FACTBOX-Policies of Japan govt’s potential ally Your Party

July 15, 2010 By Leave a Comment

(Reuters) – Japan’s ruling Democratic Party, having failed to win a majority in an upper house election, faces political deadlock unless it can find new allies to help enact bills to help curb debt and engineer sustainable growth.

Market players are focusing on a possible tie-up with the opposition Your Party, which advocates small government, market-friendly policies and more aggressive central bank steps to end deflation, although the party has so far rejected the idea of joining the government.

Your Party now has 11 seats in the upper house after Sunday’s election, enough to enable it to submit bills to parliament.

But even if it joins the government, the ruling coalition would still fall one seat short of a majority in the chamber. In addition, Your Party’s policies are diametrically opposed to those of the DPJ’s current ally, the People’s New Party.

Your Party leader Yoshimi Watanabe has said it would offer policy cooperation as long as the government or other parties can agree on and support the tiny party’s policy agenda.

Following are Your Party’s key policy proposals:

* Aim for more than 4 percent annualised economic growth in nominal terms to raise incomes by 50 percent in 10 years. To do so, the party will push various policies in three different stages.

1) In the short term, it will seek to overcome deflation by expanding money supply through more aggressive monetary policy. The law governing the Bank of Japan should be revised so that the government and the central bank share policy goals and set a target for price stability. The BOJ should choose specific tools and the timing of such steps independently.

2) In the medium term, Japan should seek to benefit from growing demand in Asia and aim to obtain a quarter of the estimated $8 trillion demand for infrastructure in the region over the next 10 years.

3) In the long term, it is important to seek a revival in Japan’s science and technology capability.

* Push forward deregulation and seek a smaller central government. Give regional communities more power over policy and reduce bureaucrats’ control over policy. Cut total personnel costs for central and regional government employees by more than 20 percent. Reduce the number of lower house lawmakers by 180 to 300 and upper house lawmakers by 142 to 100.

* Push forward the privatisation of the country’s postal system, including creating a system to better channel some 300 trillion yen ($3,384 billion) held by its banking and insurance services into financial markets and seeking profits by selling shares of Japan Post currently held by the government.

* Aim to bring down outstanding net debt — gross debt minus government assets — to less than 50 percent of Japan’s gross domestic product (GDP) in five years. Bring the primary budget balance into the black 10 years from now.

* No tax hikes over the next three years, during which Japan should focus on eliminating wasteful spending. After that, consider ways to fund social security costs including reviewing income, sales and inheritance taxes. Cut the corporate tax, which at around 40 percent is the highest among major economies, to 20-29 percent.

* Overhaul the way the state budget is compiled and seek a total of more than 30 trillion yen in additional revenues over three years by tapping into reserves in special budget accounts such as one that holds Japan’s foreign reserves, selling government assets and cutting bureaucrats’ salaries. ($1=88.66 Yen) (Reporting by Yoko Nishikawa; Editing by Michael Watson)

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Voter support drops for battered Japan govt -Kyodo

July 14, 2010 By Leave a Comment

July 13 (Reuters) – Voter support for Japanese Prime Minister Naoto Kan’s government, reeling from a thrashing at the polls, has fallen to 36.3 percent, a Kyodo news agency survey showed on Tuesday, posing another headache for Kan as he faces a potential leadership challenge from inside his own party.

Kan’s ruling coalition lost its majority in a weekend upper house election, putting his policies to deal with massive debt and generate growth at risk and prompting warnings by credit ratings agencies S&P and Fitch on Japan’s sovereign ratings. [ID:nTOE66C03L]

Kan’s ruling Democratic Party of Japan (DPJ) still controls the more powerful lower house. But it needs help from other parties to push bills through the upper chamber as they struggle to end decades of stagnation in the world’s No.2 economy. (Reporting by Linda Sieg)

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Q+A-Japan DPJ has options to break deadlock, none easy

July 14, 2010 By Leave a Comment

July 13 (Reuters) – Japan’s ruling Democratic Party, fresh from a thrashing in an upper house election, faces political deadlock unless it can find new partners to help enact bills in the chamber, but potential allies are sounding cool.

Prime Minister Naoto Kan is also in danger of a challenge from inside his party ahead of a leadership vote in September.

Below are some questions and answers about Kan’s fate, options for the Democratic Party of Japan (DPJ) and the implications for efforts to move ahead with steps to curb massive public debt, reform creaking pension and healthcare systems and engineer growth in a fast-ageing society.

CAN KAN STAY AS PM, AND THEN WHAT?

* Kan, already Japan’s fifth premier in three years, is likely to face a challenge from Democratic Party powerbroker Ichiro Ozawa, a wily political veteran who was sidelined when Kan took over from unpopular predecessor Yukio Hatoyama last month.

* Ozawa criticised Kan’s focus on steps to curb Japan’s vast public debt, including a possible sales tax hike, during the campaign, so any candidate he backs would probably be cool to that debate. But Ozawa himself floated a sales tax rise years ago, so it’s hard to say what line he would eventually take.

* Kan is unlikely to give up without a struggle, since the former grassroots activist is widely seen as made of sterner stuff than recent predecessors who abruptly threw in the towel. Many analysts think Kan can survive, but with his clout weakened.

* If Kan wins the party vote, Ozawa might bolt from the DPJ, splitting the party in a replay of the turmoil triggered by his defection from the then-ruling Liberal Democratic Party in 1993. But how many lawmakers would follow is hard to say, since some might judge Ozawa’s own influence to be waning. The possibility Ozawa will be charged over a funding scandal is also a wild card.

CAN THE DPJ COURT OPPOSITION PARTIES?

* DPJ leaders say they will seek policy-based cooperation with opposition parties, including the Buddhist-backed New Komeito, which stresses social welfare policies, and the Your Party, a proponent of market-friendly steps such as deregulation and more aggressive central bank steps to fight deflation. Cooperation with the LDP on tax reform is also theoretically possible, since it agrees on the need for a sales tax hike.

* But negotiating bill-by-bill deals would be time-consuming, the DPJ could find it hard to swallow opposition proposals whole, and doing a deal with one party on a certain issue could upset another potential ally whose support is needed on other bills. Policy consistency could prove elusive.

* Finding a new ally to formally join the coalition would provide more stability, a solution the then-ruling LDP opted for in the decades after losing control of the upper house in 1989.

* An alliance with the New Komeito, which has 19 seats in the upper house, would give the current ruling bloc a majority, with 129 seats in the 242-member chamber. The party also does not differ all that much from the DPJ on many issues, such as the need to strengthen the social safety net and eventually raise the sales tax. But having partnered the LDP until both were ousted last year, New Komeito could find it hard to switch sides quickly.

* Financial market players have focused on a possible tie-up with Your Party as this could tilt the government toward deregulation as well as put pressure on the Bank of Japan for aggressive monetary policy action to fight deflation. But adding the Your Party’s 11 upper house seats to the DPJ-led coalition would still fall one seat short of a majority. The party’s policies are diametrically opposed to those of the DPJ’s current partner, the pro-big government People’s New Party.

* A “grand coalition” with the LDP is another option that would give the ruling bloc control of 80 percent of the seats in the upper house and allow it to push ahead with fiscal reform. But the DPJ once rejected the idea when Ozawa floated it while in opposition, lawmakers in both parties are likely to resist and managing such a huge and diverse bloc would be difficult. LDP leader Sadakazu Tanigaki has said the possibility was “zero”.

WOULD A SNAP LOWER HOUSE ELECTION HELP?

* Some analysts speculate Kan could call a snap lower house election to fend off a challenge by Ozawa, since many Ozawa followers are rookies who could lose their seats.

No lower house poll need be held until 2013, and the move would be risky for the DPJ, which could lose a hefty chunk of its 307 seats in the 480-member chamber — although the diverse party could end up more cohesive.

* Others suggest the premier will be forced to call a snap election next April, if bills needed to implement the 2011/12 budget get stuck in the upper house.

* Neither an election win for the Democrats nor the LDP would resolve the parliamentary deadlock in and of itself, since neither would have an upper house majority. But in theory it would give the ruling party a mandate that would make it easier to persuade opposition parties to do deals or join a coalition. (Editing by Alex Richardson)

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UPDATE 1-Fitch says Japan fiscal consolidation harder now

July 14, 2010 By Leave a Comment

HONG KONG, July 13 (Reuters) – Japan’s ruling party’s poor showing at Sunday’s elections will make it more difficult for the country to push through fiscal consolidation and a delay in a credible plan beyond the year-end would increase the risk of a rating downgrade, Fitch Ratings said on Tuesday.

