IHS Global Insight Perspective | |
Significance | Japan's new prime minister, Naoto Kan, today unveiled the composition of his cabinet, retaining 11 of 17 ministers. |
Implications | The appointment of fiscal conservative Yoshihiko Noda as Finance Minister underscores the leader's resolve to prevent further deterioration in Japan's finances. |
Outlook | The new cabinet line-up should take the Democratic Party of Japan one step closer towards realising its domestic political agenda, and away from the financial scandals that undermined the previous administration. However, it remains to be seen how much the government will be able to achieve ahead of an Upper House election next month. |
Continuity in Government
Japan's new prime minister, Naoto Kan, announced his cabinet line-up today, seeking to restore flagging political momentum to his Democratic Party of Japan (DPJ) and display strong resolve to tackle the country's stagnating economy. Kan has been assembling the new administration since being elected to the leadership position on Friday (4 June) after the sudden resignation of Yukio Hatoyama (see Japan: 4 June 2010: Japanese Finance Minister Naoto Kan Becomes Japan's New PM). He is due to address the nation in a televised press conference later today, before heading to the Imperial Palace to be formally sworn in to the post by Emperor Akihito.
Prime Minister Kan will retain 11 of 17 ministers from the previous administration. These will include Foreign Minister Katsuya Okada, Defence Minister Toshimi Kitazawa, and Transport Minister Seiji Maehara. These posts are seen as particularly important amid heightened regional tension following North Korea's alleged attack on a South Korean warship in March, as well as ongoing negotiations over a controversial U.S. military facility on the southern island of Okinawa. Their reappointments signal that foreign and security policies in Japan are unlikely to shift drastically with the arrival of the new Premier. Trade Minister Masayuki Naoshima and Financial Services Minister and leader of minority coalition member the People's New Party (PNP), Shizuka Kamei, will also retain their positions. The retention of Kamei as the banking minister points to Kan's intention to follow through with Kamei's drive to reverse the privatisation of Japan's postal service.
Kan Sidelines DPJ Heavyweight Ichiro Ozawa
Kan named Yukio Edano as his party's Secretary-General, replacing Ichiro Ozawa, the primary architect of the DPJ's landslide election victory last August. His decision underscores a strong desire to distance himself from Ozawa, whose shady backroom political brokering became the focus of a slew of financing scandals that severely undermined the credibility of the Hatoyama administration. One of the former leader's major weaknesses was the public perception that he was unable to operate independently of the domineering former Secretary-General, dubbed the "Shadow Shogun". Kan has pledged to move away from the sort of money politics that has typified previous administrations in Japan. But while few members of Ozawa's faction appear to have been incorporated into the incoming cabinet, the sheer size of his grouping, comprising roughly 150 out of 432 DPJ legislators, means that Kan will have to engage in a difficult balancing act—attempting to act independently of Ozawa while simultaneously not alienating himself from his backers.
Fiscally Conservative Finance Minister
Kan, who has gained a reputation as a fiscal conservative during his five-month stint as Finance Minister, has handed his previous portfolio to fellow fiscal reformer, Yoshihiko Noda. Selecting someone with a resolve equal to his own for slashing the country's massive public debt, he is expected to work closely with the new Premier on economic issues. Noda built his career working in parliamentary budget committees as a member of the then-opposition DPJ. Since September 2009, he has served as one of two deputies to Kan at the Finance Ministry and has echoed calls for limiting new bond issuance for the next fiscal year at the record ¥44.3 trillion (US$482 billion). Noda also shares Kan's belief that controlling deflation represents one of the most important policy challenges for the administration, and that this must be conducted in close collaboration with the Bank of Japan (BOJ). He has indicated a readiness to distance himself from the former leader's election-winning spending pledges and views the Greek debt crisis as a warning to Japan to make more effort towards fiscal consolidation. In line with this, his immediate task will be to deliver a fiscal reform strategy, which the Hatoyama government had promised to release by the end of the month.
New Minister for Administrative Reform
Another new and unusual face in Kan's cabinet is former model and TV presenter Renho Murata. Half Japanese, half Taiwanese, she is best known for her widely broadcast efforts grilling bureaucrats over wasteful public spending plans last year. Nicknamed "hit-to-kill", she replaces Yukio Edano as minister in charge of administrative reform, taking a leading role in fulfilling the Democrats' pledge to shift power away from unelected bureaucrats towards politicians. Renho enjoyed dual Taiwanese-Japanese citizenship in childhood, but chose Japanese nationality in high school, later studying at Beijing University in China. After a stint of modelling and presenting television programmes, she moved to journalism, before eventually going on to win her first parliamentary seat as a DPJ legislator in the Upper House in 2004.
Chief Cabinet Secretary
Kan moved Yoshito Sengoku from Administrative Reform and National Strategy Minister to Chief Cabinet Secretary—replacing Hirofumi Hirano. In his new post, Sengoku will serve as the new right-hand man to Kan, acting as the top government spokesman and an important policy co-ordinator. Sengoku is a graduate from the prestigious Tokyo University with a legal background. Like Renho, he also gained prominence during an inquiry last year that held powerful Japanese bureaucrats responsible for the wasteful spending policies. Sengoku is an advocate of closer ties with China and other Asian nations, and has called for market reforms, fiscal discipline, and clean politics, having taken a heavily critical stance over recent political funding scandals.
Outlook and Implications
A Smooth Political Transition
In taking the decision to retain the bulk of Hatoyama's previous cabinet, Kan has ensured a smooth transition of power ahead of Upper House polls scheduled for July. The composition of the new cabinet should take the DPJ one step closer towards achieving its agenda of domestic political change, and away from the financial scandals that rocked his predecessor's administration. Hopes have been renewed that the like-minded Kan and Noda can steer the country out of crippling deflation and take bolder steps to rein in massive public debt through effective fiscal austerity measures. Initial signs show that Japanese voters are warming to the new leader. Over the weekend, public opinion polls by major newspapers noted a significant uptick in DPJ support levels, which rose to the mid-thirties from around the 20% mark upon the resignation of Hatoyama (see Japan: 7 June 2010: New Japanese PM Affirms Ties with U.S. amid Rising Support Ratings). The premier himself is also enjoying an early wave of support, with approval ratings sitting at roughly 60%. However, it remains to be seen how much the new government will be able to achieve ahead of important Upper House polls expected next month, while the political transition could delay the delivery of the much-anticipated fiscal reform package due out later this month. And while the DPJ will remain in power regardless of the outcome of the Upper House election, should they fail to gain a majority this will herald a messy period of political realignment in the country as the new government attempts to find more allies to pass legislation more smoothly—potentially complicating the near-term policy outlook.