Japanese Prime Minister Challenged from Within

Prime Minister Naoto Kan, barely two months in office, will face a challenge from within his own party this fall.

Japanese prime minister Naoto Kan, barely two months in office, is likely to face a challenge from within his own Democratic Party next month. Ichirō Ozawa, sometimes referred to as the party’s “shadow shogun,” announced on Thursday he that plans to run against Kan for the presidency of the party in September; a position that would assure his appointment as prime minister.

While the country’s lingering economic troubles continue to dominate national politics, Japan has had five different prime minister in the past three years, two of them Democrats since voters ousted the Liberal Democrats last year. The Democrats’ Yukio Hatoyama took office in September only to resign nine months later with an approval rating of just 17 percent.

The current prime minster, Naoto Kan, first stepped on to the national stage in January of this year when Hatoyama appointed him finance minister. Hatoyama was probably coached in this decision by Ozawa who reportedly clashed with Kan’s predecessor over economic policy. Kan was believed to favor a more “flexible” approach to solving Japan’s mounting debt problems instead of simply curtailing government spending.

Ozawa, who played an instrumental role in winning a parliamentary majority for his party last fall, has been increasingly critical of Kan and his policies since the Democrats lost ground in the upper house elections last month.

Although the Democrats campaigned on small government, their stimulus measures have left Japan with a mounting debt burden that threatens to undermine the country’s fragile economic recovery. Growth slowed to just 0.1 percent in the most recent quarter while the strength of the yen could erode earnings at Japan’s exporters.

In order to bring Japan back from a protracted period of recession, Kan announced tax relief for Japanese business in June. Simultaneously, he suggested that the value-added tax rate may be raised, possibly up to 10 percent.

While the sales tax is politically sensitive in Japan, Kan realizes that bold measures may be necessary in order to rein in spending. “If we maintain the current level of issuance of new bonds, outstanding debt will surpass 200 percent of GDP in a few years,” he warned two months ago.

Ozawa, by contrast, has been promising support for small farmers and similar handouts in what appears to be a throwback to old-fashioned pork-barrel spending that brought about Japan’s colossal debt problem in the first place.