Prime Minister Naoto Kan’s ruling coalition suffered a major blow in Sunday’s upper house election, putting his policies to deal with the country’s massive debt at risk. [ID:nTOE66B066]

“If we don’t see a credible plan come through by the end of the year, it will send a negative signal for its rating, adding pressure to the credit rating,” Andrew Colquhoun, Fitch’s sovereign analyst for Japan, told Reuters.

Fitch has rated Japan’s foreign currency debt AA and its local currency debt at AA-minus, both with a stable outlook.

However, Colquhoun said he was not pessimistic about the government’s ability to draw up such a plan and said the public had not turned its back on fiscal consolidation as a policy objective.

“The election will make it more difficult for the government to draw up and implement such a plan, but I am not too pessimistic as I do not read the election results as a rejection of fiscal consolidation,” he said.

This was reflected in the better showing by the main opposition Liberal Democratic Party (LDP), which has said that Japan should raise the 5 percent consumption tax to 10 percent, he said.

In Sunday’s upper house poll, Prime Minister Naoto Kan’s ruling Democratic Party of Japan (DPJ) won 44 seats and its tiny coalition partner none, losing their majority in parliament’s upper house. That was fewer than the 51 seats won by the LDP.

Rival rating agency Standard & Poor’s has warned it might cut Japan’s sovereign grade as the ruling party’s mauling in a weekend election posed new hurdles for Kan’s plans to cut public debt.

Colquhoun said Japan’s rating was under pressure in the medium term from a declining domestic savings rate and this was reflected in the recent pension fund selling of Japanese government bonds (JGB).

Japanese public pensions turned net sellers of JGBs for the first time in nine years in the fiscal year that ended in March, the Nikkei business daily said on Tuesday.

Japan’s outstanding public debt is the largest among industrial nations, approaching twice the size of its gross domestic product, so any indication that there will be less investment flows into JGBs could be a worry.

But Colquhoun said there was no financing pressure in the near term as the domestic savings rate was still positive and resources were being generated for JGB purchases.

“The banking system, pension funds and insurance companies all have a strong appetite for JGBs, but there is a risk in the medium term,” he said. (Reporting by Umesh Desai; Editing by Jacqueline Wong and Jonathan Hopfner)

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JGBs gain as stocks sag after Japan election

July 13, 2010 By Leave a Comment

TOKYO, July 12 (Reuters) – Japanese government bonds edged up on Monday, with the yield curve flattening as bargain hunting emerged in the superlong sector, with Tokyo’s Nikkei sagging as the political gridlock Japan faces after the ruling party’s drubbing in an election dimmed prospects for stocks.

The ruling Democratic Party of Japan (DPJ) and a small ally lost their majority in parliament’s upper house in Sunday’s election, falling short of their target and complicating efforts to get the economy in shape. [ID:nTOE66A02V]

“The bond market’s attention is on the negative implications the election outcome will have for stocks,” said a fund manager at a domestic investment firm.

“In addition to deflation, political uncertainty after the election is the biggest factor that would make foreign investors avoid Japanese stocks, which is favouring bonds like the superlongs.”

Prior to Sunday, the government’s loss of a majority in the upper house was widely expected to be negative for JGBs, as cutting back Japan’s huge public debt with the help of a consumption tax hike had been touted by Prime Minister Naoto Kan.

“The market appears to have priced in the government losing its majority beforehand, helped by selling done in preparation for last week’s debt auctions,” said Atsushi Ito, a fixed-income strategist at Morgan Stanley MUFG.

“But it still remains to be seen how the market digests policy implications going forward,” he said.

In focus is which smaller parties the DPJ might form alliances with, what policy compromises it makes, and whether that dilutes fiscal reform.

CURVE BULL FLATTENS

Market players said concerns about the Chinese economy — and in extension the global economy — losing momentum remained a factor capping debt yields despite the Japanese government’s election loss.

In particular focus was China’s second quarter GDP data due on Thursday.

September 10-year futures 2JGBv1 climbed 0.24 point to 141.45 after hitting a seven-year high of 141.95 at the start of July.

The yield curve bull flattened on the back of gains by superlongs, which were scooped up by investors, including life insurers, following the previous week’s spike in yields.

The five-year/20-year yield spread tightened by 2.5 basis points to 148 basis points, edging back towards a nine-month low of 143.5 basis points hit early in July.

The Bank of Japan’s outright JGB buying operation also lifted longer-dated maturities, traders said.

The 20-year yield JP20YTN=JBTC fell 5 basis points to 1.835 percent after climbing 11 basis points the previous week, its biggest weekly rise in a year.

The benchmark 10-year yield JP10YTN=JBTC dropped 4 basis points to 1.115 percent.

The five-year yield JP5YTN=JBTC dipped 1.5 basis points to 0.355 percent.

The Nikkei average .N225 fell 0.4 percent with policy deadlock in Japan expected to weigh on the market going forward. [.T] (Editing by Joseph Radford)

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SCENARIOS-Fate of Japan climate bill uncertain after election

July 13, 2010 By Leave a Comment

TOKYO, July 12 (Reuters) – Japan’s climate bill, which backs the creation of an emissions trading scheme, faces an uncertain fate after the ruling Democratic Party and its ally lost their majority in a weekend election for parliament’s upper house.

Prime Minister Naoto Kan’s Democratic Party of Japan (DPJ) stays in power because it controls the more powerful lower house, but will need to seek new partners to control the upper chamber and pass bills smoothly.

The ruling bloc at present does not have a two-thirds majority in the lower house that is needed to override decisions made in the upper house.

Japan is the world’s fifth-biggest greenhouse gas emitter and has pledged to cut greenhouse gas emissions by 25 percent from 1990 levels by 2020.

The target is among the most ambitious of all rich nations but has also sparked nationwide debate over how to attain it without hurting the world’s No.2 economy. [ID:nTOE63I04R]

The climate bill, shelved last month after parliament ran out of time to finish debate, would make the target legally binding and set a one-year deadline for the government to design a compulsory emissions trading system. Other measures to help Japan meet the target are also part of the bill. [ID:nTOE65L09F]

Below are some scenarios for the climate bill, which the government plans to resubmit to the next session of parliament.

BILL PASSES IN CURRENT FORM

Prospects: Possible

The government plans to resubmit the climate bill in its current form in the next session of parliament, for which a start date has not been decided.

The DPJ could, in the meantime, woo one or more smaller parties into the ruling coalition to cobble together an upper house majority, clearing the way for smooth passage of the bill.

Even without joining the coalition, some opposition parties who favour tougher climate policy to boost the clean-energy sector could agree to help the DPJ pass the bill, although they could drive hard bargains and stall debate.

The climate bill calls for the government to draft separate legislation to design a mandatory emissions trading system within a year, so any delay could stall those plans.

Currently, Japan only has a voluntary carbon market at the national level based on companies’ pledged goals, which are mostly caps on emissions per unit of production and leave room for rises in emissions when output grows.

When trading under the new scheme will actually start has been unclear, with analysts divided between 2012 and 2013.

BILL PASSES, BUT WATERED DOWN

Prospects: Possible

The DPJ could be forced to water down the bill in exchange for help from the opposition to implement strategically more important policies such as fiscal reform and overhauling the social security system.

Climate policy has not been a big focus for voters, so the DPJ might want to spend its energy making progress on other issues to build up public support ahead of a general election that must be held before late 2013.

The weekend’s weak election outcome could also force the DPJ to listen more to demands from industry and labour groups which are against tougher climate policies because of the possible impact on jobs.

The bill has already been watered down from earlier drafts compiled by the Environment Ministry. The latest bill calls for the emissions trading system to set volume caps in principle but also “consider carbon intensity”, which leaves room for the scheme to allow companies to emit more when output grows.

BILL STALLS

Prospects: Possible

If the DPJ fails to pass the bill in the upper house, the bill will stay stuck in parliament.

The government will likely stick to its tough 2020 emission reduction target but it would lose political momentum for a mandatory emissions trading scheme, which analysts say is key for Japan to achieve deep cuts in domestic emissions.

