Japan Tries (Yet) Again
Image Credit: US Treasury Department

Japan Tries (Yet) Again


Japan’s battered ruling party has just elected its third leader, and hence prime minister, in as many years. Yoshihiko Noda, who has been serving as finance minister for the past year, will take over from Naoto Kan, whose muted response to the devastating March 11 natural and nuclear disaster doomed his premiership.

It’s bad news for Noda that word of his selection was greeted with lacklustre support among the public, while the ruling Democratic Party of Japan is also slightly behind the opposition Liberal Democratic Party in an opinion poll this week by the Yomiuri Shimbun. That shouldn’t cheer the LDP, however, for both main parties received less than a quarter of public support, while nearly half the polled electorate favoured no party at all.

This is Noda’s most important challenge: an apathetic citizenry that has lost faith in its leaders and whose demand for competent leadership from the DPJ has been dashed by the failure of former prime ministers Kan and Yukio Hatoyama. Without public support, it would be hard for any prime minister to rally and unify the party and take on the obstructiveness of the LDP in the Upper House, where they hold the most seats. If he’s no more successful than his predecessors, then Noda’s premiership promises to be brief and bitter, perhaps leading to the end of the DPJ as the majority party.

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Still, Noda has some strengths that he should capitalize on. First, he’s a decade younger than Kan, and thus is the closest the DPJ has had to a generational change. He straddles party elders, such as disgraced founder Ichiro Ozawa and Kan and Hatoyama, as well as such young turks as former foreign minister Seiji Maehara, who competed for the DPJ presidency, but lost in the first round. Noda is 54 years-old, and is from the first generation of non-LDP politicians to come to power after the LDP first lost national power in 1993.

Noda is, therefore, able to portray himself as a genuine reformer, even though he has been in office for nearly two decades. Of course, Kan also was a non-LDP reformist politician, but that didn’t help him in the party. Noda will have to do better at melding reformist instincts with practical policies. His signature populist effort was meeting constituents every day at train stations in his district, located close to Tokyo. Winning the trust of Japanese by being both open and competent is his biggest challenge.

Second, he has been directly involved in dealing with Japan’s economic problems for the past two years as deputy finance minister and then as head of the ministry. Noda was among the first politicians to publicly warn about Japan’s staggering public debt, calling it unsustainable. His colleagues didn’t heed his words when it came to cutting the 225 percent debt-to-GDP ratio, and last week, Moody’s lowered Japan’s credit rating to Aa3 – three notches from the top. Faced with massive reconstruction bills, which may total $250 billion in government spending following the March 11 disaster, Noda is keenly aware of the fiscal hurricane facing Japan, and may have the authority to deal with it.

However, he has also taken the most controversial position among the contenders for the DPJ leadership, proposing doubling the national sales tax to 10 percent over the next several years. In a Japan that has seen flat income for over a decade, and in which the savings rate is steadily declining, any increase in taxes on consumers may be politically dicey. Noda will have to combine his taste for revenue enhancement with significant budget discipline to make it seem like he has a long-term plan for restoring Japan’s fiscal balance.

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