Q+A-What are Japan PM’s woes and how can he fix them?

By Chisa Fujioka

TOKYO, Dec 7 (BestGrowthStock) – Japanese Prime Minister Naoto Kan,
in office for six months, is struggling to steer the economy as
his support ratings slide and opposition parties ratchet up an
offensive to stall policies in a divided parliament.

His biggest challenge in the coming months will be to compile
and secure passage of the budget for the fiscal year starting next
April. The economy’s recovery is fragile but the government is
under pressure to limit spending to cap a public debt that is
twice the size of Japan’s $5 trillion economy.
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Here are some questions and answers on Kan’s many troubles
and what options he has to fix them.

WHAT’S GONE WRONG FOR KAN?

Kan, Japan’s fifth prime minister in three years, took over
in June with hopes of restoring public faith in his Democratic
Party of Japan (DPJ), which appeared to stumble with policies
after taking over the government for the first time last year.

But support soon took a hit after he abruptly floated the
idea of raising the sales tax before a July upper house election,
leading to a thrashing for the ruling party in the election.

The election loss weakened Kan’s clout in the party and set
the stage for policy deadlock in parliament.

Kan suffered a further setback in September when he came
under domestic fire for appearing to cave in to China’s demands
to release a Chinese skipper whose trawler collided with Japanese
patrol boats near disputed islands in the East China Sea.

The slide in ratings has discouraged opposition parties from
cooperating with him on policies in parliament.

The government managed last month to enact an extra budget
for the current fiscal year but only after much jousting between
ruling and opposition parties and after the justice minister
resigned over a gaffe.

Kan’s weak public support has also accentuated rifts in his
party, although he fended off a challenge from DPJ heavyweight
Ichiro Ozawa in a party leadership race in September.

Opposition parties are demanding that Ozawa, who faces
indictment over a funding scandal, give sworn testimony in
parliament but analysts say Kan is reluctant to alienate Ozawa,
who heads the biggest group of lawmakers in the DPJ.

HOW WILL POLICIES BE AFFECTED?

Kan’s weakened clout in the party means he could have a tough
time compiling the fiscal 2011/12 budget as he tries to balance
calls for fiscal austerity with demands to make good on DPJ
pledges to put more cash in consumers’ hands to boost growth.

The government has agreed to expand benefits for people
raising children but is still juggling proposals to fund the
increased spending, which was one of the DPJ’s top campaign
promises in last year’s election. [ID:nTOE6B203O]

It also needs to thrash out details for income grants to the
agriculture sector, funding for healthcare and tax policy, all
the while sticking to a 44 trillion yen ($533 billion) cap on new
bond issuance and a 71 trillion yen limit for the budget.

Any sign the government will miss its debt target or its
self-imposed Dec. 24 deadline to compile the budget would damage
Kan’s credibility and cast doubt in financial markets on Japan’s
ability to lower its huge debt burden.

The budget also faces an uncertain future in the divided
parliament.

The DPJ’s majority in the more powerful lower house allows it
to pass the budget but the opposition-controlled upper chamber
can block bills for its implementation.

Opposition parties have renewed threats in recent weeks to
stall budget debate if Kan does not fire Chief Cabinet Secretary
Yoshito Sengoku, dubbed by some as the “shadow prime minister”,
but Kan is unlikely to replace him for now.

WHAT ARE HIS OPTIONS TO BREAK THE IMPASSE?

Kan has reached out to the small Social Democratic Party
(SDP), a former coalition partner, since their help would give
the ruling bloc and its allies the two-thirds majority needed in
the lower house to override decisions made by the upper house.

But by accepting the leftist SDP’s policy demands, Kan would
risk repeating the fate of his predecessor, who worked with
coalition partners only to come under criticism that he was being
pushed around by tiny parties.

Kan could also reach out to the second-biggest opposition
party, the New Komeito, but the Buddhist-backed party has been
cool to the premier after his ratings slide.

Teaming up with the main opposition Liberal Democratic Party
(LDP) is another option, but lawmakers from both sides have been
reluctant and it is unclear if bringing together two divided
parties would make policymaking any smoother.

WHAT HAPPENS IF HE CAN’T BREAK THE IMPASSE?

Kan could quit as did three of his recent predecessors, but
that would likely upset a public fed up with “revolving door”
prime ministers.

Another party leadership race so soon after the one in
September would also risk a split in the DPJ, although lawmakers
in the defeated camp might not opt to leave the party as long as
it is in power.

Some analysts say Kan could be forced to call a snap election
for the lower house if the opposition blocks bills needed to
implement the 2011/12 budget.

But no election is mandated until 2013 and Kan may not want
to call a poll in which the DPJ would certainly lose seats.

The opposition may not be all that keen for an early election
either, and might opt to avoid pressing the DPJ too hard for now.

The LDP would be unlikely to win a majority on its own so
soon after its huge defeat in the 2009 general election, while
the New Komeito is said to want to avoid having a national
election coincide with a round of regional elections in April.
(Additional reporting by Linda Sieg; Editing by Michael Watson)

Q+A-What are Japan PM’s woes and how can he fix them?