Failure to pass the bill could also weaken Japan’s bargaining power at a U.N. climate meeting in Mexico from Nov. 29-Dec. 10 that aims to try to seal a tougher global agreement on fighting climate change. (Editing by David Fogarty)

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FOREX-Yen dips, longs shed on Japan ruling party woes

July 13, 2010 By Leave a Comment

TOKYO, July 12 (Reuters) – The yen eased on Monday after election results showed political uncertainty ahead for Japan, but the move was seen likely to be short-lived with attention turning to the U.S. earnings season as a gauge of risk appetite.

Japan’s ruling coalition, led by Prime Minister Naoto Kan’s Democratic Party of Japan, lost its upper house majority in Sunday’s election, putting Kan’s policies to deal with the country’s massive debt at risk. [ID:nTOE66A02V]

Although the DPJ has a dominant grip on the more powerful lower house, the election makes policy stalemate more likely.

Market players said the outcome helped trigger yen-selling, including likely long liquidation. One trader cited dollar buying against the yen by hedge funds.

Such flows, together with Japanese importer demand for the dollar, helped push the dollar higher against the yen, market players said.

But traders said focal points in the near term were the start of the U.S. earnings season this week and the results of stress test at European banks due later in July, adding that yen-selling pressure stemming solely from the upper house election result was likely to be limited in scope and duration.

“I think we may see a move towards 90 yen to the dollar and that may be it,” said a trader for a Japanese bank, adding that long liquidation in the yen seemed to be the main reason behind the yen’s dip on Monday.

The dollar rose 0.3 percent against the yen to 88.90 yen JPY=, pulling away from a seven-month low of 86.96 yen hit on trading platform EBS in early July.

On daily Ichimoku charts, the dollar faces resistance near 89.55 yen, roughly where the kijun sen now lies.

Overall, the Tokyo market reaction to the election was subdued, with the benchmark Nikkei average .N225 little changed on the day and 10-year Japanese government bond futures eking out a small gain 2JGBv1.

The latest U.S. Commodity Futures Trading Commission (CFTC) data showed that currency speculators increased their long positions in the yen to 37,926 contracts in the week that ended July 6, up from 27,427 contracts in the previous period. [IMM/FX]

The euro was almost flat against the yen at 112.00 yen, having failed to maintain small gains made earlier in the day. EURJPY=R.

Against the dollar, the euro fell 0.3 percent to $1.2598 EUR=. Resistance is seen near $1.2715/20, the trendline from the December high.

The euro touched a two-month high of $1.2723 on Friday, supported by strong German data, some clarity on European bank stress tests and a turnaround in appetite towards riskier assets.

The latest CFTC data showed speculators had decreased bets against the euro to 38,909 contracts, from 73,670 contracts.

Traders said they will watch how a Greek debt auction goes this week for more direction on the euro. The debt-laden country plans to auction six-month treasury bills on July 13.

The dollar index .DXY rose 0.3 percent to 84.225, pulling away from a two-month low of 83.622 hit on Friday. The greenback has been under pressure since early last week, hurt by growing worries about a slowdown in the United States and easing concerns about the euro zone.

“From their June 8 peak, dollar net longs have tumbled by 80 percent,” wrote David Watt, a senior currency strategist at RBC Capital.

“Along the way, the dollar index has dropped from over 88 to below 85. Much of the most recent drop seems due to a successful Spanish bond auction, though yield spreads are working against the dollar and are an underlying factor at play too.”

The U.S. earnings season begins with Alcoa Inc (AA.N) after the closing bell on Monday. Analysts are expecting overall second-quarter earnings to grow by 27 percent, according to Thomson Reuters data. That is up from the 22.4 percent that analysts were anticipating at the beginning of the year.

But given worries about a U.S. slowdown, markets will be looking at companies’ guidance on the coming quarter too, said Katsunori Kitakura, chief dealer at Chuo Mitsui Trust and Co.

“We haven’t had pre-announcement earning revisions, which is a good sign. But depending on the outlook on the third quarter, market sentiment could deteriorate again, which would hurt the dollar,” Kitakura said. [ID:nN08195712]. (Additional reporting by Anirban Nag in Sydney; Charlotte Cooper in Tokyo; Editing by Michael Watson)

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Factbox: Policies at stake after government loses election

July 13, 2010 By Leave a Comment

Voters dealt Kan’s Democratic Party of Japan a stinging rebuke in the election, depriving the DPJ and its tiny ally of a majority less than a year after the Democrats swept to power with promises of change.

The Democrats still have a dominant grip on the more powerful lower house. But they will need to seek new partners to control the upper chamber, which can block bills.

Below are key policies that could be affected by the outcome of the election:

FISCAL POLICY

Debt woes in the euro zone have turned the spotlight on Japan’s own massive debt, which the International Monetary Fund put at 217.7 percent of gross domestic product last year, far worse than Greece’s debt-to-GDP ratio of 115.1 percent.

Most of Japan’s debt is held by domestic investors, who are less sensitive to credit ratings agency downgrades than foreign investors, but that is slowly changing as the population ages and household savings fall.

Kan, a former finance minister, had made fiscal reform a top priority, floating a possible doubling of the 5 percent consumption tax. The main opposition Liberal Democratic Party also favors a rise in the sales tax to 10 percent, but the poor election results could make it harder for Kan to push forward debate on the politically touchy topic.

The government last month unveiled a mid- and long-term fiscal reform strategy. But the plan lacked specific ideas on how to meet ambitious targets such as balancing the budget and reducing its debt-to-GDP ratio.

A majority of voters agree fiscal reform is needed. But his apparent flip-flopping on a possible additional tax burden has put off many voters.

MONETARY POLICY

The Bank of Japan, which has stressed the need for a credible plan to cut back public debt, sees little need to ease monetary policy and feels it has done enough for now by outlining a loan program aimed at supporting industries with growth potential.

Political instability after Sunday’s election means it would be difficult for the government to carry out steps to support a fragile recovery in the world’s No.2 economy. That could renew government pressure for a more aggressive monetary policy. While the BOJ is independent from the government by law, direct pressure from the premier might be hard to resist.

The opposition Your Party, seen by some as a potential DPJ ally after it won 10 seats in Sunday’s poll, wants to revise the law governing the central bank to seek stronger government-BOJ cooperation to end deflation by making maximum employment one of the BOJ’s objectives, similar to a law governing the U.S. Federal Reserve.

YEN POLICY

Investors remain reluctant to test the government’s tolerance for a strong currency, although Tokyo has not intervened in the market since early 2004.

Kan caused a stir in January when he said he would work with the BOJ to weaken the yen, and that “it would be nice” if the Japanese currency slipped further.

He has subsequently toed the government line that stable exchange rates are desirable but levels should be set by the markets — but noted after becoming prime minister that there was a general view that a weaker yen would be better for Japan’s export-driven economy.

CLIMATE POLICY

Kan has stuck to a 2020 goal to cut Japan’s greenhouse gas emissions by 25 percent from 1990 levels, premised on an international framework in which major emitting countries would agree on ambitious targets.

The more powerful lower house passed a climate bill including that goal and a shortlist of domestic measures to achieve it, but the upper house ran out of time to enact the legislation. But the fate of the legislation is murky after the ruling coalition suffered a major setback in the poll.

POSTAL REFORM

The parliament session ended in mid-June without passage of a bill to scale back postal privatization. Kan has said he will resubmit the legislation, sought by his tiny coalition partner the People’s New Party, in an extra session in the autumn.

But without a coalition upper house majority, it looks almost impossible for the legislation to be enacted any time soon.

Not all Democratic Party lawmakers are keen on the legislation and banks complain it would give Japan Post an unfair advantage because of an implicit government guarantee.

Japan Post, which has retail banking and insurance services, is the world’s largest financial conglomerate with assets of about 300 trillion yen ($3,387 billion) and its fate could sway financial markets and industry.

The United States and Europe have said the draft legislation had not addressed their concerns about what they see as the preferential treatment that Japan Post receives compared with private-sector companies.

DIPLOMACY, SECURITY POLICY

The election defeat of the ruling coalition is unlikely to shift Japan’s foreign and security policies drastically.

The Democrats took power promising to steer a diplomatic course more independent of close ally the United States, but efforts by Kan’s predecessor Hatoyama to do so hit a roadblock when he failed to find an alternative to keeping a U.S. Marine airbase on the southern Japanese island of Okinawa.

