Tokyo: Japan’s trade minister Banri Kaieda and finance minister Yoshihiko Noda will square off in a second-round ruling party leadership vote to pick a new Prime Minister on Monday after none of five candidates won a majority in an initial round.
The vote by Democratic Party of Japan (DPJ) lawmakers will decide who will take over from outgoing Prime Minister Naoto Kan as the nation’s sixth leader in five years.
Whoever wins will have to cope with a resurgent yen that threatens exports, forge a new energy policy while ending the worst nuclear crisis since Chernobyl, and find funds to rebuild from the devastating March 11 tsunami at a time when ballooning public debt has already triggered a credit downgrade.
Financial markets, political commentators and the Japanese public are sceptical whether the new leader will have the vision, determination and time to tackle those challenges.
“There can be no time out for political decision making on economic, fiscal and diplomatic environment and policy issues surrounding Japan,” Kaieda told the lawmakers before the vote.
“In addition to the disaster, Japan’s economy is in a critical situation with the current sudden rise in the yen as well as the hollowing out of industries.”
Rival Noda, 54, considered a fiscal conservative, said: “Let’s do the utmost to tackle what we have promised and if there’s not enough money, we might ask the people to share the burden” -- a reference to future tax hikes.
Government bond futures nudged higher after Noda made into the second round.
Like Kan, the new leader faces a divided parliament and internal party rifts, raising concerns that he will join a gallery of short-lived Prime Ministers.
No Japanese Prime Minister has lasted much more than a year since 2006 and most market players polled by Reuters in August thought the next government head will be no exception.
Kaieda, 62, who also held the energy portfolio, clashed with Kan over whether and when to restart nuclear reactors shut for checks, and burst into tears before TV cameras when he was grilled in parliament about the dispute.
In a rare moment of levity ahead of the vote, the jowly-faced Noda compared himself to a “dojo” loach fish - an eel-like denizen of the deep.
“I do look like this and if I become Prime Minister, the support rate would not rise, so I would not call a snap election. A loach has its own abilities even though it cannot do as a goldfish does.”
Kaieda has said Japan should not build new reactors, effectively phasing out nuclear power over 40 years.
His win could unsettle bond investors worried about Japan’s bulging debt, already twice the size of its $5 trillion economy, given his reluctance to endorse tax hikes to finance the bulk of $250 billion reconstruction from the March tsunami. Moody’s Investors Service cut Japan’s sovereign credit rating last week citing a buildup of public debt and a lack of leadership and a long-term strategy to cope with its fiscal challenges.
Despite differences over policies such as whether to raise taxes to pay for rebuilding, plans for nuclear energy and how to secure opposition cooperation, none of the five candidates has presented a detailed vision of how to end Japan’s decades of stagnation and revitalise the world’s third-biggest economy.
Instead, the leadership contest has become a battle between allies and critics of Ichiro Ozawa, a 69-year-old political mastermind who heads the party’s biggest group even as he faces trial on charges of misreporting political donations.
Kaieda is backed by Ozawa, Noda is supported by his critics.
One of the new leader’s first challenges will be seeking opposition help in parliament, where the opposition controls the upper house and can block legislation. Noda has floated the idea of a “grand coalition” with opposition rivals -- although the two biggest opposition groups have been cool. Kaieda says he’s not keen on that strategy.