.
The deterioration in Japan-U.S. relations could ''prompt Japan to put more
weight on its relations with China, South Korea and ASEAN countries,'' Suzuki
said, referring to the 10-member Association of Southeast Asian Nations.
After the SDP's departure from the ruling coalition, it is increasingly
important for the DPJ to keep the People's New Party, another coalition
partner, within the alliance.
Shizuka Kamei, the leader of the PNP, strongly urged Kan on Friday to cooperate
in scaling back the planned privatization of state-owned Japan Post Holdings
Co., a policy criticized by the United States and Europe amid fears it would
stifle fair competition in Japanese markets.
The alliance of the two parties will soon be tested as they will attempt to
secure the passage of the related bill through the Diet, despite strong
protests from opposition parties, by the end of the current parliamentary
session on June 16.
==Kyodo
2010-06-04 23:35:09


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