Tokyo and Washington have basically agreed to implement a 2006 agreement to shift the Marines’ Futenma airbase to a less crowded part of Okinawa, host to about half the U.S. troops in the country.

But local opposition clouds the outlook for implementation, and experts worry that Hatoyama opened a Pandora’s box by fanning anti-base sentiment that could undermine the 50-year-old alliance.

The government will also likely keep stressing the need to deepen ties with other Asian countries including China, given Japan’s increasing reliance on the region for economic growth.

(Compiled by Leika Kihara, Hideyuki Sano, Charlotte Cooper, Yoko Nishikawa, Risa Maeda and Linda Sieg; Editing by Michael Watson)

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FACTBOX-Policies at stake after Japan govt loses election

July 13, 2010 By Leave a Comment

(Reuters) – Japanese Prime Minister Naoto Kan’s government suffered a major blow in Sunday’s upper house election, threatening a policy deadlock that could thwart efforts to curb massive public debt and engineer growth.

Voters dealt Kan’s Democratic Party of Japan a stinging rebuke in the election, depriving the DPJ and its tiny ally of a majority less than a year after the Democrats swept to power with promises of change. [ID:nTOE66A02V]

The Democrats still have a dominant grip on the more powerful lower house. But they will need to seek new partners to control the upper chamber, which can block bills.

Below are key policies that could be affected by the outcome of the election:

FISCAL POLICY

Debt woes in the euro zone have turned the spotlight on Japan’s own massive debt, which the International Monetary Fund put at 217.7 percent of gross domestic product last year, far worse than Greece’s debt-to-GDP ratio of 115.1 percent. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphic on Japan's debt woes: r.reuters.com/sez92m Graphic on Japan poll results: r.reuters.com/sax86m More stories on the Japanese politics [ID:nPOLJP] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Most of Japan’s debt is held by domestic investors, who are less sensitive to credit ratings agency downgrades than foreign investors, but that is slowly changing as the population ages and household savings fall.

Kan, a former finance minister, had made fiscal reform a top priority, floating a possible doubling of the 5 percent consumption tax. The main opposition Liberal Democratic Party also favours a rise in the sales tax to 10 percent, but the poor election results could make it harder for Kan to push forward debate on the politically touchy topic.

The government last month unveiled a mid- and long-term fiscal reform strategy. But the plan lacked specific ideas on how to meet ambitious targets such as balancing the budget and reducing its debt-to-GDP ratio. [ID:nTOE65L01H]

A majority of voters agree fiscal reform is needed. But his apparent flip-flopping on a possible additional tax burden has put off many voters.

MONETARY POLICY

The Bank of Japan, which has stressed the need for a credible plan to cut back public debt, sees little need to ease monetary policy and feels it has done enough for now by outlining a loan programme aimed at supporting industries with growth potential.

Political instability after Sunday’s election means it would be difficult for the government to carry out steps to support a fragile recovery in the world’s No.2 economy. That could renew government pressure for a more aggressive monetary policy. While the BOJ is independent from the government by law, direct pressure from the premier might be hard to resist.

The opposition Your Party, seen by some as a potential DPJ ally after it won 10 seats in Sunday’s poll, wants to revise the law governing the central bank to seek stronger government-BOJ cooperation to end deflation by making maximum employment one of the BOJ’s objectives, similar to a law governing the U.S. Federal Reserve.

YEN POLICY

Investors remain reluctant to test the government’s tolerance for a strong currency, although Tokyo has not intervened in the market since early 2004.

Kan caused a stir in January when he said he would work with the BOJ to weaken the yen, and that “it would be nice” if the Japanese currency slipped further.

He has subsequently toed the government line that stable exchange rates are desirable but levels should be set by the markets — but noted after becoming prime minister that there was a general view that a weaker yen would be better for Japan’s export-driven economy.

CLIMATE POLICY

Kan has stuck to a 2020 goal to cut Japan’s greenhouse gas emissions by 25 percent from 1990 levels, premised on an international framework in which major emitting countries would agree on ambitious targets.

The more powerful lower house passed a climate bill including that goal and a shortlist of domestic measures to achieve it, but the upper house ran out of time to enact the legislation. But the fate of the legislation is murky after the ruling coalition suffered a major setback in the poll.

POSTAL REFORM

The parliament session ended in mid-June without passage of a bill to scale back postal privatisation. Kan has said he will resubmit the legislation, sought by his tiny coalition partner the People’s New Party, in an extra session in the autumn.

But without a coalition upper house majority, it looks almost impossible for the legislation to be enacted any time soon.

Not all Democratic Party lawmakers are keen on the legislation and banks complain it would give Japan Post an unfair advantage because of an implicit government guarantee.

Japan Post, which has retail banking and insurance services, is the world’s largest financial conglomerate with assets of about 300 trillion yen ($3,387 billion) and its fate could sway financial markets and industry.

The United States and Europe have said the draft legislation had not addressed their concerns about what they see as the preferential treatment that Japan Post receives compared with private-sector companies.

DIPLOMACY, SECURITY POLICY

The election defeat of the ruling coalition is unlikely to shift Japan’s foreign and security policies drastically.

The Democrats took power promising to steer a diplomatic course more independent of close ally the United States, but efforts by Kan’s predecessor Hatoyama to do so hit a roadblock when he failed to find an alternative to keeping a U.S. Marine airbase on the southern Japanese island of Okinawa.

Tokyo and Washington have basically agreed to implement a 2006 agreement to shift the Marines’ Futenma airbase to a less crowded part of Okinawa, host to about half the U.S. troops in the country.

But local opposition clouds the outlook for implementation, and experts worry that Hatoyama opened a Pandora’s box by fanning anti-base sentiment that could undermine the 50-year-old alliance.

The government will also likely keep stressing the need to deepen ties with other Asian countries including China, given Japan’s increasing reliance on the region for economic growth. ($1=88.56 Yen) (Compiled by Leika Kihara, Hideyuki Sano, Charlotte Cooper, Yoko Nishikawa, Risa Maeda and Linda Sieg; Editing by Michael Watson)

Filed Under: International News Tagged With: , , , , , , , , , , , , , , , , , , ,

Japan PM’s party at risk of setback in Sunday vote

July 11, 2010 By Leave a Comment

July 11 (Reuters) – Japan’s ruling coalition could lose control of parliament’s upper house in an election on Sunday that could stall efforts to curb a huge public debt and ultimately put Prime Minister Naoto Kan’s job at risk.

Sagging support for the leading Democratic Party of Japan (DPJ), which surged to power for the first time last year, rebounded after Kan — Japan’s fifth leader in three years — replaced his indecisive predecessor last month.

But ratings slipped again after Kan floated the long taboo topic of raising sales tax to curb a public debt, already close to twice the size of the nearly $5 trillion economy. He also struggled to persuade voters he had a clear plan to fix Japan’s economy.

Kan has since stressed he would not hike the sales tax “one yen” without seeking a mandate in the next lower house poll, which must be held by late 2013, but stressed that Japan must make tough decisions to avoid a Greek-style debt crisis.

“Ten to 30 years from now, will people look back and think, the prime minister said something catchy but things went wrong, or … the prime minister said what was bitter and harsh, but that was the start of rebuilding our economy and social security system?” Kan said on Saturday as he wound up his campaign.

“I am determined to do something that will not go down in history with shame.”

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See graphics:

PM support falls over sales tax: r.reuters.com/myv63g

DPJ lead narrows over rival: link.reuters.com/jev83j

Japan's massive public debt: r.reuters.com/sez92m

Upper house seats before poll: link.reuters.com/tuv85m

More stories on the Japanese politics: [ID:nPOLJP] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

MISSING THE TARGET?

The DPJ, which ousted its long-dominant rival last year with pledges to cut waste, pry control of policymaking from bureaucrats and focus spending on households to boost growth, will almost certainly run the government whatever the outcome of Sunday’s vote because it controls the powerful lower house.

But the party needs a majority in the upper chamber to avoid policy deadlock and begin taking steps to reduce a public debt that is the worst among advanced countries.

Media surveys last week showed the DPJ would likely win around 50 or even fewer of the 121 seats up for grabs in the 242-member chamber — well short of Kan’s target of keeping all 54 seats the Democrats have up for re-election.

That would deprive the DPJ and its tiny coalition partner, the pro-spending People’s New Party, of a majority in the upper house. The Democrats would be forced to seek new allies, complicating the government’s ability to forge ahead with the fiscal reform that Kan has put at the heart of his campaign.

