Q+A-Japan PM Kan faces multiple hurdles as year starts

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By Linda Sieg

TOKYO, Jan 5 (BestGrowthStock) – Prime Minister Naoto Kan appears
determined to avoid becoming the latest of Japan’s short-lived
leaders, but faces tough battles as he struggles with sagging
ratings, a divided parliament and a fractious ruling party.

Below are key hurdles that Kan, who took office last June
as Japan’s fifth premier since 2006, faces as he tries to
enact the budget for the year from April and tackle tax
reforms, including a possible sales tax hike to fund rising
social welfare costs for a rapidly ageing society.

JANUARY CABINET RESHUFFLE — WILL SENGOKU STAY, OR GO?

Japanese media say Kan is likely to reshuffle his cabinet
after his Democratic Party of Japan (DPJ) holds its annual
convention on Jan. 13. The focus is on whether he will replace
de facto No. 2, Chief Cabinet Secretary Yoshito Sengoku, to
clear the way to enact the 2011/12 budget and related bills.

Opposition parties are threatening to boycott
parliamentary business when the assembly opens, probably this
month, unless Sengoku and the transport minister are replaced.
Both were censured over the handling of a territorial row with
China.

Some Japanese media have reported Kan is preparing to let
Sengoku go. Analysts say he may finally decide to do so but
Sengoku’s departure would risk weakening the government since
finding a replacement with suitable clout will be tough.

If the political fuss keeps distracting the government,
lawmakers might push the Bank of Japan to ease already
hyper-loose monetary policy to help the fragile economy.

RULING PARTY FUSS — WILL POWERBROKER OZAWA GO?

DPJ powerbroker Ichiro Ozawa has reluctantly agreed to
appear at a parliamentary ethic panel parliament over a
funding scandal in which he faces indictment, possibly this
month.

But Kan upped the ante on Tuesday by hinting that Ozawa —
who has denied any wrongdoing — should not only leave the DPJ
after he is charged but also consider quitting parliament.

Kan appears to believe that ridding the ruling party of
the influence of Ozawa, a veteran political strategist, will
boost his ratings and make it easier for the second-biggest
opposition party, the New Komeito, to cooperate in passing
bills.

But that outcome is far from assured. Kan’s tough stance
is also angering Ozawa’s backers in the party.

The Democrats would almost certainly retain a majority in
parliament’s powerful lower house even if some of Ozawa’s
backers follow him out of the party. But the fuss is draining
energy needed for pressing policy matters such as tax reform
to help fix Japan’s public debt already twice the size of the
$5 trillion economy.

MARCH BUDGET RECKONING — WILL OPPOSITION HELP?

In order to pass bills needed to implement the 2011/12
budget, Kan must either cobble together a simple majority in
the upper house with opposition help or build a two-thirds
majority in the lower house to override the upper chamber.

Japanese media say Kan might agree to resign or call a
snap election in return for opposition help on the
budget-related bills, but analysts are sceptical of that
scenario.

Kan has signalled willingness to revise the budget to win
opposition support and the New Komeito, whose votes would be
enough to clear the upper house, might be persuaded to help
rather than risk voter ire for delaying spending.

Or the tiny Social Democrats — a former coalition partner
— could help create the needed two-thirds lower house majority.

Any changes to the budget are more likely to involve
redirecting spending than an overall increase in spending,
given wide-spread recognition of Japan’s big debt burden.

APRIL LOCAL ELECTIONS — A REVOLT FROM BELOW?

Local DPJ lawmakers’ calls for Kan to resign are likely to
mount if his ratings are still rock-bottom ahead of nationwide
local elections on April 10 and April 24, or if — as many
anticipate — the party suffers a thrashing in those polls.

But pushing out a prime minister is hard if the incumbent
is determined to hang on and the ruling party has enough votes
to reject a no-confidence motion, which it does at present.

JUNE CRISIS — INTERNAL REBELLION?

Some Japanese media have also floated a scenario in which
opposition parties submit a no-confidence motion toward the
end of parliament’s session in June, and irate Ozawa backers
as well as members of a small ruling coalition party help it
to pass.

That would force Kan either to resign or call a snap lower
house election that is otherwise not mandated until 2013.

But sceptics question whether many DPJ lawmakers would
take the risk of facing voters in an election in which the
party is almost certain to lose seats. If a snap election were
held, chances are that neither the Democrats nor their biggest
rival, the conservative Liberal Democratic Party, would win a
majority.

And since neither has a majority in the upper house,
parliament would remain divided and policymaking would still
be messy.
(Editing by Yoko Nishikawa)

Q+A-Japan PM Kan faces multiple hurdles as year starts