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Japan PM survives no-confidence vote, says ready to resign

Japan PM survives no-confidence vote, says ready to resign
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First Published: Thu, Jun 02 2011. 02 07 PM IST
Updated: Thu, Jun 02 2011. 02 07 PM IST
Tokyo: Japanese Prime Minister Naoto Kan survived a no-confidence vote in parliament on Thursday after the unpopular leader offered to resign once he had dealt with the worst of the country’s nuclear crisis and tsunami disaster.
Parliament’s lower house rejected the opposition-sponsored no-confidence motion by 293 votes to 152.
Hidenori Suezawa, chief strategist at SMBC Nikko securities
“Kan surviving the no-confidence vote was widely expected after former premier Yukio Hatoyama earlier decided to vote against it. The Kan administration will now continue on for a while. He is working on tax and social security reforms and such policies could be favorable to the bond market”.
That said, the next one to two months will be a period of uncertainty. And even if he resigns there will be an election to choose a new leader. The market will likely key on developments in the economic and fiscal policy. In the meantime, the status quo is expected to continue and long-term interest rates may therefore remain low. But depending on the outcome of the election there could be an opposite move in the bond market after a few months.
Yuji Saito, director, foreign exchange division, Credit Agricole Bank
“The no-confidence motion was voted down, although that had been expected after Kan indicated (earlier in the day) that he would step down after having made tangible progress in bringing the nuclear crisis under control”.
“The mood was already such that it was difficult to sell the yen. After the motion was rejected overseas players may move to buy the yen a bit more, but as it has now disappeared from the market as a yen-selling factor, it is likely that the currency pair’s moves will again be lead by the dollar.”
Koji Shimamoto, chief strategist at BNP Paribas
“JGBs rose sharply today after the 10-year US treasury yield dipped below the closely watched 3% level and US and Japanese shares both dropped. Such market moves were also supported by the view that worries over political chaos and an expansion of public debt may recede in the near term”.
“But market participants may become increasingly cautious on buying JGBs as we head into summer as an additional supplementary budget is likely to be compiled in the parliamentary session, which is expected to be extended. In that case additional debt issuance may come earlier than expected. Issuance is expected to be mostly in superlongs, but if the budget gets large, there may be more issuance in 10-year bonds.”
Hiroyuki Fukunaga, chief executive, Investrust
“Because Ichiro Ozawa didn’t cast his vote and due to other factors the DPJ is not likely to split in two. This means the current political structure, albeit shaky, will remain intact. The equity market will neither welcome this nor find it disappointing as opposition parties are likely to continue opposing the DPJ’s policies in the divided Diet”.
“The market is also likely to find it unfavorable that the current cabinet has been trying to ask power companies and banks to shoulder a part of Tokyo Electric’s financial support scheme. Although PM Kan has offered to step down, the timing is still unclear. I expect that market sentiment will remain weak without bargain hunters.”
Fumiyuki Nakanishi, chief strategist, SMBC Friend Securities
“The outcome was not surprising. It surely shows that Kan spent some time talking with Ozawa and Hatoyama behind the scenes and looked for a compromise. That’s why he has offered to quit after the nuclear crisis is under control”.
“Now opposition parties will likely help Kan pass bills, and this will likely help Japan rebuild its businesses and economy more smoothly”.
“The market’s focus is now on who will become our new prime minister and I personally think it will be Mr. Edano. He is very popular and always calm. Foreign investors would also likely welcome Edano as the new PM.”
Seiji Adachi, senior economist, Deutsche Securities, Tokyo
“There is no change in the sense that political uncertainty still exists. But at least the worst case scenario has been avoided. If the no-confidence motion had passed it would have created a political vacuum capable of significantly delaying post-disaster reconstruction.
“Whether the political decision-making process will speed up or not depends on how the LDP and Komeito parties take this result. There is a possibility that they will try to oust Kan if they view this as a move to protect Kan and extend his term”.
“The Kan administration will have to seek cooperation from the opposition parties, which means the DPJ will have to compromise on some political issues. There is still a risk of political turmoil.”
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First Published: Thu, Jun 02 2011. 02 07 PM IST