It would also leave Kan vulnerable to a challenge from party powerbroker Ichiro Ozawa — a critic of his sales tax proposal — ahead of a September party leadership vote. Few, though, would expect Kan to go without a fight.

Many voters have been having trouble finding a party to their taste — although a flurry of new, small parties has broadened their options — with surveys showing a hefty chunk were undecided, making precise predictions difficult.

The DPJ’s current coalition partner opposes raising the 5 percent sales tax any time soon, as do some potential allies.

Other opposition parties agree a hike is inevitable but would probably be reluctant to help out the rival DPJ. [ID:nTOE661014]

The leaders of two potential partners, the small, pro-reform Your Party and New Komeito, which partnered with the Liberal Democratic Party until its defeat last year, have rejected the idea of an alliance with the DPJ.

Analysts say they might change their tune later, but would drive hard bargains if the Democrats fare badly. (Editing by Ralph Boulton)

Filed Under: International News Tagged With: , , , , , , , , , , , , , , , , , , ,

WRAPUP 2-Japan PM makes pitch as party struggles before poll

July 11, 2010 By Leave a Comment

TOKYO, July 10 (Reuters) – Japanese Prime Minister Naoto Kan urged voters to give his party a second chance in a weekend election that could deliver a sharp setback to his government, putting his job at risk and stalling efforts at fiscal reform.

Sagging support for the Democratic Party of Japan (DPJ), which surged to power for the first time just last year, jumped after Kan — a former civic activist and Japan’s fifth leader in three years — replaced his indecisive predecessor last month.

But ratings slipped after Kan floated the long taboo topic of raising the sales tax to curb a public debt close to twice the size of the nearly $5 trillion economy, and struggled to persuade voters he had a clear plan for fixing Japan’s economic woes.

Since then, Kan has stressed that no tax hike would occur before seeking a mandate in the next lower house poll, which must be held by late 2013, but argued that Japan could not put off painful choices if it wants to avoid a Greek-style debt crisis.

“Japan’s economy is 20 to 30 times bigger than that of Greece and its public debt is huge, so no country in the world could rescue Japan,” Kan told a crowd of voters sweltering on Saturday under the hot sun in a popular shopping area of western Tokyo.

“Japan itself must make sure it avoids collapse,” he said, adding ordinary folk would suffer most if finances crumbled. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

See graphics:

PM support falls over sales tax: r.reuters.com/myv63g

DPJ lead narrows over rival: link.reuters.com/jev83j

Japan's massive public debt: r.reuters.com/sez92m

Upper house seats before poll: link.reuters.com/tuv85m

More stories on the Japanese politics: [ID:nPOLJP] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

The DPJ, which ousted its long-dominant rival last year with pledges to cut waste, end bureaucrats’ control over policymaking and spend more on consumers to boost growth, will almost certainly run the government whatever the outcome of Sunday’s vote because it controls the powerful lower house.

But the party needs a majority in the upper chamber to avoid policy deadlock and begin taking steps to reduce a public debt that is the worst among advanced countries.

NEEDING ALLIES, FACING CHALLENGE

Media surveys this week showed the DPJ would likely win around 50 or even fewer of the 121 seats up for grabs in the 242-member chamber — well short of Kan’s target of keeping all 54 seats the Democrats have up for re-election.

That would deprive the DPJ and its tiny coalition partner, the pro-spending People’s New Party, of a majority in the upper house. The Democrats would be forced to seek new allies, complicating the government’s ability to forge ahead with the fiscal reform that Kan has put at the heart of his campaign.

It would also leave Kan vulnerable to a challenge from party powerbroker Ichiro Ozawa — a critic of his sales tax proposal — ahead of a September party leadership vote, although few expect Kan to go without a fight.

Not all voters have been put off by the sales tax talk, and indeed, surveys have shown many think a rise is inevitable.

“I agree with a sales tax rise and I think the sooner, the better,” said Akiko Takita, a 63-year-old retired Tokyo resident who voted for the DPJ last year and plans to do so again.

“There should be less discussion and more action.”

But many others are having trouble finding a party to their taste, with surveys showing a hefty chunk are undecided.

“I’ve looked at them all but there is no one I like,” said event planner Osamu Sato, 32. “I’ll just decide on the day.”

The DPJ’s current coalition partner opposes raising the 5 percent sales tax any time soon, as do some potential allies. Other opposition parties agree a hike is inevitable but would probably be reluctant to help out the rival DPJ, which has not yet mapped out any detailed tax reform proposals. [ID:nTOE661014]

The 63-year-old Kan has called for non-partisan talks on tax reform and said any rise in the 5 percent sales tax would take at least two to three years to implement.

He is also touting a “Third Way” economic strategy that would use tax revenues to target growth areas such as healthcare and the environment, although many economist are dubious.

The leaders of two potential partners, the pro-reform Your Party and New Komeito, which partnered with the Liberal Democratic Party until its ouster last year, have rejected the idea of an alliance with the DPJ.

Analysts say they might change their tune later, but would drive hard bargains if the Democrats fare badly. (Additional reporting by Rika Otsuka; Writing by Linda Sieg)

Filed Under: International News Tagged With: , , , , , , , , , , , , , , , , , , ,

SCENARIOS-Japan DPJ may stumble in vote, fiscal reform at risk

July 10, 2010 By Leave a Comment

July 9 (Reuters) – Japan’s ruling Democratic Party could fall far short of Prime Minister Naoto Kan’s target in Sunday’s upper house election, a result that could put his job at risk and hamper efforts to curb huge public debt.

The Democratic Party of Japan (DPJ) will almost certainly stay in power whatever the outcome of the vote because of its huge majority in parliament’s lower house, but it needs an upper house majority to pass bills and avoid policy deadlock.

Below are scenarios for the election outcome and policy implications. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

See graphics:

PM support falls over sales tax: r.reuters.com/myv63g

DPJ lead narrows over rival: link.reuters.com/jev83j

Japan's massive public debt: r.reuters.com/sez92m

Upper house seats before poll: link.reuters.com/tuv85m

More stories on the Japanese politics [ID:nPOLJP] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

DEMOCRATS WIN OUTRIGHT MAJORITY (HIGHLY UNLIKELY)

The resignations of Kan’s unpopular predecessor Yukio Hatoyama and powerbroker Ichiro Ozawa as party No. 2 last month lifted support for the government, but voter ratings have slid to under 50 percent since Kan proposed a sales tax rise.

To win an outright majority in the 242-member chamber, the Democrats need to win 60 of the 121 seats up for grabs, but no media surveys showed the DPJ winning that many seats.

If the Democrats win a majority, they would no longer have to rely on the tiny, pro-spending People’s New Party (PNP), their coalition ally, to pass bills in the upper house.

The Democrats themselves, however, remain a party of diverse policies, from pro-market reformers to proponents of big government, so effective decision-making needs strong leadership.

DPJ HITS PM’S TARGET (UNLIKELY)

If the Democrats hit Kan’s own target of 54, he can claim success and probably fend off any challenge from party rivals in a leadership vote set for September, and avoid becoming the latest of revolving-door premiers. This is partly because finding extra lawmakers to make up a majority might not be that hard.

The DPJ and the PNP need to win 56 seats to keep a bare majority. But if, as now seems likely, they fall short of that, the DPJ would need to find new allies. This would most likely be done on a policy-by-policy basis rather than by giving away cabinet posts in a formal coalition.

Several potential partners have said they have no plans to help out. While some analysts predict they will change their tune after the vote, political manoeuvring would absorb energy after the election, delaying key policy decisions.

Possible allies include the small pro-reform Your Party, set up by defectors from the then-ruling Liberal Democratic Party (LDP) before last year’s lower house poll, and the New Komeito, a Buddhist-backed party that partnered with the LDP until last year’s election defeat.

The New Komeito stresses tax reform to bolster social welfare policies, while the Your Party insists more waste must be cut before raising taxes. Some lawmakers might bolt from the main opposition, the LDP, which has also proposed a sales tax rise.

A tie-up with the Your Party would push the government towards more market-friendly policies.

But juggling divergent policy priorities among allies would complicate decisions, as was the case during the Democrats’ first eight months in power, when they had to deal with the PNP and a small leftist party, the Social Democrats, who left the coalition in a feud over a U.S. base in southern Japan.

