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In Japan, Waffling Hurts Hatoyama's Credibility

By John Brinsley

[Bloomberg] -- Japanese Prime Minister Yukio Hatoyama Yukio Hatoyama (鳩山由紀夫 Hatoyama Yukio) (born 2 February 1947 in Tokyo) is a politician of the Democratic Party of Japan representing the 18th district of Tokyo in the House of Representatives. , already damaged by voter anger over abandoned campaign pledges, may face new credibility questions after reversing course on allowing his ailing finance minister to step down.

Hatoyama delayed accepting Hirohisa Fujii's resignation even after the 77-year-old minister indicated he might leave on doctors' advice. The prime minister said on Jan. 5 he wanted Fujii to "do his best" to stay. He named deputy premier Naoto Kan Naoto Kan (菅 直人 Kan Naoto, b. October 10 1946) is a Japanese politician who was the former leader of the Democratic Party of Japan (DPJ), the largest opposition party in the Diet. Kan was former Minister for Health and Welfare.  to the post the next day.

The premier's wavering over who will oversee efforts to revive a recession-mired economy and keep the world's largest government debt from further expansion comes amid plummeting popularity. Hatoyama has scaled back campaign pledges to increase spending and cut taxes, and postponed resolving a dispute with the U.S. about where to relocate an American military base in Okinawa.

"Once again Hatoyama appears to be lacking in judgment by taking so long to reach a decision," said Koichi Nakano Koichi Nakano (中野浩一 Nakano Koichi b. November 14, 1955 in Kurume, Fukuoka) of Japan is a former professional racing cyclist and ten time World Champion track racing cyclist. , a political science professor at Sophia University in Tokyo. "He certainly could have handled the Fujii situation better."

Stocks have fallen since the Democratic Party of Japan's Aug. 30 landslide victory, with the benchmark Topix Index down 3 percent. By contrast, the MSCI Asia Pacific Index is up 8.8 percent during the same period.

The approval rating for Hatoyama's cabinet dropped to 50 percent in a Dec. 25-27 poll by Nikkei Inc. and TV Tokyo Corp., from 75 percent backing in mid-September. The survey canvassed 1,597 households and gave no margin of error.

Back Taxes

The prime minister's reputation was tarnished after two former aides were charged on Dec. 24 with falsifying his campaign finances. The same day he said he would pay about 600 million yen [$6.5 million] in gift taxes dating back to 2002.

Hatoyama last week said in his New Year's statement that the government's "honeymoon period honeymoon period A timespan after diagnosing a disease before its impact is manifest, fancifully likened to the HP of early marriage, during which the husband and wife are most cordial and passionate with each other Diabetology A period of residual β cell  is over," and that he welcomed "severe criticism" of his policies.

"How can I assess Hatoyama's polices when he hasn't introduced any?" Takeshi Niinami, president of Tokyo-based Lawson Inc., Japan's second-largest convenience store operator, said in a Jan. 5 interview. "The government must come up with more detailed measures, and soon."

Fujii was hospitalized on Dec. 28 for high blood pressure and exhaustion. He was one of the few members of the DPJ DPJ Democratic Party of Japan
DPJ D├ępartement de la Protection de la Jeunesse
, which has never governed, with cabinet experience: He headed the Finance Ministry in 1993. Kan served as health minister in 1996 and won public praise for exposing the ministry's role in allowing as many as 5,000 Japanese to contract HIV HIV (Human Immunodeficiency Virus), either of two closely related retroviruses that invade T-helper lymphocytes and are responsible for AIDS. There are two types of HIV: HIV-1 and HIV-2. HIV-1 is responsible for the vast majority of AIDS in the United States.  through contaminated blood products.

Currency Move

Kan told a press conference yesterday that he would like the yen, which has retreated 9 percent from a 14-year high in November, to fall "a bit more," sending the currency down. Hatoyama today said the comments "were basically a reflection of what the business community thinks." Fujii had said he didn't support a weak yen.

Japan's currency was trading at 93.21 per dollar at 2:29 p.m. in Tokyo, from 92.37 late yesterday in New York New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of

Hatoyama is struggling to reverse the trends of an aging, shrinking population and address 13 years of price declines since 1994. Japan's 5.2 percent unemployment rate is near a record high, and price cuts by companies such as supermarket operator Seiyu Ltd., owned by Bentonville, Arkansas-based Wal- Mart Stores Inc., threaten to squeeze profits.

While Hatoyama unveiled a 7.2 trillion yen stimulus package in December, the Bank of Japan's quarterly survey of business sentiment the same month indicated the economy's rebound from its worst postwar recession is faltering. Large companies said they plan on cutting capital spending capital spending

Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years.
 by 13.8 percent this fiscal year, the second-worst projection on record.

Record Budget

Before Fujii left, he oversaw the formation of a record 92.3 trillion yen budget for the fiscal year starting April 1. He was a strong proponent of keeping government bond issuances at about 44 trillion yen, the same as the current fiscal year, to rein in to check the speed of, or cause to stop, by drawing the reins.
to cause (a person) to slow down or cease some activity; - to rein in is used commonly of superiors in a chain of command, ordering a subordinate to moderate or cease some activity deemed excessive.

See also: Rein Rein
 a public debt approaching 200 percent of gross domestic product.

Fujii "was the veteran safe hand on the economy," said Jeff Kingston, director of Asian Studies at Temple University in Tokyo. "Now he's gone and they don't have a huge depth chart."

Faced with record spending, the administration has backed off pledges to end abolish gasoline surtaxes and ease the burden on local governments and businesses by paying some child-care costs.

Hatoyama has also vacillated on whether to keep a DPJ pledge to remove the Marine Corps Futenma Air Base on Okinawa, abrogating a 2006 U.S.-Japan agreement. Residents want it moved off the island, while the administration of President Barack Obama is pushing to relocate it elsewhere on Okinawa.

Last month Hatoyama postponed any decision until May. Foreign Minister Katsuya Okada and U.S. Secretary of State Hillary Clinton will meet to discuss the issue in Hawaii on Jan. 12, Philip Crowley, assistant secretary of state for public affairs, said yesterday.

Hatoyama and Kan "must reassure markets that the DPJ is up to the task," Temple University's Kingston said. "Futenma is a bilateral issue, but the finance minister of the world's second- largest economy is of global importance."

To contact the reporter on this story: John Brinsley in Tokyo at
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Author:Business Week
Date:Jan 11, 2010
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