DEMOCRATS WIN 50-53 SEATS (POSSIBLE)

Kan might still be able to fend off a challenge, but his ability to forge ahead with policies would be seriously weakened.

Party powerbroker Ichiro Ozawa, who has criticised the prime minister’s shift towards fiscal reform, would be more likely to back a rival in the September party leadership vote.

The worse the Democrats’ performance, the harder the bargains that small opposition parties such as the Your Party would drive to cooperate, making policy stalemate more likely.

Your Party leader Yoshimi Watanabe would probably be more inclined to stay in opposition in hopes of sparking a political realignment, possibly but not necessarily along policy lines.

Ozawa might bolt the Democratic Party if his challenge to Kan fails, splitting the party — although it is unclear how many lawmakers would follow.

DEMOCRATS WIN FEWER THAN 50 SEATS (POSSIBLE)

Ozawa and his allies would pressure Kan to resign and seek to move forward the party leadership vote.

Few analysts see the fiery former civic activist bowing out of his own accord, and some say Kan might even threaten to call a general election, gambling that Ozawa’s supporters in the lower house — many of whom are rookie lawmakers — would be the ones to lose seats while a slimmed-down DPJ kept a majority.

With smaller parties wary of tie-ups, Kan might invite the rival LDP, which agrees on the need for a future sales tax rise, into a “grand coalition”.

But if that proves fruitless, he might call a lower house election to seek a new mandate, some analysts said.

Political manoeuvering would absorb the government’s energy and difficult policy decisions would be in abeyance. (Editing by Ron Popeski)

Filed Under: International News Tagged With: , , , , , , , , , , , , , , , , , , ,

Japan PM sticks to modest election goal after polls

June 28, 2010 By Leave a Comment

(Reuters) – Japan’s prime minister tried to quell suggestions on Saturday he could be the next in line of revolving door leaders, sticking to a modest target in a forthcoming election after polls showed his party may miss a majority.

World | Japan

Speculation simmers that rivals in Naoto Kan’s ruling Democratic Party of Japan (DPJ) could try to oust him if the party fares poorly in the July 11 upper house election. The party needs a majority in the chamber to forge ahead with policies to boost the economy and cut huge debt.

The DPJ, which swept to power for the first time last year, will run the government regardless of the outcome given its dominance in the lower house, but control of the upper house would enable it to avoid policy deadlock.

Kan, who took over this month as Japan’s fifth premier in three years, said he was standing by a goal to win 54 of 121 seats in the election. That would fall short of a majority but analysts say Kan is setting the bar low to avoid being ousted in a party leadership vote in September.

“Before I became the party leader, the DPJ was in a tough position,” he told reporters in Toronto, where he was making his debut at a meeting of G8 and G20 leaders.

“I want to focus on winning the current number of seats we have, then how we can exceed that.”

SHORT OF A MAJORITY

Media have reported that the DPJ could well fall short of an outright majority and may need to find new allies to control the chamber, clouding the outlook for policies.

A June 24-25 survey by the Asahi newspaper showed the DPJ could win about 54 of the 121 seats up for grabs in the 242-member upper house, in line with Kan’s target but short of the 60 it needs for an outright majority.

Support for the DPJ-led government has rebounded since Kan took over from the unpopular Yukio Hatoyama. But ratings slipped after Kan made fiscal reform the heart of his campaign and floated the idea of doubling the 5 percent sales tax.

While many voters agree an increase in the sales tax is inevitable to pay growing social security costs and fix tattered public finances, others say the government should first do more to cut wasteful spending.

Kan said priorities would be established for spending cuts and pledged to drum up support for bold tax reforms from DPJ members, some of whom are wary that the idea could hurt the party’s election chances.

“Of course we will consider ways to not put too much burden on people with low incomes,” Kan said. “My proposal is to initiate debate, so I think I can win (the party’s) understanding.”

(Editing by Ron Popeski)

Filed Under: International News Tagged With: , , , , , , , , , , , , , , , , , , ,

CORRECTED-Japan PM sticks to modest election goal after polls

June 28, 2010 By Leave a Comment

TORONTO, June 26 (Reuters) – Japan’s prime minister tried to quell suggestions on Saturday he could be the next in line of revolving door leaders, sticking to a modest target in a forthcoming election after polls showed his party may miss a majority.

Speculation simmers that rivals in Naoto Kan’s ruling Democratic Party of Japan (DPJ) could try to oust him if the party fares poorly in the July 11 upper house election. The party needs a majority in the chamber to forge ahead with policies to boost the economy and cut huge debt.

The DPJ, which swept to power for the first time last year, will run the government regardless of the outcome given its dominance in the lower house, but control of the upper house would enable it to avoid policy deadlock.

Kan, who took over this month as Japan’s fifth premier in three years, said he was standing by a goal to win 54 of 121 seats in the election. That would fall short of a majority but analysts say Kan is setting the bar low to avoid being ousted in a party leadership vote in September.

“Before I became the party leader, the DPJ was in a tough position,” he told reporters in Toronto, where he was making his debut at a meeting of G8 and G20 leaders.

“I want to focus on winning the current number of seats we have, then how we can exceed that.”

SHORT OF A MAJORITY

Media have reported that the DPJ could well fall short of an outright majority and may need to find new allies to control the chamber, clouding the outlook for policies.

A June 24-25 survey by the Asahi newspaper showed the DPJ could win about 54 of the 121 seats up for grabs in the 242-member upper house, in line with Kan’s target but short of the 60 it needs for an outright majority. [ID:nTOE65P006]

Support for the DPJ-led government has rebounded since Kan took over from the unpopular Yukio Hatoyama. But ratings slipped after Kan made fiscal reform the heart of his campaign and floated the idea of doubling the 5 percent sales tax.

While many voters agree an increase in the sales tax is inevitable to pay growing social security costs and fix tattered public finances, others say the government should first do more to cut wasteful spending.

Kan said priorities would be established for spending cuts and pledged to drum up support for bold tax reforms from DPJ members, some of whom are wary that the idea could hurt the party’s election chances.

“Of course we will consider ways to not put too much burden on people with low incomes,” Kan said. “My proposal is to initiate debate, so I think I can win (the party’s) understanding.” (Editing by Ron Popeski)

Filed Under: International News Tagged With: , , , , , , , , , , , , , , , , , , ,

Japan PM eyes July election, opposition resists

June 17, 2010 By Leave a Comment

TOKYO, June 16 (Reuters) – Japan’s main opposition party submitted a symbolic no-confidence motion against Prime Minister Naoto Kan’s cabinet on Wednesday as Kan looked set to rush into a national election to capitalise on a jump in ratings.

The ruling Democratic Party of Japan’s (DPJ) support rates have bounced since Kan took over from his unpopular predecessor Yukio Hatoyama last week, improving the party’s chances in a likely July 11 vote for parliament’s upper house.

The DPJ will stay in power regardless of the election outcome given its majority in the lower house, but the party needs to win in the upper chamber to forge ahead smoothly with policies to cut the country’s huge public debt. [ID:nSGE65D0BK]

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Graphic on voter intentions link.reuters.com/jev83j

Graphic on voter support r.reuters.com/myv63g

For possible election scenarios, click [ID:nTOE65F00Z]

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Lambasting the DPJ for not extending the current session of parliament after the abrupt leadership change, the main opposition Liberal Democratic Party (LDP) handed in a motion of no-confidence against the cabinet on the last day of debate.

But the move was largely symbolic, since opposition parties are outnumbered by the ruling bloc in the powerful lower chamber. Opposition parties also submitted non-binding censure motions against Kan and a cabinet minister to the upper house.

“If debate took place, their (the Democrats’) support rate would fall,” Jiro Kawasaki, an LDP executive in charge of parliamentary affairs, told reporters.

“Prime Minister Kan is clearly running away.”

Kan, Japan’s fifth premier in three years, has rejected calls for an extended parliament session, listening instead to DPJ lawmakers who want an election as soon as possible.

Media polls show support for Kan’s cabinet at around 60 percent, a jump from around 20 percent during Hatoyama’s final days in office. [ID:nTOE65903N]

ELECTION CHANCES

Kan has revamped the DPJ’s image among voters, tapping policy experts for key cabinet posts and distancing himself from a scandal-tainted party kingpin who was seen as pulling the strings in Hatoyama’s government.

“Former prime minister Hatoyama had no heart. He had no ability to judge the situation properly so it all ended in disaster,” said retiree Kyoko Suiguchi, 65.

“I’ll be voting for Kan’s (party) because they really know what they’re doing.”

But while the leadership change has improved the DPJ’s election chances, it remains unclear if the party can win an outright majority and avoid policy deadlock as it tries to strengthen an economic recovery and fix tattered public finances.

Fiscal problems in Europe and growing market concerns about sovereign debt risk have prompted Kan to make tackling Japan’s public debt — now near twice the size of GDP — a top priority.

If the Democrats fail to win a majority, it would need to maintain its current coalition with the tiny, pro-spending People’s New Party (PNP), or seek help from other allies to pass bills, complicating policy making.

“There is still a month before the election so the Democrats’ ratings could well cool by then,” said Mikitaka Masuyama, a professor at the National Graduate Institute for Policy Studies.

“It’s likely that no party wins a majority and there will be a lot of political jockeying after the election to pull together groups for a majority,” Masuyama said.

(Additional reporting by Linda Sieg; Editing by Paul Tait)

Filed Under: International News Tagged With: , , , , , , , , , , , , , , , , , , ,

Fate of climate bill uncertain as Japan poll nears

June 11, 2010 By Leave a Comment

(Reuters) – Japan’s government could run out of time to enact a climate bill before upper-house elections expected next month, fuelling worries it might drop a plan to trade carbon emissions by setting obligatory caps on firms.

Green Business | Japan

Japan is the world’s fifth-biggest greenhouse gas emitter and a pledge to cut emissions by 25 percent from 1990 levels by 2020 has become a cornerstone of the government’s long-term economic growth strategy.

The target is among the most ambitious of all rich nations but has also sparked nationwide debate over how to attain it without hurting the world’s No.2 economy.

The powerful lower house passed the climate bill last month, including the emissions cut goal and a shortlist of steps to reach it, such as the launch of a compulsory emissions trading scheme. Upper house debate has just started.

Here are some scenarios for the climate bill after new Prime Minister Naoto Kan formed a cabinet this week.

PARLIAMENT EXTENDED LONG ENOUGH TO PASS BILL

Prospects: Possible

Japanese media have reported that the new government could extend parliament’s current session beyond June 16 to enact a bill to scale back postal privatization.

The postal bill is strategically more important than the climate bill for Kan’s ruling Democratic Party of Japan (DPJ) to keep a tiny coalition partner happy ahead of the election.

But if passed, the climate bill would give the government a year in which to craft rules for a new emissions trading scheme. The rules would then take effect as early as next year if an emissions trading bill is enacted when the government holds the next regular parliamentary session in early 2011.

When trading will actually start remains unclear, with analysts divided between 2012 and 2013.

SESSION ENDS WITHOUT PASSAGE, SAME BILL SUBMITTED LATER

Prospects: Likely

If parliament is not extended, the climate bill may be shelved ahead of the upper house poll.

The DPJ will stay in power regardless of the poll’s outcome because of its huge majority in the lower house, and would likely compile a bill later with the same 2020 goal.

The same bill might be submitted to the lower house during a parliament session due to start after the July election.

But the risk of the DPJ falling short of a majority in the upper house means the bill could be changed to appease new coalition partners.

SESSION ENDS WITHOUT PASSAGE, BILL TO GET WATERED DOWN

Prospects: Possible

The government will keep the 2020 goal but could revise the bill as complaints rise from industry worried tough carbon caps would hurt firms’ global competitiveness.

Currently, Japan only has a voluntary carbon market at the national level based on companies’ pledged goals, which are mostly caps on emissions per unit of production and leave room for rises in emissions when output grows.

A report by a trade ministry panel of energy experts this week showed how tough it would be for Japan to achieve a 25 percent cut in emissions by 2020 solely through domestic cuts. Offsetting could be crucial and Japanese companies are among the top buyers of carbon offsets from abroad.

The report showed policy initiatives to enhance low-carbon energy and fuel saving could make the difference two decades later, resulting in a major fall in CO2 emissions from energy use, the main source of Japan’s greenhouse gas pollution.

Energy supply-side plans for 2020 have already been fixed, so it is easily understood that Japan’s pledged 2020 goal is likely out of reach, said Masahiro Kuroda, head of the committee and president of Tohoku University of Community Service and Science.

Filed Under: International News Tagged With: , , , , , , , , , , , , , , , , , , ,

SCENARIOS-Fate of climate bill uncertain as Japan poll nears

June 11, 2010 By Leave a Comment

June 10 (Reuters) – Japan’s government could run out of time to enact a climate bill before upper-house elections expected next month, fuelling worries it might drop a plan to trade carbon emissions by setting obligatory caps on firms.

Japan is the world’s fifth-biggest greenhouse gas emitter and a pledge to cut emissions by 25 percent from 1990 levels by 2020 has become a cornerstone of the government’s long-term economic growth strategy. [ID:nTOE5BS06G]

The target is among the most ambitious of all rich nations but has also sparked nationwide debate over how to attain it without hurting the world’s No.2 economy. [ID:nTOE63I04R]

The powerful lower house passed the climate bill last month, including the emissions cut goal and a shortlist of steps to reach it, such as the launch of a compulsory emissions trading scheme. Upper house debate has just started. [ID:nTOE62B06A]

Here are some scenarios for the climate bill after new Prime Minister Naoto Kan formed a cabinet this week. [ID:nPOLJP]

PARLIAMENT EXTENDED LONG ENOUGH TO PASS BILL

Prospects: Possible

Japanese media have reported that the new government could extend parliament’s current session beyond June 16 to enact a bill to scale back postal privatisation. [ID:nTOE657038]

The postal bill is strategically more important than the climate bill for Kan’s ruling Democratic Party of Japan (DPJ) to keep a tiny coalition partner happy ahead of the election.

But if passed, the climate bill would give the government a year in which to craft rules for a new emissions trading scheme. The rules would then take effect as early as next year if an emissions trading bill is enacted when the government holds the next regular parliamentary session in early 2011.

When trading will actually start remains unclear, with analysts divided between 2012 and 2013.

SESSION ENDS WITHOUT PASSAGE, SAME BILL SUBMITTED LATER

Prospects: Likely

If parliament is not extended, the climate bill may be shelved ahead of the upper house poll.

The DPJ will stay in power regardless of the poll’s outcome because of its huge majority in the lower house, and would likely compile a bill later with the same 2020 goal.

The same bill might be submitted to the lower house during a parliament session due to start after the July election.

But the risk of the DPJ falling short of a majority in the upper house means the bill could be changed to appease new coalition partners.

SESSION ENDS WITHOUT PASSAGE, BILL TO GET WATERED DOWN

Prospects: Possible

The government will keep the 2020 goal but could revise the bill as complaints rise from industry worried tough carbon caps would hurt firms’ global competitiveness. [ID:nTOE64909O]

Currently, Japan only has a voluntary carbon market at the national level based on companies’ pledged goals, which are mostly caps on emissions per unit of production and leave room for rises in emissions when output grows.

A report by a trade ministry panel of energy experts this week showed how tough it would be for Japan to achieve a 25 percent cut in emissions by 2020 solely through domestic cuts. Offsetting could be crucial and Japanese companies are among the top buyers of carbon offsets from abroad.

The report showed policy initiatives to enhance low-carbon energy and fuel saving could make the difference two decades later, resulting in a major fall in CO2 emissions from energy use, the main source of Japan’s greenhouse gas pollution. [ID:nTFD006428]

Energy supply-side plans for 2020 have already been fixed, so it is easily understood that Japan’s pledged 2020 goal is likely out of reach, said Masahiro Kuroda, head of the committee and president of Tohoku University of Community Service and Science. (Editing by David Fogarty)

Filed Under: International News Tagged With: , , , , , , , , , , , , , , , , , , ,

Japan PM confident ruling coalition will hold

May 26, 2010 By Leave a Comment

Struggling Japanese Prime Minister Yukio Hatoyama said on Wednesday he was confident his coalition would stick together, despite concerns a junior partner might withdraw over a plan to keep a U.S. airbase on Okinawa.

Hatoyama’s decision to abandon a pledge to try to shift the U.S. Marines’ Futenma air base off the southern island has made Okinawans angry, upset the tiny leftist Social Democratic Party (SDP), and eroded support for the government due to voter perception the premier has mishandled the issue.

Graphic on Japan voter support: http://r.reuters.com/myv63g

Graphic on voting intentions: http://link.reuters.com/jev83j

SDP leader Mizuho Fukushima, who is also a cabinet member, said on Tuesday she would not sign off on the U.S.-Japan deal, but stopped short of threatening to leave the coalition ahead of a mid-year upper house poll that the ruling bloc needs to win to avoid a parliamentary deadlock.

“Given the current situation on the Korean peninsula, the message that we will firmly maintain the U.S.-Japan alliance is extremely important. I want the people of Japan to understand this,” Hatoyama told reporters, referring to rising tensions after Seoul accused the North of sinking a South Korean ship.

“It goes without saying that this is a coalition government, so I want to continue discussions so that we can maintain the coalition. I believe the coalition will be firmly maintained.”

ILL-TIMED, NOT FATAL

An SDP executive told reporters on Wednesday he thought the government would take the party’s demands into account.

“What is important now is to do what we can under the current circumstances. I don’t think we should comment lightly on future hypothetical cases,” SDP Secretary-general Yasumasa Shigeno said after meeting Chief Cabinet Secretary Hirofumi Hirano.

Some SDP members have said the party should leave the coalition after Hatoyama abandoned his pledge to try to move the base off of Okinawa.

Hatoyama’s Democratic Party of Japan (DPJ) has a huge majority in parliament’s lower house, which picks the prime minister, and SDP votes are no longer needed in the upper house to pass bills smoothly, since the Democrats and another small party now have a majority there.

But a rift in the coalition would be ill-timed ahead of an upper house election, expected in July, with the Democrats chances of an outright win fading as voter support slumps.

A split could see the Democrats lose SDP cooperation in the election campaign but some analysts said the Social Democrats’ departure could make it easier for Hatoyama’s government to make decisions by reducing policy gaps among coalition partners.

In the campaign that swept the Democrats to power last year, Hatoyama had raised hopes that Futenma could be moved off Okinawa, whose residents have long resented the heavy concentration of U.S. military bases there. But Hatoyama later backtracked, saying some marines had to stay to deter threats.

A formal agreement with the United States on the plan to move Futenma base from a crowded city to the Henoko area of the northern Okinawa city of Nago — largely in line with a 2006 U.S-Japan agreement — is expected to be announced on Friday and then the cabinet may adopt a resolution based on that deal.

The Yomiuri newspaper said the Social Democrats were leaning toward staying in the coalition on the premise that the cabinet resolution would not specify the exact location for the new base and that consultations on the issue would continue.

(Additional reporting by Isabel Reynolds; Writing by Linda Sieg; Editing by Michael Perry)

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Q+A – U.S. Airbase row in focus as Clinton visits Japan

May 21, 2010 By Leave a Comment

U.S. Secretary of State Hillary Clinton is expected to play down a row over a U.S. airbase that has frayed ties with close ally Tokyo and eroded support for Japan’s prime minister when she visits Japan on Friday.

The feud has distracted the allies as they try to cope with an unpredictable North Korea and a rising China, while voter perception that Prime Minister Yukio Hatoyama has mishandled the issue is eroding support before a mid-year election his party needs to win to avoid policy paralysis.

Following are some questions and answers about the issue:

WHY HAS THIS DISPUTE COME TO A HEAD NOW?

In the election that swept his Democratic Party of Japan (DPJ) to power last year, Hatoyama raised hopes on the southern island of Okinawa that the Marines’ Futenma airbase could be moved elsewhere, despite a 2006 deal to shift it to a less crowded site on Okinawa, host to about half the 49,000 U.S. military personnel in Japan.

Hatoyama has set himself an end-of-May deadline for resolving the issue, and said he would stake his job on meeting it.

But with no new deal in sight Hatoyama has changed tack, saying some Marines would have to stay in Okinawa to deter threats, a shift that outraged many Okinawans and upset a small ruling coalition partner, the Social Democratic Party (SDP).

The Democrats have also promised to take a diplomatic stance more independent of Washington, but talks on reviewing the five-decade-old alliance have been snarled by the Futenma feud.

CAN HATOYAMA STAY ON AFTER DEADLINE?

Hatoyama has been trying to redefine what “resolving” the row means and appears to be putting priority on reaching agreement with the United States.

Domestic media say the two governments will announce on May 28 an agreement to stick to the 2006 plan with minor changes.

That risks outraging many Okinawans, irking the DPJ’s coalition partner and leaving voters wondering what the fuss was all about.

The tiny Social Democratic Party’s votes are no longer needed to pass bills smoothly in parliament after some upper house lawmakers switched sides, but a rift in the coalition ahead of an upper house election expected on July 11 would be ill-timed.

Analysts say Hatoyama will likely stay on despite the fuss, partly because the Democrats had criticised two predecessors from the rival Liberal Democratic Party for quitting after only a year and because time is running out before the upper house poll.

The dispute seems unlikely to spill over into trade and investment ties between the world’s two biggest economies. Trade between the United States and Japan amounted to 14.2 trillion yen ($159 billion) in 2009, while two-way flows between China and Japan totalled 21.7 trillion yen.

But damage to the alliance could create uncertainty in the region, eventually affecting investment flows.

WHY CLOSE THE FUTENMA BASE AND REPLACE IT?

Residents of Okinawa, 1,600 km (1,000 miles) south of Tokyo and the site of a bloody World War Two battle, resent what they see as an unfair burden for maintaining the security alliance.

Outrage flares periodically among residents over accidents, crime and pollution associated with the bases — most strikingly after the 1995 rape of a schoolgirl by three U.S. servicemen.

For the U.S. military, Okinawa provides a forward logistics base strategically located in the western Pacific close to Taiwan and the Korean peninsula.

As part of a 1996 pact to reduce the U.S. military presence, the United States and Japan agreed to close Futenma Air Station, home to about 2,000 Marines and located in crowded Ginowan City, within seven years if a replacement could be found on Okinawa.

An initial plan for an offshore facility in northern Okinawa was opposed by locals and environmentalists. The 2006 plan would shift the facility to the northern city of Nago, where it would be partly built within another base and on reclaimed land.

IS THIS JUST ABOUT FUTENMA?

No. The issue is much broader. Washington and Tokyo agreed in 2006 on a “road map” to transform the decades-old alliance, the pillar of Japan’s post-World War Two security policies.

Part of a U.S. effort to make its military more flexible globally, the realignment fit efforts by the then-ruling Liberal Democratic Party to shed the constraints of Japan’s pacifist constitution and assume a higher security profile.

Central to the pact was a plan to reorganise U.S. troops in Japan, including a shift of up to 8,000 Marines by 2014 to the U.S. territory of Guam from Okinawa. The Marines’ move depends on finding a replacement site for Futenma, although some critics have questioned whether the two really need to be linked.

(Additional reporting by Isabel Reynolds and Chisa Fujioka; Editing by Paul Tait)

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Japanese government blocks child pornography ban

May 15, 2010 By Leave a Comment

London, May 15 (ANI): The Japanese government has dismissed legislation criminalizing possession of child pornography, claiming that it violates individuals” freedom of expression.

The ruling Democratic Party of Japan rejected the legislation, but police campaign has been stepped-up against people selling sexual images of children.

Few recent incidents have drawn the attention towards child pornography in Japan.

Earlier this week, twenty people were arrested for posting child pornography on a mobile phone web site, which was set up by a 17-year-old high school student.

In another incident a mother who took indecent images of her infant son and sold them via the internet was arrested.

The National Police Agency revealed that it received 4,486 complaints from the public of child pornography on the internet in 2009.

Also, a record 650 people were charged with offences related to child pornography.

“We are urging all the political parties here to ban the possession of child pornography in the present session of parliament, but I am not at all optimistic that it will happen,” the Telegraph quoted Keiji Goto, a lawyer and chairman of the Forum for Creating a Society That Does Not Tolerate Child Pornography, as saying.

In 2009 the government submitted a bill to revise the law on child pornography but lost the general election in August before it could be enacted.

The DPJ opposed the bill and instead called for the definition of child pornography to be narrowed down, while acquisition for money and multiple acquisitions would be made illegal.

Gotto said: “We consider child pornography to be the worst of all evils and we find it hard to understand how images of naked children tied up with ropes can be considered acceptable.”

“The only people who will be pleased at the failure to pass this legislation are paedophiles.” (ANI)

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